Current model is the infoDev model. infoDev is a powerful and well-known World Bank program that “grows innovation around the world”. They work in five different areas: Access to Finance, Agribusiness Entrepreneurship, Climate Technology, Mobile Innovation, Women Entrepreneurs. One of the works they do is helping entrepreneurs by bringing them business coaching, access to early-stage financing, and better entrepreneurship environments (which are often include business incubators). They have published several materials that could be valuable for those who are creating business incubators. One of the models will be described today. An interesting point about this model of Business Incubation Series is the linkage between business incubation phases and entrepreneurial life cycle.
2009, InfoDev, process, internal, operations
I think what many business incubators miss is real links between entrepreneurs problems and what they (incubators) can propose. Let’s shortly describe the classical business incubator. They are, firstly, organizations that have limited resources (people, money). Secondly, business incubators are constrained by their sponsors (government, or private investors) and act according to the goals they have been assigned. This happens if they are dependent on financing and do not have independent income streams to be selfsustainable. Lastly, business incubators act within the “traditional innovation ecosystem” which has the following laws: 9 out of 10 fails (thus, create a diversified portfolio to reduce risk), pick the best of the best and invest (“pick the winners policy”), lack of resources.
In order to be successful incubator have to balance between external and internal parties. Therefore, they have to choose either they exist but help few (due to lack of resources) startups and get funding from external sponsor. This usually ends up in applying only business incubation stage (not pre-incubation or post-incubation). Or they apply different strategy and try to develop and accelerate projects like business accelerators (Y Combinator, TechStars, 500Startups, etc), acting fastly in order to resell the project to venture fund or other investor (from their network). But very few incubators really adjust their processes to the entrepreneurial life cycle. This is what infoDev model is about.
The InfoDev model (2009) proposes how to link entrepreneurial life cycle and incubation process. Entrepreneur passes four stages: idea, startup, expansion, maturity. Incubator (as a SME development tool) proposes three main stages (and one small pre-stage):
- Germinate This is the very earliest stage of intervention, where you entrepreneurial ideas come. This is also the most riskiest part of the venture because high uncertainty exists. Moreover, due to lack of knowledge, capabilities, etc. this is the most expansive part for entrepreneur and business incubator. They should invest time and effort mostly.
- Pre-incubation. The main goal of the stage is to help an individual with an idea. This is the most riskiest and expensive stage of the process. Very few incubators can afford this kind of activity where they can access public support or private risk capital. This is often required in high-tech innovation industries and with incubators closely attached to universities. Authors believe that this innovation comes out of need.
- Incubation. An idea has graduated to a plan, with a team, and operations have begun. Consequently startup started scaling and expansion. Risks are still high, investments here are expensive and still don’t bring any profit. Incubators help in a search of business model, provide business assistance, build the team, provide resources, access to networks, and capital sources. Some incubators invest in the companies.
- Post-incubation. “This is where a profitable company merely seeks a particular type of facility.” There is basically no need of intervention by an incubator, but experience shows that incubators still help companies. For instance, many companies continue to rent spaces in an incubator. As authors accentuate for some incubators “this relationship with mature companies can be a crucial strategy to assist with and subsidize their other programs.” Companies are mature, and safe.
Summary of the Model
|Source (Author, Year):||InfoDev, 2009|
|Purpose of a model:||To link business incubation process with entrepreneurial life cycle|
|Type of a model:||Process model|
|Theoretical background:||Entrepreneurial life cycle, InfoDev|
|Processes and practices:||InfoDev splitted the process into 3 stages:
|Efficiency and effectiveness:||No information|
|Linkages “Entrepreneur – Business Incubator – Innovation Ecosystem”:||Incubation should have direct relation to the startup life cycle. According to that authors defined three types of interventions that could be done: pre-incubation, incubation, post-incubation.|
|Key contribution:||Model provides strong links between entrepreneurial life cycle and incubation process.|
Business incubators could adopt different strategies for incubating startups. The most complicated strategy for incubator, and the most valuable for an entrepreneur is the way when incubator links it’s processes and phases of incubation to entrepreneurial life cycle. This method means that business incubator should have resources, processes and instruments for pre-incubation, incubation and post-incubation stages.
 InfoDev, 2009