Supporting entrepreneurs: business incubators and accelerators Boris Mrkajic, PhD Milan, Italy...

Supporting entrepreneurs: business incubators and accelerators

Boris Mrkajic, PhD

Milan, ItalyOctober 16th, 2015

Workshop on entrepreneurship in emerging countries Resources for entrepreneurs: from patents to international markets

Young and sustainable entrepreneurship in Egypt for a more inclusive society

PoliSocial Award 2014

Content

• Entrepreneurship ecosystem concept• Business incubators: concepts, definitions

and relevance• How to choose an incubator• How to prepare for and make the most of an

incubator• Business incubators in Egypt

Supporting entrepreneurs: business incubators and accelerators 2

Entrepreneurship ecosystem

3Supporting entrepreneurs: business incubators and accelerators


Babson entrepreneurship ecosystem framework (Isenberg, 2010)



5

Finance

• Entrepreneurs of all types and sizes require a range of financial services

• Different phases of start-up financing:– Bootstrapping– Pre-seed funding– Seed funding – Later phase financing

• Different sources of financing:– Personal resources, FFF– Business angels– Debt issuers (e.g. banks, typically micro-loans and micro-credits)– Governmental financial support (e.g. grants, loans, etc.)– Venture capital

• Remains a major obstacle for many aspiring entrepreneurs, particularly in developing countries (Stein, Goland, & Schiff, 2010).



6

Finance



7

Human capital

• Human capital is a collection of hard and soft skills possessed by an individual or by population in sum– Technical and managerial skills, financial literacy, business planning, etc.– Self-confidence, social networks, risk-aversion, etc.

• Enables individuals to produce economic value, or more generally, accomplish certain objectives

• Typically gained through education and work experience– Entrepreneurial education as a key mechanisms

• Existing educational programmes• Non-traditional training programmes

– Engagement of new agents in the educational process– Online learning platforms (MOOCS)

– Entrepreneurial experienceSupporting entrepreneurs: business incubators and accelerators


8

Policy and regulations

• Principal driver that can influence the role of other elements of the ecosystem

• Examples of new-venture-friendly legislations: – ease of starting business (time and cost)– protection of intellectual property rights– contract enforcement– indirect monetary incentives like specialized tax benefits, tax

waivers, etc.– stable and long-term policy measure– quality of governance



9

Culture and social norms

• Influence general behaviour of individuals, and hence entrepreneurial activity

• Examples:– Legitimacy and awareness of entrepreneurship– Entrepreneurs’ social status and related success stories– Tolerance of risk, mistakes and failures – Propensity for innovation, creativity and experimentation– Ambition and hunger for success– Lack of trust in youth and age discrimination



10

Supports

• Can be an essential components of an entrepreneurial environment

• Examples of supports:– Infrastructure and logistics

• Affordable access to energy• Telecommunications• Transportation and logistics• Access to resources

– Business-related supports• Specialised institutions that support entrepreneurship (e.g. business incubator and

accelerators)• Auxiliary supporting network of professionals (e.g. legal, accounting, and technical

experts and advisors)• General Business-related organisations (e.g. MNEs, NGOs, TNOs)



11

Markets

• Market conditions determine how new ventures enter business arena and subsequently compete for their market share

• Globalization and technological development have opened new commercialization possibilities and created new mechanisms of reaching customers, which is particularly important for emerging markets

• Some important features:– Access to suppliers (local and global value chains)– Existence of and access to early customers– Local market access– International market access and export channels– ICT diffusion among potential customers


Business incubators and accelerators


Why are incubators important?

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1. Improve access to finance• Provide funding internally• Connect entrepreneurs with investor

2. Enhance human capital• Trainings programmes• Formal and informal mentoring by experts• Sharing between incubated founders• Academic incubators

4. Improve culture • Legitimize entrepreneurial activity• Promote successful stories• Decrease risk of starting up a business

3. Improve support system• Provide infrastructure (e.g. working space)• Boost networking with external

stakeholders and professionals

5. Improve access to markets• Provide easier access to the local and global

value chain (suppliers and customers)

Incubator definitions

• “Business incubation catalyses the process of starting and growing companies, providing entrepreneurs with the expertise, networks and tools they need to make their ventures successful.”

• “Incubation programs diversify economies, commercialize technologies, create jobs and build wealth.”

