Financing An Incubator - World Bank Innovation And .
05 Financing an IncubatorTrainee Manual Part 2
infoDevc/o the World Bank Group1818 H StreetWashington DC ationinfodev@worldbank.org
Introduction to theTraining Programwww.infodev.orgwww.idisc.net
Suite 2Business Incubator OperationsINTRODUCTION TO THE TRAINING PROGRAMThis is the trainee manual for Module 5 Part 2 - out of 11 modules in total - of infoDev’s State-of-theArt Business Incubation Training Program for Business Incubator Managers in Developing Countries.infoDev (www.infodev.org) is a research, capacity building and advisory services program, coordinatedand served by an expert Secretariat hosted by the World Bank Group. It helps developing countriesand their international partners use innovation and information and communication technologiesinfoDev is a leader in business incubation of technology-enabled enterprises. infoDev’s global businessincubation network reaches close to 300 business incubators, more than 20,000 small and mediumenterprises, and has helped create over 200,000 jobs across 87 developing countries.1infoDev has found that high quality leadership is a key factor determining the probability of successfor an incubator. infoDev therefore seeks to increase the capacity of business incubation managers– and their stakeholders – through one-on-one technical assistance, regional and topical peer-topeer networks, the bi-annual Global Forum on Innovation and Entrepreneurship, and its web-basednetworking and knowledge-sharing tool www.idisc.net. This training program was designed in directresponse to repeated requests from infoDev’s technology entrepreneurship community for an in-TRAINEE MANUAL PART 2(ICT) effectively as tools for poverty reduction and sustainable social and economic development.5This training program is the first-of-its-kind, drawing from the lessons, models, and examples in businessincubation from across Africa, East Asia and the Pacific, Europe and Central Asia, Latin America & theCaribbean, Middle East & North Africa, and South Asia. More than 30 experts contributed directly tothe writing of the training modules, and the materials were tested with more than 300 professionalsin developing countries all of whom provided inputs to the final design.This training program is designed for business incubation managers and other business incubationstakeholders wishing to increase their understanding and know-how of the business incubationprocess. It consists of 11 training modules ranging from basic introductory topics designed forprofessionals new to business incubation, to specialized topics such as Technology Commercializationand Virtual Business Incubation Services.1Souce: infoDev activities from 2002 to 2009 - http://www.infodev.org/en/Article.473.html05 FINANCING AN INCUBATORdepth business incubation training program relevant to the developing country context.
Suite 2Business Incubator OperationsThe modules include:Suite 1 – Business Incubation BasicsModule 1 – Business Incubation Definitions and PrinciplesThis module provides an introduction to business incubation. It introduces key definitions andpresents the main principles and good practices of business incubation. It aims to equip current andfuture incubator managers and policy makers with the knowledge, skills and understanding of theTRAINEE MANUAL PART 2fundamentals of business incubation in order to effectively foster and encourage businesses.Module 2 – Business Incubator Models, Including Success FactorsThis module aims to illustrate various business incubator models based on practical examples ofincubators from all over the world. The ultimate goal of this module is to empower current and futureincubator managers with a thorough understanding of the various business incubator models and theircritical success factors as well as to help them identify the best model to adopt for their own incubatorto be successful.Suite 2 – Business Incubator Operations605 FINANCING AN INCUBATORModule 3 – Planning an IncubatorThis module, which divided in two parts, covers assessing the feasibility and designing the businessmodel for an incubator. The first part is aimed at providing a thorough understanding of developinga feasibility study. This includes the steps to undertake a pre-feasibility study, the components that itshould address, as well as how to gauge the market need and decide whether an incubator is the mostappropriate solution. The second part of the module focuses on business planning to establish theincubator business model.Module 4 – Marketing and Stakeholder ManagementThis module is designed to support efficient and effective communication of the incubator withkey customers and other stakeholders based on a good understanding of the market place. This isimportant since it will help the incubator to establish and increase its reputation as a sustainableorganization that fulfils its mission.The first part of the module focuses on identifying, assessing, and reaching customers/ stakeholders, aswell as potential ally organizations providing business support services to enterprises; while the secondpart is dedicated to defining the incubator’s value proposition and engaging marketing channels.Module 5 – Financing an IncubatorThe first part of this module aims to guide current and future business incubator managers throughmastering the incubator’s financial data (such as costs and revenues) in order to enable them toidentify the financing needs of the organization as well as to explore potential sources of financing.Building on the first part, the second part of the module is dedicated to demonstrating, to current
