Best practice for incubators in Region Vstra Gtaland

1
Developing Industrial Strategies Through
Innovative Clusters and Technologies

• Best practice for incubators in Region Västra
  Götaland
• Chalmers Innovation, Gothenburg
  
• Gothia Science Park, Skövde

Best Practice for Incubators
2
Preface to the Study of Best Practice for
Incubators

• The idea for this study evolved from discussions
  in Thematic Working Group (TWG) Start-ups within
  the ERIK network (European Regions Knowledge
  Based Innovation Network, part funded by DG
  Regional Policy) in which Region Västra Götaland
  is a member. These initial discussions were then
  followed by in-depth working group sessions
  involving the regions of Hamburg, Lower Austria
  and Västra Götaland. These working group sessions
  were paid for with funds provided by the regional
  budget of ERIK . However, it was not possible to
  use ERIK funding to pay for the study itself
  due to the projects limited budget. It was
  therefore decided that the study would be funded
  by the regional budget within the DISTRICT
  programme within Interreg IIIC (part funded by DG
  Regional Policy) in which Västra Götaland is a
  partner, along with the regions of Tuscany, West
  Midlands and Sachsen. Under this programme, the
  region of Västra Götaland is responsible for the
  thematic area start-ups, spin-offs and financial
  engineering. This study was therefore of interest
  for augmenting our knowledge of the working
  methods of different incubators, since these play
  a major role in assisting with new start-ups.
  This knowledge can be passed on to other European
  regions. This study can also be of interest to
  the region of Västra Götaland, which expends
  considerable resources for part funding of almost
  all incubators in the region. This is to increase
  the number of technology-based and
  knowledge-intensive companies with potential in
  the global market. It should be pointed out that
  the incubator system is relatively new in the
  region of Västra Götaland. The first
  publicly-funded incubator was opened as recently
  as 1998 (Sahlgrenska Science Park however, this
  has operated solely as an incubator only in the
  last couple of years). Most of the incubators in
  the region were established in 2002 or at a later
  date. The public investment in a more systematic
  means of developing advanced innovations is thus
  quite recent. The forerunners of the incubators
  were The House of Innovations at Chalmers
  University of Technology and the Business
  Innovation Centre (BIC) an EU concept, which
  began in Uddevalla in 1995. It is this latter
  concept that worked with advanced business
  development for starts-ups in the industrial
  sphere, but without any incubator activity.

Best Practice for Incubators
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• To be able to carry out this study, it was
  essential that the chosen incubators had worked
  enough years for their working methods to have
  been verified and that the incubator companies
  interviewed had gone through the entire process.
• The regional dimension was also of particular
  interest the different techniques and working
  methods of the incubators in various research and
  development environments, such as a metropolitan
  city area and smaller university college town. It
  was also important that the management/key
  persons were still with the company, since the
  study also adopted a company perspective, i.e.
  the companys experience of the incubators
  service and support.
• Chalmers Innovation in Gothenburg (began
  operating in 1999) and Gothia Science Park in
  Skövde (2000) were considered as the most
  successful in their respective regional segments.
  These are also two of the oldest incubators in
  Region Västra Götaland. For that reason, these
  two were chosen for this study.
• The nine incubators operating in the Region are
  mentioned in the study. It ought to be added that
  a tenth incubator is being established (CIEL in
  Lidköping). This means that five incubators are
  operating in the Gothenburg city area and five in
  towns with university colleges or university
  departments. In addition to these ten incubators,
  which are part funded by the Region Västra
  Götaland, there is also a private incubator in
  Gothenburg that is run by Scandinavian Financial
  Management (SFM). This receives no public
  funding. Yet another private incubator, which has
  a more virtual organisation, is located in
  Gothenburg. Incubator Expertise is a regional
  network that promotes the exploitation of
  synergies and the skills development of publicly
  funded incubators. This is financially funded by
  Region Västra Götaland.Consequently, the
  incubators play a vital role in helping
  innovative start-up companies in the process of
  gaining a foothold in the market. It is also
  essential that these companies develop corporate
  concepts that are of such quality and show such
  potential that they can obtain private funding at
  later stages. However, funding has to come from
  public sources in the early stages because access
  to private seed capital is limited. Similarly,
  the incubators depend on a great influx of
  innovative concepts, driven by dynamic
  entrepreneurs, so that they can select the
  concepts that show most potential and good
  marketing prospects.If the regional public
  innovation system is going to be successful, it
  also has to contain these elements.

