Triodos facet presentation on vritual business incubation for wb info dev
LESSONS LEARNED FROM VIRTUAL BUSINESS INCUBATIONSummary of the report
“What is virtual business incubation?” Physical incubation clients served in a physical building (only) Virtual incubation is “the full range of business incubation tools and services that are not (necessarily) provided to clients residing inside the facilities of a business incubator” As shorthand, “virtual” = location-independent.Definition:(V)BI Service concept = package of incubation services(V)BI Tools = way to deliver a service
Conventional & virtual‘Conventional’ business Virtual businessincubation incubation- Intense contact with - Outreach potential clients - New revenue- Capital intensive generation models- Limited outreach - Impact on business growth?
Questions to be addressed1. How (and under what conditions) does virtual incubation work?2. What successful examples of virtual business incubators exist?3. What lessons can be derived from virtual business incubation and how can they be replicated?
VBI: How and under what conditions? Tools Prevailing On-site; conditions incubatees are invited to come to physical location. E-learning and websites; - Business Online training materials and online information provision. environment 1-on-1 ICT exchange; - Mission of the E-mail, SMS, phone, Skype, MSN and online collaboration tools. incubator Online recruitment; Recruiting incubatees, mentors, interns, investors - Target group of the Virtual communities; incubator (location, online and physical networking and exchange skills, ICT access) The online crowd; Crowdsourcing, Crowd funding
Types of VBIs3 types of VBIs: “Hand-holders”; focussed on offering mainly business development services “Network boosters”; networking focussed business incubators (two sub-types: BPC+ and 2.0) “Seed capital providers”, Finance focussed business incubators
‘Hand-holder’ example 3ie3ie; Technological University inValparaíso, Chile. 3ieClients inside and outside the walls Acces to finance 5 4 3 2 Selection Networking “Virtual tools” 1 0 Incubatee comes to the incubator / meetings in other locations Mentoring Training Email, phone, skype, online collaboration tools
‘Hand holder’ lessonsLessons ICT, 1-on-1 communication can partially replace face-to-face mentoring, trust Considerations for replication: remains essential Most likely to be of relevance in Use of online collaboration tools makes remote, basic or (to a lesser ICT communication more effective. extent) emerging business Peer-to-peer exchange in the start-up environments phase remains crucial, face-to-face Increasing outreach to rural / Usually, no new source of revenues dispersed groups is possible, but Management of quality requires new may be more expensive structures Replacing training with E-learning is less effective, is a supplement
‘Network booster’ BiD NetworkBusiness plan competitions +and investment matchmaking Acces to finance 5 4 “Virtual tools” 3 2 Selection Networking Online recruitment 1 0 Online matchmaking and coaching Mentoring Training Online networking and events
‘Network booster BPC+’ lessonsLessons Considerations for replication: High outreach initially, but limited services to a small group. Cost of a BPC+ needs to be Added value more limited carefully weighed against the benefits. where other BPCs are already active Good tool to raise interest in entrepreneurship and increase brand recognition of the incubator Internet access for starting entrepreneurs essential Service intensity is typically highest during and Designed for small, not micro after the awarding ceremony entrepreneurs Donor-funded most of the time To increase outreach & impact, online recruitment of (int’l) fellows and (local) volunteers, and promoting emergence of and linking to (angel) investor networks are effective
‘Network booster’ the HUBBringing people together, typically byhosting regular events. Examples: the HUBand Mobile Monday. the Hub Amsterdam Acces to finance Virtual tools: 5 4 3 Online recruitment Selection 2 Networking 1 Virtual Communities 0 Brand building Mentoring Training
‘Network booster 2.0’ lessonsLessons Considerations for replication: Reaches and mobilises large numbers of people. Potential members are not too dispersed. Attending an event Members have to be passionate to be involved and should require less than one hour volunteer their time travelling. Financially self supporting because of mobilising The business environment should members for in-kind and in-cash contributions offer ample business opportunities in the targeted Limited life-time: generally active for 3-5 years. Over sector time, the added value of the network decreases. Members of the target group are Needs to be innovative (“hip”, “in vogue”), and diverse and complementary in skills and know how. It is useful to changing itself constantly for (most of) them to network; Local business culture allows for open networking with people of different backgrounds.