Suite 2Business Incubator Operationsand future business incubator managers, how to develop a fundraising strategy and to monitor thefinancial performance of an incubator.Module 6 – Managing the IncubatorThis module provides current and future business incubator managers with an overview of soundmanagement practices for a successful incubator.The first part addresses the topics of incubator policies and governance and the second part isModule 7 – Monitoring, Evaluation and BenchmarkingThis module aims to provide incubator managers with the required information, skills and insights todevelop their own monitoring and evaluation system and to carry out benchmarking activities.The first part of the module is dedicated to helping the incubator manager understand the addedvalue of monitoring and evaluating the performances of his/her incubator; defining relevant andadequate performance indicators; and exploring how to monitor and evaluate, notably by studyingTRAINEE MANUAL PART 2dedicated to operations and human resources management.existing tools and methodologies.7through monitoring and evaluation activities to compare the business incubator’s performance withthose of similar organizations.Suite 3 – Advanced Incubator ManagementModule 8 – Implementing a Mentoring ProgramThis module provides, in its first part, a conceptual framework for gaining a thorough understandingof the mentoring process and its purposes from three perspectives: that of the business incubator, thementor, and the mentee.The second part of the module focuses on how to implement a mentoring program.Module 9 – Deals and Financing for Incubator ClientsThis module aims to provide a thorough understanding of the alternative sources of financing forincubator clients by notably describing programs and processes that will enable the incubator managerto assist his/her clients in accessing financing.The first part focuses on preparing incubatees to engage in the process of accessing financing whiledeveloping the capacity of the incubator to assist incubatees in accessing financing. The second part ofthe training module explores financing from the perspective of both the incubatees and the incubator.Module 10 – Technology Commercialization through IncubationThis module describes technology commercialization divided in two parts. The first relating to05 FINANCING AN INCUBATORThe second part focuses on empowering the business incubator manager to use the data collected
Suite 2Business Incubator Operationschallenges and lessons learned associated with this process as well as how to manage expectationsregarding the results of technology commercialization. This part also concerns the role of the incubatorin facilitating technology commercialization in the pre-incubation phase.The second part of this module focuses on the role of the incubator in technology commercializationin both the incubation and the growth phases.Module 11 – Setting Up Virtual ServicesThe first part of this module provides a conceptual framework for understanding virtual services. It isTRAINEE MANUAL PART 2designed for current and future business incubator managers who are considering virtual incubation05 FINANCING AN INCUBATOR8either as a stand-alone business model or as part of their overall incubator service portfolio to extendtheir current service offering.In its second part, the module aims to guide current and future business incubator managers and helpthem to decide if virtual incubation is the right solution for their incubator. The module then exploresthe most common challenges and how to address them.Figure 1 groups the modules by preferred level of experience and suggested module sequence.
Suite 2Business Incubator OperationsModule 1 - Business IncubationDefinitions and PrinciplesModule 2 - Business Incubator Models,Including Success FactorsSuggested tobe donesequentiallyModule 3 - Planning an IncubatorModule 4 - Marketing and StakeholderManagementModule 6 - Managing the IncubatorModule 7 - Monitoring, Evaluation andBenchmarkingMoreExperiencedThese modulesare for incubatormanagers andtheir staffDon’t needto be donesequentiallyModule 8 - Implementing a MentoringProgramModule 5 - Financing an IncubatorModule 9 - Deals and Financing forIncubator ClientsSuggested tobe donesequentiallyTRAINEE MANUAL PART 2LessExperiencedThese modulesare for incubationpractitioners whoare “beginners”or incubatorstakeholdersStand AloneModulesThese modulesare for incubationmanagersdealing with hightech or looking atextending theirservice offeringModule 10 - TechnologyCommercialization through IncubationModule 11 - Setting Up Virtual ServicesFigure 1 – Module Selection and SequenceDon’t needto be donesequentially05 FINANCING AN INCUBATOR9