Best Practice for Incubators
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• In recent years, Region Västra Götaland has
  systematically invested in these key areas too.
  In order to promote academic entrepreneurship,
  each university and university college now has an
  entrepreneur school. This initiative was inspired
  by the Chalmers School of Entrepreneurship, which
  began in 1997 in Gothenburg. The school was later
  expanded with a pre-incubator. The Chalmers
  School of Entrepreneurship also now has a branch
  in Lidköping. To foster entrepreneurship and
  business development at universities and
  university colleges, Chalmers University of
  Technology and Gothenburg University developed
  the Hothouse concept at about the same time as
  Chalmers School of Entrepreneurship. This concept
  has since spread to other university colleges in
  the region. The University in Skövde has its own
  variety called Startblocket (Starting Block),
  which was launched in 2005. As well as
  encouraging entrepreneurship and trying to change
  attitudes to self-employment, many Hothouses also
  provide assistance and advice to simpler
  start-ups.
• Connect Väst also focuses on developing
  entrepreneurs and start-ups with what it calls
  its springboard programme. Connect began in
  Gothenburg in 1999 using Connect San Diego in
  California as its role model and now also works
  with new, promising companies through various
  networks, such as business angel networks.
  Connect is run by a private-public partnership
  with limited public funding. In recent years,
  Connect Väst has also established branches in all
  university towns across the region. One important
  organisation that promotes new concepts and
  business ideas by arranging annual business plan
  contests is Venture Cup. As can be seen from this
  report, numerous concepts have started in
  Gothenburg, particularly at Chalmers University
  of Technology, and have then spread to the three
  university towns in the region. In the area of
  public funding in early business stages, Region
  Västra Götaland has been a forerunner with seed
  capital for start-ups. These initiatives began in
  2001 and in recent years have been developed and
  augmented with other initiatives in partnership
  with private and public players, such as
  Innovationsbron Väst and ALMI Väst. These two
  players also have their own funding solutions,
  such as option loans and start-up loans
  (Innovationsbron Väst) and innovation loans
  (ALMI). The regional holding companies also play
  a key role. The public efforts have been focused
  on the early stages (pre-seed and seed capital)
  as it is difficult to obtain private venture
  capital for these early stages. The companies may
  receive some public funding during their
  expansion phase through holding companies and
  initiatives with private/public partnerships.

Best Practice for Incubators
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• The appended illustrations show, in a somewhat
  simplified manner, the most important components
  of this innovation system.
• If all of these key components
  entrepreneurship initiatives, incubators and
  public venture capital in early stages are
  weighed together, Region Västra Götaland probably
  has the best
• public-funded innovation system for
  technology-based and knowledge-intensive
  start-ups of any region in Sweden. However, the
  system needs to be developed in order to exploit
  all the potential that exists. It is therefore
  necessary to devise and test new concepts while
  at the same time continually improving existing
  initiatives.
• This study has been conducted by Scandinavian
  Financial Management (SFM) at the request of
  Region Västra Götaland. The authors are
  responsible for the conclusions and
  recommendations that have been made.
• Christer Enerskog
• Regional Coordinator for DISTRICT
• in Region Västra Götaland and
• member of ERIK
• www.vgregion.se/district
• www.district-rfo.eu
• www.eriknetwork.net

Best Practice for Incubators
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7
Best Practice, Chalmers Innovation and Gothia
Science Park
Martin Skoglund (SFM AB) and Petter Skoglund
(Blåbergsholmen) Gothenburg December 2006 Revised
March 2007
Best Practice for Incubators
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List of contents

• Background
• Basic concept and purpose
• Listing of interviews and literature
• Regional conditions
• Summary of regional disparities and conclusions
• Description of processes and structures
• Interviews with incubators and conclusions drawn
  from these
• Conclusions and recommendations to achieve best
  practice
• Discussion
• Appendix

Best Practice for Incubators
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Basic concept

