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 Supporting entrepreneurs: business incubators and accelerators Boris Mrkajic, PhD Milan, Italy October 16th, 2015 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 Supporting entrepreneurs: business incubators and accelerators 3 Entrepreneurship ecosystem Babson entrepreneurship ecosystem framework (Isenberg, 2010) Supporting entrepreneurs: business incubators and accelerators 4 Entrepreneurship ecosystem 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). Supporting entrepreneurs: business incubators and accelerators 5 Entrepreneurship ecosystem Finance Supporting entrepreneurs: business incubators and accelerators 6 Entrepreneurship ecosystem 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 experience Supporting entrepreneurs: business incubators and accelerators 7 Entrepreneurship ecosystem 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 Supporting entrepreneurs: business incubators and accelerators 8 Entrepreneurship ecosystem 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 Supporting entrepreneurs: business incubators and accelerators 9 Entrepreneurship ecosystem 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) Supporting entrepreneurs: business incubators and accelerators 10 Entrepreneurship ecosystem 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 Supporting entrepreneurs: business incubators and accelerators 11 Business incubators and accelerators Supporting entrepreneurs: business incubators and accelerators 12 Why are incubators important? 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 3. Improve support system • Provide infrastructure (e.g. working space) • Boost networking with external stakeholders and professionals 4. Improve culture • Legitimize entrepreneurial activity • Promote successful stories • Decrease risk of starting up a business 5. Improve access to markets • Provide easier access to the local and global value chain (suppliers and 13 customers) Supporting entrepreneurs: business incubators and accelerators 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) Supporting entrepreneurs: business incubators and accelerators 14 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 Supporting entrepreneurs: business incubators and accelerators 15 Incubator concept Resources (human capital, technologies, supports, capital, funding, etc.) Entrepreneurs Business Incubators Intermediaries Markets (suppliers, customers, etc.) • Incubators have a twofold objective: • • Business competence development (individual) Entrepreneurial ecosystem development (individual & collective) Supporting entrepreneurs: business incubators and accelerators 16 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 Source: Scaramuzzi, E. (2002). Incubators in Developing Countries: Status and Development Perspectives (pp. 1–35). InfoDev. Washington DC. Supporting entrepreneurs: business incubators and accelerators 17 Incubators history Supporting entrepreneurs: business incubators and accelerators 18 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 salt Supporting entrepreneurs: business incubators and accelerators 19 Incubator types They vary according to multiple dimensions: Mandate • • For-profit Non-profit Sponsorship • • • Public (governmental, academic, NGO) Private (corporate, investors-supported) Mixed Focus • • Niche (technology, social) Mixed-use Sector Location • • • • Single Mixed Physical Virtual Supporting entrepreneurs: business incubators and accelerators 20 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 Supporting entrepreneurs: business incubators and accelerators 21 Accelerator definitions • “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.” Supporting entrepreneurs: business incubators and accelerators 22 Accelerator definitions • 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) Supporting entrepreneurs: business incubators and accelerators 23 Accelerator definitions • 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’ Supporting entrepreneurs: business incubators and accelerators 24 Accelerator types Similar to incubators Mandate • • For-profit Non-profit Sponsorship • • • Public (governmental, academic, NGO) Private (corporate, investors-supported) Mixed Focus • • Niche (technology, social) Mixed-use Sector Location • • • • Single Mixed Physical Virtual Supporting entrepreneurs: business incubators and accelerators 25 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 Supporting entrepreneurs: business incubators and accelerators 26 Incubator/accelerator services 1. Infrastructure • • • • 2. Financial services / Access to finance • • • • 3. Private or shared office space Office materials and ICT services Shared laboratory with specialized equipment Informal areas 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 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. Supporting entrepreneurs: business incubators and accelerators 27 Incubator/accelerator services 4. Training • • 5. 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 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 Supporting entrepreneurs: business incubators and accelerators 28 How to choose an incubator/accelerator Supporting entrepreneurs: business incubators and accelerators 29 How to choose an incubator/accelerator? 1. Carefully analyse your own needs 2. Carefully analyse what the incubator/accelerator has to offer 3. Make sure you match them Supporting entrepreneurs: business incubators and accelerators 30 How to choose an incubator/accelerator? 