(National Business Incubators Association, US)


Incubator definitions

• Incubators are generally characterized by following features:• A small management team with core competencies• 4 main roles

– Selection: attracting, selecting and admitting the most promising entrepreneurs and their business ideas

– Infrastructure: A managed working space with shared facilities providing logistics support

– Business support and monitoring: coaching, mentoring, training, financial and innovation services

– Mediation and networking: connecting entrepreneurs to tangible and intangible resources, which can be internally or externally available


Incubator concept

16

Business Incubators

Resources(human capital, technologies,

supports, capital, funding, etc.)

Markets (suppliers,

customers, etc.)

Entrepreneurs

Intermediaries

• Incubators have a twofold objective:• Business competence development (individual)• Entrepreneurial ecosystem development (individual &

collective)Supporting entrepreneurs: business incubators and accelerators

Incubators history

• Relatively old concept • More that 50 years old• Started as a shared spaces for new ventures in 1956

in Batavia, NY (USA)• Had three main development phases

• 1st generation: Infrastructure• 2nd generation: Business support and monitoring• 3rd generation: Networking and value chain

• Business incubators are being slowly overtaken by business accelerators

17

Source: Scaramuzzi, E. (2002). Incubators in Developing Countries: Status and Development Perspectives (pp. 1–35). InfoDev. Washington DC.


Incubators history


Incubators history: impact

• Survival rate: more than 80 percent for the incubated startups as opposed to the overall survival rate of about 20 percent for all startups (Carayannisa and von Zedtwitzb, 2005)

• Startup growth: research suggests that incubated firms grow faster than their non-incubated counterparts (Colombo and Delmastro, 2002)

• Job creation: NBIA estimates that North American incubators have generated about 500,000 jobs since 1980, and every 50 jobs created by an incubator client generate another 25 jobs in the community

• In developing countries, incubatee survival rates have also shown to be very high (e.g. above 85 percent in countries with strong support from the government and tight links with the university system, like for instance in Brazil or China)

*Please take this stats with a grain of salt19Supporting entrepreneurs: business incubators and accelerators

Incubator types

They vary according to multiple dimensions:Mandate• For-profit• Non-profitSponsorship• Public (governmental, academic, NGO)• Private (corporate, investors-supported)• MixedFocus • Niche (technology, social)• Mixed-useSector• Single• Mixed


Location• Physical• Virtual

Accelerator definitions

• Sub-type of business incubators• Relatively recent concept, started in the US

• Y Combinator (Silicon Valley, US) in 2005 • Techstars (Colorado, US) in 2006

• Growing phenomenon world-wide



• “A business accelerator is an intensive (e.g. 3-6 months) business program which includes mentorship, educational components, networking and aims at growing business rapidly, ending in demo-day.”

• “Usually an entrepreneur moves into a shared office space with other new founders for a period of time to work under the tutelage of advisors and experts to grow their business rapidly.”

• “In exchange for the expert mentoring, exposure to investors/future capital and cash investment that entrepreneurs get from the accelerator, the entrepreneur gives a portion of his or her company’s equity to the partners of the program.”



• The accelerator programmes consist of these distinguishing elements (Christiansen, 2009): • Office space• Funding, typically to the (pre)seed level • Company founders are small teams with technical

backgrounds • Companies are admitted in cohorts• Each cohort is supported for a defined period of time • Education programme focusing on business & product

advice (training, mentoring, coaching)• Networking programme to meet and/or contact other

investors and advisors (and usually, a final demo day)



• NESTA organisation definition of accelerators (Miller & Bound, 2011):• Provision of pre-seed investment, usually in exchange for

equity• A focus on small teams, not individuals• Time-limited support comprising programmed events

and intensive mentoring• An application process that is open yet highly competitive• Start-ups supported in cohort batches or ‘classes’


Accelerator types

Similar to incubatorsMandate• For-profit• Non-profitSponsorship• Public (governmental, academic, NGO)• Private (corporate, investors-supported)• MixedFocus • Niche (technology, social)• Mixed-useSector• Single• Mixed

25

Location• Physical• Virtual


Incubators vs. Accelerators

• Accelerator usually have a greater focus on companies closer to the market• Accelerators will generally offer all of the services offered by a

business incubator• Acceleration program has limited (relatively short) duration• The key difference is the level of hands-on involvement by

accelerator management - should increase the chances of success

• Accelerators are more likely to be financed by private investors (venture capitalist and business angels), who are looking for an opportunity to finance growth potential through defined action plans (i.e. create a pipeline for businesses)• Good for both entrepreneurs and investors


Incubator/accelerator services

1. Infrastructure • Private or shared office space• Office materials and ICT services• Shared laboratory with specialized equipment• Informal areas

2. Financial services / Access to finance• Direct funding (pre-seed or seed)• Direct exposure to professional investors (business angels and venture capital

firms) – demo day• Collaboration with banks for specialized micro-credits• Accounting and budgeting services

3. Networking• Access to knowledge resources (University, TTO, Techno / Science park)• Access to suppliers and clients• Access to potential employees/human capital• Access to strategic partners• Interaction with the other incubated firms/entrepreneurs, investors, etc.