• To identify best practice for incubators working
  under different
• conditions. A focus on Chalmers Innovation in
  Gothenburg and Gothia Science
• Park in Skövde

Best Practice for Incubators
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Chalmers Innovation

• The Chalmers Innovation Foundation was created in
  1997 through a donation to Chalmers from the
  Sten A Olsson Foundation for Research and
  Culture. This donation provided the basis for
  creating the Chalmers Innovation Foundation and
  enabled the development of a centre for
  innovative activities at Chalmers.
• Facts
• Chalmers Innovation was launched in May 1999
• At present, there are 18 companies in the
  incubator and 4 in the pre-incubator
• Number of new companies each year 10-12
• Number of graduate companies 43 companies in
  business today and 14 no longer operating
• External capital attracted to the companies EURO
  88.6 million invested capital (accumulated since
  inception) EURO 10.9 million in public funding
  (accumulated since inception)
• Number of business developers 7

Best Practice for Incubators
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Gothia Science Park

• Gothia Science Park provides a complete
  environment for expanding, knowledge-intensive
  companies at the campus of the University of
  Skövde. The University of Skövde offers
  programmes with an emphasis on business where the
  main focus is on computing, natural science,
  technology, economics and humanities.
• Facts
• Gothia Science Park opened for business in 2000
• At present, there are 8 companies 3 projects in
  the incubator
• Number of new companies each year 3-5 on average
  
• Number of graduate companies 25
• External capital attracted to the companies EURO
  1,7 million invested capital (accumulated since
  inception) EURO 540 000 in public funding
  (accumulated since inception)
• Number of business developers 2.5

Best Practice for Incubators
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Purpose of the study

• Using good examples from two cities with
  different conditions, this study seeks to
• Illustrate disparities in conditions of best
  practice in two different local environments
• Show how best practice is implemented practically
• Provide guidance for how other incubators can
  manage and improve their operations
• Suggest areas of improvement to the incubators in
  the study to help them enhance their business
  offering
• Provide guidance on requirements for start-up of
  incubators
• Provide guidance on management of new incubators

Best Practice for Incubators
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10 incubator companies
Best Practice for Incubators
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Incubators in Region Västra Götaland
Nine incubators
Source
Innovation system in Västra Götaland - strengths
and challenges
Best Practice for Incubators
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Public Funding
FUNDING GUIDE
What kind of capital is needed for the idea or
company to grow?
growth capital
seed capital
pre-seed
pre-study funding
development
packaging
verification
idea
pre company formation
post company formation
Option loan
Conditional loan Profit share loan
Growth loan
Holding company
Innovation loan
Holding company
Source
Innovation system in Västra Götaland - strengths
and challenges
Best Practice for Incubators
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Innovation systems for technology-based and
knowledge-intensive companies

• Available throughout the region
• Can provide funding and assistance with projects,
  from initial ideas through to early growth stages
• Does not provide services for later stages
  (growth)
• Focuses on projects with high technology content

Best Practice for Incubators
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Gothenburg and Skövde based on regional
conditions according to NUTEK's division into
Local Work Regions
Regional categorisation of Sweden
Region Family 1 Metropolitan cities
Region Family 2 University towns and cities
Region Family 3 Regional centres
Region Family 4 Secondary centres
Region Family 5 Small regions - private
Region Family 6 Small regions - public
Source NUTEK
Gothenburg
Best Practice for Incubators
Skövde
18
Academic research per region family and average
per individual Local Work Region, RD annual work
units
Analysis of regional sources for research and
development
RD annual work units (Universities and colleges)
There is virtually no academic research in region
families 4-6
There is virtually no academic research in region
families 4-6
Source SCB "Research and development in the
university and university college sector"
Gothenburg
Best Practice for Incubators
Skövde
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Summary of an average Local Work Region in each
family regarding RD sources
Analysis of regional sources for research and
development
Region Family 1 Metropolitan Cities
Region Family 2 University towns and cities
Region Family 3 Regional centres
Region Family 4 Secondary centres
Region Family 5 Small regions - private
Region Family 6 Small regions - public
RD sources
0
6
1
130
840
3,400
Academic research (RD annual work units)
0
0
0
45
23
496
Research institute (no. employees)
3
4
9
26
41
294
Large companies (gt200 employees)
153
159
384
1,056
1,566
8 783
SME companies (10-199 employees)
207 (1.4)
319 (2.1)
776 (2.2)
2,674 (2.7)
4,656 (3.0)
37,800 (4.5)
People with engineering degrees ()
Colours indicate relative access to RD in
different regions
Excellent access
Good access
Some access
No access
Gothenburg
Best Practice for Incubators
Skövde
Source WARP/SFM analysis
20
Level of education per region family (II/II),
general post-secondary education
Analysis of regional sources for research and
development
Number of people (16-74 years old)
As a percentage
Equivalent to the number of highly-qualified
people in the Örebro region
Equivalent to the number of highly-qualified
people in the Helsingborg region
Equivalent to the number of highly-qualified
people in just the Helsingborg region
Equivalent to the number of highly-qualified
people in just the Örebro region
Source The State of the Regions in 2002, ITPS
and NUTEK
Gothenburg
Best Practice for Incubators
Skövde
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Summary of disparities in conditions for Chalmers
and Gothia