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? Supporting entrepreneurs: business incubators and accelerators 31 How to choose an incubator/accelerator? 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? Supporting entrepreneurs: business incubators and accelerators 32 How to choose an incubator/accelerator? 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)? Supporting entrepreneurs: business incubators and accelerators 33 How to choose an incubator/accelerator? 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? Supporting entrepreneurs: business incubators and accelerators 34 How to choose an incubator/accelerator? • 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 Supporting entrepreneurs: business incubators and accelerators 35 How to prepare and make most of an incubators/accelerator Supporting entrepreneurs: business incubators and accelerators 36 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!) • • 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!) • • Consider adding “missing pieces” 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. Supporting entrepreneurs: business incubators and accelerators 37 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 Supporting entrepreneurs: business incubators and accelerators 38 Business incubators in Egypt Supporting entrepreneurs: business incubators and accelerators 39 Entrepreneurship ecosystem in Egypt 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 Business incubators Supporting entrepreneurs: business incubators and accelerators 40 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 Supporting entrepreneurs: business incubators and accelerators 41 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 Supporting entrepreneurs: business incubators and accelerators 42 Incubators in Egypt Name Type Mandate/Af filiation Location Activity Length (months) Seed Funding Equity Incubator & Accelerator Governmen t Cairo area ICT/Tech 12 No No 1 Technology Innovation and Entrepreneurship Centre (TIEC) 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/Sustai nable 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 1015% 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/Softwa re 6 $20k <15% 1 0 TechWadi Sprint Accelerator Private MENA + Silicon Valley Tech 1 No No Supporting entrepreneurs: business incubators and accelerators 43 Incubators in Egypt Technology Innovation and Entrepreneurship Centre (TIEC) incubator • • • Since 2011, Governmental incubator 18 companies graduated till now Mainly ICT, but also other tech-based – – • • • Currently 18 companies Examples: water and electricity consumption reduction, solar street lighting, improving agriculture production, etc. TIEC Premises (Smart Village, Cairo) 1-year virtual incubation (no office space) Services: – – – – – No seed funding Up to EGP 120K in services only (consultancy services, ICT and marketing) Work space and basic (hardware and software) tools during incubation Access to technical, subject-matter advisory, business consulting and mentoring Business competitions (Start IT) Supporting entrepreneurs: business incubators and accelerators 44 Incubators in Egypt Technology Innovation and Entrepreneurship Centre (TIEC) accelerator • • • • • • • Since 2013, Governmental accelerator 8 rounds till now (5-15 start-ups/round) Mainly ICT, but also other tech-based TIEC Premises (Smart Village, Cairo) 12 weeks acceleration Business idea into business plan Services: – – – – No seed funding Mentoring and coaching Business plans evaluation by a panel from TIEC, industry and academia experts The qualified teams will pitch their concepts and prototypes in front of investors Supporting entrepreneurs: business incubators and accelerators 45 Incubators in Egypt AUC Venture Lab • • • Since 2013, university incubator (first Egyptian university incubator) 29 companies graduated till now Tech-based start-ups – – • • • 6-10 companies twice per year Mainly ICT Cairo-area 5+8-month incubation/acceleration Services: – – – – – – Funding (US$ 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 Supporting entrepreneurs: business incubators and accelerators 46 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 Supporting entrepreneurs: business incubators and accelerators 47 Incubators in Egypt Sustaincubator • • Since 2014, private incubator Mainly tech-based high-impact start-ups – • 4 locations in Egypt, all in Cairo area – • • Water, food, renewable energy and IT-enabled solutions supporting sustainable causes 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 Supporting entrepreneurs: business incubators and accelerators 48 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 Supporting entrepreneurs: business incubators and accelerators 49 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 Supporting entrepreneurs: business incubators and accelerators 50 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 Supporting entrepreneurs: business incubators and accelerators 51 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 Supporting entrepreneurs: business incubators and accelerators 52 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 Supporting entrepreneurs: business incubators and accelerators 53 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 Supporting entrepreneurs: business incubators and accelerators 54 Incubators in Egypt Business idea Market Supporting entrepreneurs: business incubators and accelerators 55 Thank you. Q&A boris.mrkajic@polimi.it Supporting entrepreneurs: business incubators and accelerators 56