Acknowledgementswww.infodev.orgwww.idisc.net
Suite 2Business Incubator OperationsAcknowledgementsThe training curriculum was developed by the following consortium under the direction of infoDev:European Business & Innovation Centre Network Robert Sanders, Head of International ProjectsBabson College Mark P. Rice, Frederic C. Hamilton Professor for Free EnterpriseSociedade Portuguesa de Inovação, S.A.TRAINEE MANUAL PART 2 Julia Brethenoux, Project Manager Augusto Medina, President Mark Spinoglio, Senior Consultant13 Nuno Gonçalves, ConsultantinfoDev wishes to thank its innovation and entrepreneurship community, including those who providedmaterial for and whose names appear in the case studies. In particular, infoDev wishes to thank thefollowing individuals for their contributions to developing this training curriculum: Seth Ayers ICT – Policy Specialist, infoDev Michel Botzung – Business Edge Manager, International Finance Corporation Alistair Brett – Cottingham Associates LLC, Consultant Member of the Science TechnologyInnovation Global Expert Team, The World Bank Raimund Broechler – Senior Delivery Manager, Intrasoft Valerie D’Costa – Program Manager, infoDev Heinz Fiedler – infoDev Regional Facilitator for the Middle East and North Africa Han Fraeters – Manager, The World Bank Steve Giddings – infoDev Regional Facilitator for the Africa region Stephen Hampson – Managing Partner, Powerhouse-Ventures Jane Hill – Venture Partner, Powerhouse-Ventures05 FINANCING AN INCUBATOR Douglas Thompson, Senior Consultant
Suite 2Business Incubator Operations Sheila Jagannathan – Senior Education Specialist (E-Learning), The World Bank Institute Natasha Kapil – Private Sector Development Specialist, The World Bank Anthony Lambkin – Task Manager, Low-Carbon Innovation Program, infoDev Gideon Maas – Co-Director of the Institute of Applied Entrepreneurship at Coventry University,United Kingdom Kiragu Maina – Senior Operations Officer, International Finance CorporationTRAINEE MANUAL PART 2 Siobhan McQuaid – Project Director, ABÚ International Project Management Mustapha Mezghani – infoDev Regional Facilitator for Africa Mark Nielsen – Senior Advisor, Business Edge Management Training, SME ManagementSolutions, International Finance Corporation Ellen Olafsen – Operations Officer, infoDev Edward Rubesch – Director, Technology Licensing Office National Science and TechnologyDevelopment Agency, Thailand Tania Saba Mazraani – Director, Technology & Health, Berytech, Lebanon05 FINANCING AN INCUBATOR14 Jill Sawers – infoDev Innovation and Business Incubation Consultant Stefan Schandera – infoDev Regional Facilitator the East European and Central Asian region Julian Webb – infoDev Regional Facilitator for Asia Cesar Yammal – infoDev Regional Facilitator for Latin America and the Caribbean Krzysztof Zasiadly – infoDev Innovation and Business Incubation Consultant Sylvia Zulu – SME Toolkit Program Manager, International Finance Corporation
Module Indexwww.infodev.orgwww.idisc.net
Suite 2Business Incubator OperationsACKNOWLEDGEMENTS11MODULE INDEX15TABLES AND FIGURES18MODULE OBJECTIVES19INTRODUCTION TO THIS MODULE23COMPONENT 3 (PART 2 TRAINING): DEVELOPING A FUNDRAISING STRATEGY27COMPONENT INDEX29COMPONENT OBJECTIVES29SECTION 3.1: ASSESSING FUNDING CHALLENGES IN DEVELOPING COUNTRIES30SECTION 3.2: DEVELOPING THE APPROPRIATE FUNDRAISING STRATEGY32COMPONENT CONCLUSIONS42COMPONENT 4 (PART 2 TRAINING): MONITORING THE INCUBATOR’S FINANCIAL PERFORMANCE 43COMPONENT INDEX45COMPONENT OBJECTIVES45SECTION 4.1: INDICATORS OF SUCCESSFUL FINANCIAL MANAGEMENT46SECTION 4.2: OPPORTUNITIES & SUCCESS MODELS FOR SUSTAINABILITY48COMPONENT CONCLUSIONS51CASE STUDIES53SUBSIDIZATION FINANCING MODEL55THE JOURNEY TO SELF-SUSTAINABILITY59BIBLIOGRAPHY65TRAINEE MANUAL PART 231705 FINANCING AN INCUBATORINTRODUCTION TO THE TRAINING PROGRAM
Suite 2Business Incubator OperationsTables and figuresTABLE 2 – ARGUMENTS FOR FUNDING, DETAILED BY EACH TYPE OF FINANCIER33FIGURE 1 – MODULE SELECTION AND SEQUENCE9FIGURE 10 – THE IMPORTANCE OF FUNDRAISING ACTIVITIES PER STAKEHOLDER32TRAINEE MANUAL PART 2FIGURE 11 – THE IMPACT OF infoDev GRANT TOWARDS THE IMPLEMENTATION OF BUSINESS05 FINANCING AN INCUBATOR18INCUBATION ACTIVITIES35FIGURE 12 – ADDITIONAL BENEFITS OF AN infoDev GRANT FOR THE INCUBATOR’S ACTIVITIES36FIGURE 13 –AVERAGE AMOUNT AN infoDev GRANT HELPED SECURE FOR THE INCUBATOR’SFUNDRAISING ACTIVITIESFIGURE 14 –ACTIVITIES UNDERTAKEN BY CLIENTS OF INCUBATORS RECEIVING infoDev GRANTS3738FIGURE 15 – NUMBER OF NEW CLIENT BUSINESSES WHOSE START WAS SUPPORTED BY infoDev GRANTRECIPIENTS39FIGURE 16 – TOTAL NUMBER OF CLIENTS infoDev GRANT RECIPIENTS HAVE WORKED WITH SINCETHEIR FOUNDING40FIGURE 17 – CONTRIBUTION OF BUSINESS INCUBATION TOWARDS THE CREATION OF JOBS41
Module Objectiveswww.infodev.orgwww.idisc.net