Incubator/accelerator services

4. Training• Hard skills:

– Technical: Manufacturing practices, product design and development– Business and management skills: business plan writing, marketing and e-commerce,

financial and investment literacy, intellectual property rights protection and management• Soft skills:

– Team work– Self-confidence– Risk-taking attitude– Focus,– Presenting and pitching skills

5. Mentoring / Coaching• Business management and development• Financial management • Product development • Commercialization and marketing • Trade facilitation and internationalisation• Intellectual property rights management and other legal issues• Business etiquette


How to choose an incubator/accelerator


How to choose an incubator/accelerator?

1. Carefully analyse your own needs2. Carefully analyse what the

incubator/accelerator has to offer3. Make sure you match them



1. Carefully analyse your own needs• Do you just need cheap/free workspace or more?• Do you need business/management mentoring? • Do you need help in refining your business model? • Do you need help in developing your product?• Do you need help in commercializing your product?• Do you need help in access to suppliers and customers?• Do you need help in reaching out to strategic partners?• Are you willing to relocate, if necessary? • Are you willing to listen and have others guide your through

your own company?• How much do are you willing to give away in equity?



2. Carefully analyse what the incubator/accelerator has to offer

• Is there a co-working space available? Other infrastructure/logistics support?

• Is there a specialized laboratory for product development?• Is there a (pre)seed funding available? How much is it?• What is the cohort/class size? How long is the process? What

are the expectations for graduation?• What kind of training is available? Is it technical or business

focused?• Who are the trainers? Do they have the needed expertise to

provide the trainings?• How many mentors are there per startup? Who are the

mentors? Are they successful entrepreneurs? 32Supporting entrepreneurs: business incubators and accelerators


2. Carefully analyse what the incubator/accelerator has to offer

• Who are the investor? Are they professionals? Do they have a successful investment record?

• Is there a formal demo day to pitch the business? Are there other types of exposure to investors?

• How have the previous incubator's graduates done? How many got follow-up funding? How much capital have the incubated firms raised after the graduation?

• How is their network? Can they systematically provide relationship with knowledge/suppliers/customers/strategic partners/human capital/investors/etc.?

• Do they have long-term relationship with their startups (after graduation)?



3. Make sure you match them• Be honest and critical in assessing what you need

• You should not prioritize financial capital as your primary reason for applying, as a good incubator can typically offer much more than money.

• Do your research about the possible incubators/accelerators• Talk to as many people as possible (mentors, investors, incubator/accelerator

managers, current and previous incubated startups, etc.)• Understand the resources and services offered & the cost of being involved.• Do they provide training that you need?• Do the mentors have experiences that are beneficial for your startup?• Do the investors invest in startups similar to yours?• Consider that the location is in line with your business. Can your business

flourish with the resources in the location? • Evaluate the work-load of the programme and assess if you can follow it.• Understand if the incubator/accelerator brand is going to help you in the future.• How much (equity) do you need to give away? What do you get in return?



• General examples: • If you need knowledge resources

-> university (schools have human capital, a knowledge base, access to grants and resources and other enabling infrastructure to help you succeed)

• If you need quick access to market or capital-> private accelerator that has strong relationship with the industry and investors

• If you need more time to further develop your idea -> governmental or NGO-supported that provides long incubation time with low commitment requirements

• If your idea solves a socially or environmentally relevant issue -> governmental or NGO-supported that has a strong focus on the related issues


How to prepare and make most of an

incubators/accelerator


How to do you prepare for an incubator/accelerator?

• Focus on the right fit between the incubator/accelerator and your startup (scope, focus, services/needs, funding, location, etc.)

• Assemble your team carefully (important!)• Consider adding “missing pieces”

• Try to build a business model using standard and well-diffused frameworks• For instance, the Business Model Canvas

• Try to have some market validation (even simple!)• For instance, Google AdWords to drive traffic to a landing page where you

describe the product briefly and request an email address from the visitor• Prepare a good pitch – simple and clear

• Why is the business idea unique?• Why you can execute it better than others?• Show that you are coachable and easy to work with!• Be prepared to answer questions related to your business idea, budgeting

needs, expansion model, commercialisation strategy, pivoting strategy, etc.