‘Seed capital provider’ Y-CombinatorCommercially oriented – short termcapital with network boosting and Ycombinator Acces tomentoring finance 5 4Socially oriented – patient capital 3 2 Selection Networkingwith long term mentoring 1 0 Virtual tools: Mentoring Training Online recruitment Brand building
‘Seed capital provider’ lessonsLessons Considerations for replication: Suitable for quick-return start-ups, or already later-stage innovative enterprises, if Commercial: commercially oriented Availability of business and Outreach is limited, with an average 10 -30 investment opportunities for firms companies per year. that can grow quickly with little cash Quality of outreach and impact depend highly Advanced venture capital markets on the quality of the selection process and the monitoring and mentoring. Non-commercial: Training and mentoring services are light, but if Availability of patient they are highly sector specific, can be of high capital, funding sources value. ICT is mainly used during the selection process, and to boost the brand of the seed capital provider.
Revenue generation Virtual service concepts offer new opportunities to generate revenue; some general observations: For hand holders: challenging to raise additional revenues through out-of-walls/satellite incubation, but more public funding For network boosters: good opportunity to generate revenue through membership fees (small amount, large group), and events For seed capital providers: financial sustainability is possible, but for a narrow slice of the market (quick return, later-stage incubatees); revenue from training/mentoring, not equity shares
OverviewItem Hand-holders Network boosters Seed capital providersService Focus BDS Access to business networks Access to business finance (training, mentoring)Target group Wide range; High potential, High potential, Special target group to high Educated or ‘Social enterprise’ potential Early stage or establishedOutreach 100-300 businesses per 10-20 business per year 15-30 per season network / competitionService provision Service provider Facilitator FacilitatorFunding Donor / Gvt/ Univ / NGO Foundations, Commercial CommercialTypical main revenue model Donations, Sponsors, Sponsors, Admission fees, (consultancy) projects membership fees return on equity Client own contributions to service fees
Key lessonsKey benefits of Virtual Business incubation Service quality: New opportunities to use tailored, diverse and specialised sources and services for incubatees Scale: Possible to increase outreach and customer base significantly (with network boosting). Inventive: More possibilities to cater to innovative entrepreneurs by fast, flexible and creative networks of people Capital: access to new sources of (risk-) capital
Key lessonsChallenges of Virtual Business incubation Different set of skills and abilities in VBI are required; is not “easier” to do Cost is not necessarily lower; overhead cost same or more Lower capital outlay, but high maintenance and shorter lifetime of asset (of network boosting) Brand building is essential to catch the eye of the online crowd
Considerations for replication To design a VBI service concept: Define the desired target group Assess and understand “needs” of incubatees Prioritise demand (=need x price) of incubatees for services and design a lean service package Weigh cost and benefits of virtual tools Assess own staff’s skills and -gaps Consider investment cost/time Decide on strategy, check consistency of concept Act...