• Academic research is carried out to a far greater
  extent in Gothenburg
• There are more engineers per capita and in actual
  numbers in Gothenburg
• There are more students in Gothenburg
• More RD is conducted at the large companies in
  Gothenburg
• There is more private venture capital in
  Gothenburg

Best Practice for Incubators
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List of contents

• Background
• Description of processes and structures
• Chalmers Innovation, Deal Flow, selection and
  growth rate
• Gothia Science Park, Deal Flow, selection and
  growth rate
• Chalmers Innovation, process
• Gothia Science Park, process
• Business growth process
• Summary of differences in working methods and
  structures at Chalmers and Gothia
• Interviews with incubators and conclusions drawn
  from these
• Conclusions and recommendations to achieve best
  practice
• Discussion
• Appendix

Best Practice for Incubators
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Chalmers Innovation, Deal Flow, selection and
growth rate
High and rapid growth by means of venture
capital
Many objects
Tough selection (approx. 10)
3 years
Best Practice for Incubators
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Gothia Science Park Deal Flow, selection and
growth rate
Slow growth with little external funding and
substantial own funding
Few objects
Considerate selection (50?)
7 years
Best Practice for Incubators
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Business growth

• Characterised by two different roles for the
  business developers in the incubator
• Consultant - has an active, operational role in
  the company. For example, acts as the CEO or CFO
  for a period of time
• Coach - has a more passive role, is responsible
  for follow-up of the companies and provides
  support to the management team throughout an
  entire incubation phase
• External consultants are employed in various
  roles
• In the management team for the companies
• In sales and marketing
• In technology development
• Chalmers has an extensive alumni network from the
  E-school
• Can start up companies
• Can step in as a leader in later stages
• As sales representatives, etc.

Best Practice for Incubators
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Chalmers Innovation, process
Private venture capital
Capital from the incubator
Little start-up capital
External
External
Potential
Selection
Supply value
Exit
"Major consulting effort"
"Rapid growth"
Little sourcing effort
"Tough selection"
3 years
Best Practice for Incubators
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Skövde Gothia Science Park, process
Private venture capital
Capital from the incubator
External
External
Little start-up capital
Potential
Selection
Supply value
Exit
"Major consulting effort"
"Slow growth"
Major sourcing effort
"Considerate selection"
7 years 7 years
Best Practice for Incubators
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Business growth process in the incubator
Gothia, own staff
Chalmers, own staff
E-school students Chalmers Alumni
Consultant
Board business
Coach
years
3
6
-1
1
2
4
5
Best Practice for Incubators
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Summary of differences and similarities in
working methods and structures at Chalmers and at
Gothia Science Park

• Chalmers
• Large deal flow with high levels of technological
  sophistication - lots of projects with research
  backgrounds
• Tough selection process similar to that at
  venture capital companies
• Business growth based on many business developers
  with a deep commitment to the companies
• The business developers have varying roles
  (coach/consultant)
• E-school alumni provide a recruiting base for
  project managers/consultants
• Relatively good access to private capital via
  business angels and venture capital companies
• Short development period through influx of
  venture capital
• The portfolio companies have fast routes to
  public funding since this focuses on
  technological sophistication