How to make most of an incubator/accelerator?

• Be proactive – use extensively the services provided (trainings, mentoring, networking, equipment, etc.)

• Startup is more than just technology – learn the commercial part too

• Consider building a board of advisors from the network – it will be useful after the incubation

• Talk to the other incubated startups and entrepreneurs – learn from their experiences

• Develop a fund raising strategy (for after the incubation), by talking to the investors and mentors in the network

• Prepare diligently for the demo day – most of the follow-up funding is obtained there


Business incubators in Egypt


40

Main barriers (GEM Egypt NES Report, 2012):• Lack of financial solutions• Educational system inhibits creativity and innovation • Lack of business supports• Lack of good pro-entrepreneurship all-round policies• Vast and cumbersome bureaucracy• Risk aversion culture• Corruption

Entrepreneurship ecosystem in Egypt


Business incubators

Incubators in Egypt

• First initiatives incepted almost 20 years ago (1995) by government, i.e. Social Fund for Development in Egypt (SFD) – no remarkable success• The Egyptian Incubator Association (EIA) - planning for,

and providing assistance in, the creation of different types of incubators suited to local conditions

• The Egyptian incubator programme - development of a sustainable network of incubation-related facilities that would spur the competitiveness and productivity of SMEs


Incubators in Egypt

• Vast of governmental initiatives / projects did not fully succeed (not active today / no info on the web):• Tala Incubator • Mansoura University Technology Incubator • Benha Technology Incubator • Doueika Virtual Incubator• 6th of October City Incubator • Assiut Incubator • Ain Shams Incubator • Aswan Incubator • Tenth of Ramadan Incubator• Tabbin Institute for Metallurgical Studies Incubator

• Number of non-governmental incubators is increasing in the last couple of years, mainly in Cairo area


Incubators in Egypt

43

Name Type Mandate/Affiliation

Location Activity Length (months)

Seed Funding

Equity

1 Technology Innovation and Entrepreneurship Centre (TIEC)

Incubator & Accelerator

Government Cairo area ICT/Tech 12 No No

2 AUC Venture Lab Incubator University Cairo area Tech 5+8 $2.800 No

3 Nahdet el Mahrousa Incubator NGO Cairo Tech/Social 24 No No

4 Sustaincubator Incubator Private Cairo area (4 locations)

Tech/Sustainabl

e

3-12 No No

5 GESR Incubator Accelerator NGO Cairo area Tech/Social 6-12 $25-65k <10%

6 Flat6labs Accelerator Private Cairo ICT/Tech 4 $10-15k 10-15%

7 GrEEK Campus Co-working space

Private Cairo Tech - No No

8 Inno101 Incubator & Accelerator

Private Alexandria Tech/Social 6-12 No 10%

9 JuiceLabs Accelerator Private Cairo ICT/Software

6 $20k <15%

10 TechWadi Sprint Accelerator Private MENA + Silicon Valley

Tech 1 No No


Incubators in Egypt

Technology Innovation and Entrepreneurship Centre (TIEC) incubator

• Since 2011, Governmental incubator• 18 companies graduated till now• Mainly ICT, but also other tech-based

– Currently 18 companies– Examples: water and electricity consumption reduction, solar street lighting,

improving agriculture production, etc.• TIEC Premises (Smart Village, Cairo)• 1-year virtual incubation (no office space)• Services:

– No seed funding– Up to EGP 120K in services only (consultancy services, ICT and marketing)– Work space and basic (hardware and software) tools during incubation– Access to technical, subject-matter advisory, business consulting and mentoring– Business competitions (Start IT)


http://tiec.gov.eg/en-us/Departments/Incubation/Pages/default.aspx

http://tiec.gov.eg/en-us/Departments/Incubation/Pages/default.aspx

Incubators in Egypt

Technology Innovation and Entrepreneurship Centre (TIEC) accelerator

• Since 2013, Governmental accelerator• 8 rounds till now (5-15 start-ups/round)• Mainly ICT, but also other tech-based• TIEC Premises (Smart Village, Cairo)• 12 weeks acceleration• Business idea into business plan • Services:

– No seed funding– Mentoring and coaching– Business plans evaluation by a panel from TIEC, industry and academia experts– The qualified teams will pitch their concepts and prototypes in front of investors


http://www.tiec.gov.eg/en-US/Accelerator/Pages/about.aspx



Incubators in Egypt

AUC Venture Lab• Since 2013, university incubator (first Egyptian university incubator)• 29 companies graduated till now• Tech-based start-ups

