Egging business on in incubation units

Mon, Apr 2, 2012, 01:00

On paper, incubation centres and hothouses offer a lot. But are they all they are cracked up to be? Would a start-up business not do equally well in the spare bedroom, asks OLIVE KEOGH

STARTING A BUSINESS is a bit like getting on a giant roller coaster, with no idea when it is going to stop. It can be an exhilarating destination but a lonely journey.

One way entrepreneurs can get support is by locating in business “hothouses”. On paper hothouses offer a lot. But are they all they are cracked up to be? Would someone determined to start a business not do equally well in the spare bedroom?

“Isolation is the biggest thing anyone starting a business has to overcome,” says Breda Fox, chief executive of the Galway County City Enterprise Board. “The value of getting out of the house to talk to people and bounce ideas cannot be underestimated. It also takes incredible discipline to sit at a desk on your own every day. That said, incubation units do not suit everyone.”

Inventor Peter Scanlan is a case in point. He developed iShade, an anti-glare visor for mobile phones, at home. “I was fearful of disclosing my idea to any third party prior to getting my patent,” he says. “The problem with this is that your support is coming from family and friends who are very encouraging but biased. You need an objective opinion. My patent attorney, Philip Coyle, played this role.”

There are no hard and fast rules about what defines an incubation unit. There are many variations on the theme including privately-run centres. Some centres charge. Others do not. Some take equity in return for support. This may solve a short term need but may not be a good long term strategy.

Key players in the sector are county enterprise boards and centres attached to third-level colleges. High-tech and knowledge-based projects are better served than traditional services or manufacturing. Anyone thinking of starting a small food business, for example, will struggle to find incubation space.

There are big variations in the support provided. Some centres simply offer space. Others offer space and services. Top tier hubs are holistic, offering a range of supports such as management training, mentoring, introductions to investors or potential partners and, in the case of college-based centres, links into the academic research community.

Nova is the purpose-built incubation centre at the heart of knowledge transfer at University College Dublin. It has earned a strong reputation and places are coveted.

Nova accepts around 10 new companies a year and the average stay is three to four years.

“Having companies coming and going refreshes the community,” says programme manager, Dr Ciara Leonard. “The incubator environment also helps our companies to build an external network of important relationships with experienced entrepreneurs, venture capitalists, angel investors, advisors in finance, law, intellectual property, sales and marketing.”

Having the approval of a well regarded hub can be of commercial benefit. “Venture capitalists come to Nova, investors come to Nova and if you’re there it’s clear you meet certain criteria which helps credibility,” says Richard Boyd, chief executive of 3 Strata Technologies which is behind the Inca Clinic, a new travel vaccination application aimed at the healthcare sector. “Nova is very focused on biotechnology and has a strong slant towards healthcare so they immediately ‘got’ what we were about.”

Most hubs have companies at different stages of development and are open to applications all year round.

The criteria for being accepted varies, but one way of increasing the chances of getting a place in Cork’s CIT-based Rubicon Centre, for example, is by participating in the Genesis Enterprise Programme which feeds companies into the incubator. Genesis helps companies accelerate the growth of their business in the first 12 months of operation.

There are 57 companies in the Rubicon Centre and manager, Paul Healy, says the number of companies in a centre is critical because the aim is to create knowledge clusters. “We support our companies with a full team of staff and there is a lot of emphasis on developing relationships with CIT in terms of ‘spin ins’ and linking our companies to the existing eco structure,” he says.

The Genesis programme has been running since 1997 and the survival rate of companies from this programme that have also come through the centre is 75 per cent after five years. Rubicon has also addressed the issue of companies outgrowing the incubation units by launching a stage two facility. This is aimed at companies that want to scale up and raise the funding to do so.

Carlow County Enterprise Board has constant brisk demand for its 23 starter units. “The building looks good and we have reception staff to greet visitors which creates a very professional environment into which our companies can bring their clients,” says assistant chief executive, Kieran Comerford.

“The biggest advantage of being in a hub is mixing with like-minded people. Five minutes in the canteen with someone who has experienced a similar problem can be invaluable.”

Security company Netwatch, which employs 98 people with a turnover of €10 million, is a former tenant of the Carlow facility.

“Money is very tight in a start-up and the last thing to invest in is bricks and mortar,” says founder David Walsh. “Our main need was office space but we also benefited greatly from the owner manager course run by the board.”

Bernadette O’Reilly manages DIT’s Hothouse incubation facility in Dublin. Hothouse has been running 11 years and O’Reilly says company survival rates are 75 per cent after three years and 60 per cent after five. “We conduct exit interviews with companies moving on and the peer group network is constantly cited as being of great importance,” O’Reilly says.

Hothouse is supported by Enterprise Ireland so there is no cost to be there but there are mandatory training workshops. “Being in a centre encourages companies to grow quicker but also enables them to do so through our connections with state agencies and potential investors,” O’Reilly says.

“Without Hothouse our business would never have developed as it has,” says Ronan Perceval, founder of Phorest which provides an online booking, stock control and administration system to hair and beauty salons in Ireland and the UK. The company employs 35 people, has a turnover of €2.5 million and is growing at a rate of 40 per cent per annum.

“We came into Hothouse with an idea in the computer games space but there were problems with how far we could take it and with Hothouse’s help we went off in a completely different direction. We did most of our development at home, but we went to all the sessions and did the homework, had a mentor and got a lot out of mixing with our group.”

The incubator environment also helps our companies to build an external network of important relationships with experienced entrepreneurs, venture capitalists, angel investors, advisors in finance, law, intellectual property, sales and marketing

The biggest advantage of being in a hub is mixing with like-minded people. Five minutes in the canteen with someone who has experienced a similar problem can be invaluable