On-site servicesDelivering BDS to non-resident clients can: expand geographical coverage of an incubator, (can) increase its cost effectiveness (if facilities are readily available), exposes entrepreneur to a new business environment, and allows for exchange between entrepreneurs from different backgrounds and regions.Lessons If an incubator works with incubatees in a remote location, it needs a local partner to mobilise local knowledge, networks and reputation in that specific area. In the start-up phase, entrepreneurs highly value interacting with peers. Incubators need to actively facilitate this interaction. If incubatees and incubator staff need to travel, this can be costly and time consuming; Interacting with the entrepreneur without experiencing their workplace can be less effective
Websites and e-learningWebsites and E-learning: Websites can provide information or online training materials. This can expand outreach and geographical coverage of an incubator, and also has the benefit that incubatee can learn / look for information at own pace, whenever and wherever convenient.Lessons The potential of E-learning depends on the skills and access to tools of the incubatees, the training topic, and the level of responsibility or motivation from the incubatee. If training is related to changing the habits, motivation or mind-set of the trainee, face-to- face training is far more effective For a business incubator, it is costly to develop quality e-Learning training modules and materials. Cooperation with existing e-learning portals is recommended. Information made available through the Internet (website) needs to be kept up-to-date. Social media tools can be added to a site at little or no cost, and are a good tool for enhancing the brand identity of the incubator, but an incubator will need to allocate time and resources to monitor user content, frequently post new announcements, and reply to requests.
1-on-1 ICT based exchange1-on-1 interaction with ICT Mentoring of monitoring the incubatees through ICT (phone, email, skype) can save time and (travel) costs, and is a fast way of communication, which can be important in some situations.Lessons: Use of ICT in communication between VBI and incubatee depends on complexity of the issue to be addressed. Complex issues need to be addressed in face-to-face contact. Simple tasks can be performed through ICT. Success of ICT based communication also depends on a relationship of trust between the incubatee and the service provider. These relationships do not develop overnight, and often require face to face contact, and/or a business incubator with a strong reputation. For specific advice that does not involve disclosing too much about the background of the entrepreneur and the business, ICT based advice is considered fast and efficient. Video skype in another location (outside the incubatee office) can help to ensure that the incubatee makes him or herself fully available for the conversation. Online collaboration tools can make exchange through phone and skype more effective. Remote supporting of incubatees through a diverse means of ICT poses management challenges to the incubator, if it is not systemised.
Online recruitmentOnline recruitment Through the internet, incubators can reach and mobilise interested mentors / volunteers / incubatees and select the most suited candidates and improve the quality of the incubator service. Recruiting highly qualified volunteers can save costs without jeopardising quality. Online recruitment can also positively contribute to the brand of the incubator.Lessons: Online recruitment is a suitable tool for recruiting incubatees and mentors; for access to finance, other tools need to be used. The incubator needs a well thought through recruitment strategy, to ensure the high quality of the applications. The incubator needs to invest in building a brand, and build partnerships with networks or organisations that have relations with the targeted audience (volunteers, mentors, incubatees). Social media are support recruitment campaigns as additional tools. The incubator needs to verify the quality of applicants. In the final phase of recruitment, face-to-face interaction is usually still needed.
Virtual communities & eventsA vivid community mobilises members to actively contribute, by providing resources.This may improve the quality of services of the incubator, and may cut costs or evengenerate revenues because members may be willing to pay a membership oradmission fee.Lessons: Social media can be used to build and maintain a brand in existing off-line communities, or for spreading invitations, announcements and news; building an active online community where members exchange knowledge is very challenging. Successful virtual communities in our sample are based on regular combined networking or training events, usually outside of office hours. Members join the networks to learn, get inspired and build their network. Hosting a community is an art, and requires skills and resources. Financing networks work best if they involve investors at geographical and cultural proximity of the incubatees.
The online crowdCrowd sourcing and crowd fundingThrough the internet, incubators as well as incubatees can mobilises large numbers ofpeople to contribute their knowledge and/or finances online.Lessons: Building an attractive platform for crowds to become active is a sophisticated challenge, VBIs can however seek cooperation with existing platforms; Crowds so far are mostly emerging in advanced countries, with maybe limited knowledge for local solutions in other countries; Crowdsourcing may be suitable for incubators or incubatees with a clear problem definition, such as feedback on a new product or service design (as suggested by Mobile Monday in the start-up phase), or feedback on specific business model related challenges. Crowd funding is may offer an access to finance opportunity, especially when incubators can connect with existing crowd funding platforms.