– 6-10 companies twice per year– Mainly ICT

• Cairo-area• 5+8-month incubation/acceleration• Services:

– Funding (US$ 2,800)– Workspace and access to AUC facilities– Business trainings, mentoring and coaching from the AUC’s extended network– Networking events – Assistance with professional services including human resources and recruitment,

communication, marketing and legal assistance– Access to students for product testing, class projects and interns


http://www.aucegypt.edu/Business/eip/Pages/Venture%20Lab.aspx



Incubators in Egypt

Nahdet el Mahrousa• Since 2003, NGO-affiliated incubator (first Egyptian social incubator)• 20 companies graduated till now• Tech-based social start-ups

– Currently 40 social enterprises incubated – Youth development, education and employment, health services,

environment, scientific advancement, arts and culture, and identity• Cairo-area• Up to 24-month incubation• Services:

– Capacity building– Technical support– Infrastructural support– Networking and connections


http://nahdetelmahrousa.org/

Incubators in Egypt

Sustaincubator• Since 2014, private incubator• Mainly tech-based high-impact start-ups

– Water, food, renewable energy and IT-enabled solutions supporting sustainable causes

• 4 locations in Egypt, all in Cairo area– 6th of October City, Cairo-Alexandria Desert Road, Beni Suef, Maadi

• 3- to 12-month incubation (for 10-20% of equity)• Services:

– Mentorship– Training and events– Access to seed investors after the incubation or crowdfunding platform– Networking– Cloud services– Demo day


http://www.sustaincubator.com/

Incubators in Egypt

GESR Incubator• Since 2015, NGO-affiliated accelerator (Misr El-Kheir foundation)• Tech-based social start-ups

– Energy, food, water, health and education• Cairo-area• 6- to 12-month acceleration• Services:

– Seed funding (EGP 200-500k = $25-65k, for <10% of equity)– Co-working space– Access to GESR lab (high-tech)– Networking opportunities– Entrepreneurship-focused business training and mentorship– Technical and administrative support


http://gesr.net/en/incubator

http://gesr.net/en/incubator

Incubators in Egypt

Flat6labs• Since 2011, private accelerator• 46 companies graduated till now• Mainly ICT, but also other tech-based

– Currently 8 companies– Examples: renewable energy solutions, solar powered solutions, other ICT-based

(mobile/ecommerce) firms

• Cairo-area• 4-month acceleration• Services:

– Seed funding (EGP 70-100k = $10-15k, for 10-15% of equity)– Strategic mentorship– A creative workspace– Entrepreneurship-focused business training and mentorship– Direct support and exposure through an expansive network of partner entities, mentors and

investors– A multitude of perks (up to $300k)– Demo day


http://www.flat6labs.com/

Incubators in Egypt

The GrEEK Campus• Since 2014, private co-working space • Mainly tech-based high-impact start-ups

– 40+ companies currently present• Cairo• Collaboration with Flat6Labs and AUC• Services:

– Co-working space– Technical support


http://www.thegreekcampus.com/




Incubators in Egypt

Inno101• Since 2015, private incubator and accelerator• Mainly tech-based start-ups• Accept: Idea/concept only, prototype/working demo, product/service has

paying customers• Alexandria• 2-month acceleration• Services:

– No seed funding – $15k in services, for 10% of equity– Educational program, mentoring & Coaching sessions – Access to investment (investor network)– Business & market reach assistance (strategic partner network, strategic planning, etc.)– Legal and financial/accounting consultation– Technology and technical assistance– Equipped office space at special rates– Demo day


http://inno101.com/

Incubators in Egypt

JuiceLabs • Since 2013, accelerator• Mainly ICT (software) focused start-ups

– A couple of start-ups per cycle• Cairo• 6-month acceleration• Services:

– Seed funding ($20k for <15% of equity)– Mentorship– Technical support– Infrastructural support– Networking and connections for further funding


http://juicelabs.me/%23tagline

Incubators in Egypt

TechWadi Sprint • Since 2014, accelerator connecting MENA startups with Silicon Valley• 11-13 companies graduated till now• Mainly tech-based high-impact start-ups

– Examples: ICT, music equipment, etc.

• MENA (not Egypt only!)• Collaboration with Google for Entrepreneurs and MIT Competition• 1-month acceleration• Services:

– Positioning for fundraising with relevant SV investor– Coaching– Mentorship– Networking– Cloud services– Demo day


http://techwadi.org/programs/acceleration/



Incubators in Egypt


Business idea Market

Thank you.

Q&A

[email protected]


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