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Money Matters

Incubators are businesses, just like any other, and have a bottom line to attend to. As practitioners in this challenging field, we therefore have to constantly find ways to optimise our sources of income from the incubation activity, as part of our overall portfolio of support to innovative enterprises.

Unless underwritten by state or regional authorities or indeed, higher-education colleges, incubators are fundamentally businesses too; ones that need to survive, grow and pay their way. They need a market presence, a strategy and a business model to sustain their survival and participation in the applied innovation eco-system of their region. An incubator has to be run as a business and needs to be able to ‘wash its face’, to use an Irish colloquialism.

WESTBIC currently runs four incubation sites in the Border, Midland and Western Region (NUTS2) of Ireland. The biggest of these, the Galway Technology Centre (www.gtc.ie), is a 5,000m2, ICT-dedicated centre which has become an international cluster of global names trading side-by-side with indigenous start-ups and early-stage ICT companies. It was founded from the ashes of Digital Hardware, following its closure back in 1993/4, with the Chamber of Commerce as the lead partner and developer, and WESTBIC as the delivery partner. The results were testimony to what an accredited EC-BIC (Business and Innovation Centre) and its extended networks could achieve. The cumulative job creation record of the Centre is now a multiple of the jobs lost during Digital’s collapse. That story alone is a case study in itself and worth describing in greater detail at a later date. What remained became Compaq, which then became HP who, most appropriately, came back again in tangible support of the GTC.

Part of the incubator mix includes ‘Fiontarlann’ (www.fiontarlann.com) which was developed, built and delivered as a second incubation facility in the rural Gaeltacht (Gaelic speaking) area of South West Donegal. This incubator served to attract more art-related and digital relevant market niches, while the other two centres are currently more desk incubation in nature. The first of these is operated as part of the Mayo Ideas Lab, which pilots initiatives with local partners further up-stream on the innovation curve. The other is located in the Midlands in County Roscommon and is supported by the municipality and a number of local partners in that area.

Consistent with core marketing principles, the division and ‘divisibility’ of the overall product mix, to suit the various market niches, is a necessary approach to optimise on revenue returns.

Hot-desking

WESTBIC accommodates entrepreneurs who just want to use a desk and ‘plug in’ to the incubator’s advanced technology, to perhaps test a concept. This activity is accommodated at ‘The Cube’, a separately branded facility of desk incubation, perfected and replicated at each site. For the client, the deal is a flexible one and well-suited to companies who need to travel throughout the region, but need a fixed ‘post box’ or IP address, if necessary, and to be able to access the same facilities as they move around the region. This solution can also work for companies with executives active in various parts of the region on a part-time basis. They may only need a desk, one day per week, but need to have very good connectivity on that day and a five-star facility to hold business meetings, receive important customers, and gain easy on-site access to other support services and vital networks in the WESTBIC portfolio.

Soft-landing

Matching the client’s overhead usage to need is key, and very appealing to companies, especially in these times. Current capacities at WESTBIC can accommodate small companies employing two, three or four people, and mid-sized companies of up to 20 people. A recent example was the US global player who ‘soft landed’ in the Galway site about two years ago with two employees. They recently graduated to a purpose built, stand-alone site, nearby, with 130 employees. Companies can grow or down-size or merge with a neighbour on a new contract in the incubator. Experience has shown that it is vital to match the rentals to space and growth of employees in order to expand on an upwardly mobile route. Yet, oddly (or maybe not so oddly) enabling the easy departure of a company from an incubator, is a very attractive feature for companies, and a key reason spaces such as this get picked over others. It is all about the client and their needs on their development curve.

Inward investment

Being the ultimate resource for a budding business can be lucrative for an incubator. Fiontarlann, for example, presently offers support to the project management needs of a prospective incubatee who wishes to out-source that service, until they can build more secure revenues themselves and justify the HR investment ‘in-house’. For Fiontarlann it is an additional revenue stream and greatly enhances the holistic and integrated nature of the relationship with the incubatee and, no doubt, adds significantly to their ‘feel good’ experience – which always leads to additional revenues through a variety of means, like referrals and customer loyalty. Therefore it is crucial to invest in overheads and hardware so that the incubatee does not need to.

At Galway the span of services and facilities can be customized to suit the needs of an incubatee company using the Centre. Because the incubator has invested in these core technology services, start-ups and developing companies can focus their scarce resources on innovation, product development and marketing. Start-ups in particular need a low threshold of access and need to avoid overheads in those vital, early stages of growth and traction in the market. It is very beneficial to them that the infrastructure is already there so that they can avoid contracts with utility companies, avoid onerous lease arrangements and work on a ‘plug-and-play’ and an ‘easy-in-easy-out’ basis.
From a revenue optimisation point of view, incubators can buy and sell the connectivity, allowing a margin for the incubator. Megabytes of broadband and telephony can be sold at a profit both on-site and off-site by beaming broadband from the roof into certain areas with ‘line of sight’ access.

Win the space-race

Incubator spaces do not just have to be on loan to incubate tenants. Expanding on the use of the existing space offers benefits to the business community around, as well as giving the incubator another means of revenue.

HP MAP (Micro-Enterprises Acceleration Programme) is an example of how well this concept works. The HP MAP suite is a further facility on offer in both the Midlands site and the Galway site. It is a well-appointed computer lab and meeting/training facility sponsored by HP that in the Galway site has its own server and state-of-the-art multi-media equipment. This is in fairly constant demand from both within and outside the Centre and is attractive to major neighbouring large corporates on the Business Park who want to engage in ‘off-site’ workshops, planning and training initiatives. An innovative way to raise revenues is to offer the full service of tea/coffee/refreshments, lunch and break-out rooms and open mezzanine space for such groups in a most flexible and client-centred way, as companies are attracted to this conferencing facility. They come into an entrepreneurial environment and have it all laid on with competitive rates and a pay-as-you use principle. The return on the facility, to the bottom line, is above the equivalent if that space was simply occupied by a single company.

And so...

In these difficult times, flexibility and client-centred thinking is definitely the order of the day. Knowing what and how to buy and sell beyond ‘just space’ is commercially important for the incubator. It is equally advantageous for the company or entrepreneur who needs to use such facilities in a timely manner in order to gain that vital foothold in a market where they are developing and selling their knowledge-based solutions. Simply stated, it pays to continually seek out other add-on support services and network-based advantages to pass on to our community of innovators – putting the incubator at the heart of the business needs of not just the entrepreneur, but the local business community as a whole. Relying on grants and handouts is no longer the only viable and sustainable option available to the rap?dly expand?ng incubation industry. We must consider that self-funding and maximising revenue sources from within may well be the route to enhancing financial survival in these challenging times that we are all facing.






Current EBN President, Joe Greaney, has worked with start-ups in the West of Ireland since 1981 and is one of the longest serving CEOs of an EC-BIC across the EU. He is the founding Director of the Galway Technology Centre Ltd, the Irish BICs Seed Capital Fund Ltd, Gaillimh le Gaeilge Teo, and is an elected Director of Galway Chamber of Commerce, having already served as President. He is a long-time contributor to policy in Economic Development and Innovation delivery at EU level and is regularly invited to share his experience and knowledge in Applied Innovation measures in EuropeAid supported countries.

www.westbic.ie
Published on 23-05-2012 10:01 by David Tee. 1308 page views

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