Suite 2Business Incubator OperationsThis module is divided into two parts, each with two main objectives. The objectives of Part 1 are (1) toprovide incubator managers with the tools they need to identify the incubator’s funding requirementsand (2) to explore potential sources of financing. The objectives of Part 2 are (1) to explain importantaspects for developing a fundraising strategy and (2) how to monitor the financial performance of theincubator.Trainee Training Objectives Set up spreadsheets outlining the incubator’s costs and revenues; Identify the funding needs of the incubator and the corresponding available fundingresources; Develop an adequate fundraising strategy; and Monitor the financial performance of the incubator towards financial sustainability.2105 FINANCING AN INCUBATORto:TRAINEE MANUAL PART 2By the end of this training, the trainee (an incubator manager or staff member) will understand how
Introduction to this Modulewww.infodev.orgwww.idisc.net
Suite 2Business Incubator OperationsIncubators need to secure and carefully manage financial resources. Financial resources are neededto: Establish the business incubator; Start its activities; Operate efficiently and in a manner that contributes to achieving the incubator’s overallgoals; andHence, a business incubator should be managed with an entrepreneurial mindset.By exploring the different funding opportunities available in their catchment area, an incubatormanager may develop a targeted fundraising strategy in order to secure the most appropriate sourcesof funding to meet the incubator’s funding requirements. This also involves determining the mostappropriate revenue streams to cover the costs generated by the incubator’s activities.In addition to bringing in funds and revenues, managers must carefully manage how these financialresources are used. Operations need carefulTRAINEE MANUAL PART 2 Ultimately, reach sustainability.25incubator manager will monitor cash flow,projected and real revenues, investments andexpenditures.By applying the information contained in thismodule, incubator managers will learn howto determine the incubator’s investment andrevenue needs as part of an accurate budget. Tothis end, business incubation practitioners willhave access to the adequate tools and sourcesof financing to efficiently manage the incubator’sfinancial position and drive the organizationtowards sustainability.Note: The module has been designedfollowing a “keep it simple” approachin order to ensure the uptake of thesignificant amount of terms andconcepts, which are illustrated bytemplates in the manual. Moreover,the definitions of all terms andconcepts addressed in the currentmodule can be easily found in theGlossary of Terms provided along withthe manual.Nonetheless,specifictrainingmaterial, such as Business Edge andthe SME Toolkit (referred to in thenext pages), provide more detailedresources for business incubationpractitioners to refer to for an indepth hands on implementationof the learning outcomes from thetraining module.05 FINANCING AN INCUBATORattention and strict record keeping. An effective
Component 3(Part 2 Training):Developing a FundraisingStrategy
Suite 2Business Incubator OperationsComponent indexSection 3.1.: Assessing Funding Challenges in Developing CountriesSection 3.1.1: Cost of Financing and BureaucracySection 3.1.2: Information GapsSection 3.1.3: Lack of Institutional DevelopmentSection 3.1.4: Political and Economic InstabilitySection 3.1.5: CorruptionSection 3.2.: Developing the Appropriate Fundraising StrategyComponent OBJECTIVESThis component is designed to support the trainee in defining the appropriate fundraising strategyin response to the incubator’s identified funding gap. By highlighting the particular challengesTRAINEE MANUAL PART 2Section 3.1.6: Unreliability of Government and Donor Fundingof fundraising activities in developing countries, the aim of this component is to enable incubatorAt the completion of this component, trainees should be able to identify and overcome the specificfundraising challenges in their area and adopt the most relevant strategy in order to secure thenecessary funds for the incubator to operate efficiently.2905 FINANCING AN INCUBATORmanagers to define the most appropriate fundraising strategy for their incubator.
Suite 2Business Incubator OperationsSection 3.1: Assessing Funding Challenges inDeveloping CountriesThere are several challenges and obstaclesTRAINEE MANUAL PART 2Note: The following challenges andobstacles do not represent all possiblefactors impacting the availability of capitalfunds in developing countries, but areinstead a summary o
5 05 FINANCING AN INCUBATOR TRAINEE MANUAL PART 2 Suite 2 Business Incubator Operations INTRODUCTION TO THE TRAINING PROGRAM This is the trainee manual for Module 5 Part 2 - out of 11 modules in total - of infoDev’s State-of-the- Art Business Incubation Training Program for Business Incubator Managers in Developing Countries.
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The variability of the incubator temperature that will be observed over a one-hour period after incubator temperature equilibrium has been reached. TEMPERATURE RISING TIME. The time required for the incubator temperature to rise 11 , when t
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