• Gothia Science Park
• Small deal flow with varying levels of
  technological sophistication - few projects with
  research backgrounds
• Considerate selection process in which much time
  is spent helping the companies along
• Business growth based on many business developers
  with a deep commitment to the companies
• The business developers have varying roles
  (coach/consultant)
• Poor access to private capital via business
  angels and venture capital companies
• Long development period because of a slow influx
  of venture capital
• The portfolio companies have longer routes to
  public funding since this focuses on
  technological sophistication

Best Practice for Incubators
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List of contents

• Background
• Description of processes and structures
• Interviews with the incubator companies and
  conclusions drawn from these
• Bottlenecks in the process and the benefit
  provided by Gothia to the companies according to
  best practice.
• Bottlenecks in the process and the benefit
  provided by Chalmers to the companies according
  to best practice.
• Summary from interviews
• Conclusions and recommendations to achieve best
  practice
• Discussion
• Appendix

Best Practice for Incubators
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Bottlenecks in the process and the benefit
provided by Gothia to the companies according to
best practice.
Phase 1 idea to start-up phase Phase 2 start-up
phase in the first year Phase 3 after the first
year
Benefit provided by Gothia 5 indicates that the
benefit provided is highly valuable
Bottlenecks for Gothia 1 indicates no bottleneck
5
5
4.5
4.5
4
4
3.5
3.5
3
3
Capital
Capital
2.5
Coach
2.5
Coach
Consultant
Consultant
2
2
Other
Other
1.5
1.5
1
1
0.5
0.5
0
0
Phase 1
Phase 2
Phase 3
Phase 1
Phase 2
Phase 3
According to best practice, Gothia provides the
companies with the help they require and counters
the formation of bottlenecks.
Best Practice for Incubators
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Bottlenecks in the process and the benefit
provided by Chalmers to the companies according
to best practice.
Phase 1 idea to start-up phase Phase 2 start-up
phase in the first year Phase 3 after the first
year
Bottlenecks for Chalmers 1 indicates no bottleneck
Benefit provided by Chalmers 5 indicates that the
benefit provided is highly valuable
5
5
4.5
4.5
4
4
3.5
3.5
Capital
3
3
Capital
Coach
Coach
2.5
2.5
Consultant
Consultant
2
2
Other
Other
1.5
1.5
3D stack 5
1
1
0.5
0.5
0
0
Phase 1
Phase 2
Phase 3
Phase 1
Phase 2
Phase 3
According to best practice, Chalmers provides the
companies with the help they require and counters
the formation of bottlenecks.
Best Practice for Incubators
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Summary based on interviews with the companies in
this study

• Many of the companies at Gothia Science Park have
  industrial backgrounds, focus on one specific
  customer group and have varying levels of
  technological sophistication
• Many of the companies at Chalmers Innovation have
  research backgrounds, are focused on finding a
  suitable market and application and are often
  highly technologically sophisticated
• The incubators have a clear picture of their
  prospects
• The incubators have a clear picture of their
  process and how it has developed over time
• The incubators and the incubator companies give a
  homogeneous picture of the actual situation
• All companies interviewed stated that they would
  not be in existence today without the support of
  the incubator
• The incubators provide help that counters the
  bottlenecks of the seedling companies
• Skövde has major problems with funding in phases
  1 and 2
• In Skövde, the seedling companies raise much of
  the funding through their own work
• Swifter progress could be made in Skövde if it
  had a larger private funding network and access
  to industrial development skills

Best Practice for Incubators
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List of contents

• Background
• Description of processes and structures
• Interviews with incubators and conclusions drawn
  from these
• Conclusions and recommendations for best practice
• Staffing
• Deal Flow and selection
• Funding
• Networks
• Summary
• Discussion
• Appendix

Best Practice for Incubators
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Best Practice Staffing

• The incubator should have a critical mass of 4 or
  5 employees with a very broad skills base
• Comments from seedling companies It is excellent
  to be able to pick the brains of so many people.
  And if you don't get on with one person, you can
  always turn to someone else
• Business developers in the incubator ought to be
  pragmatic and deeply committed to each company
• Skills, experience and self-confidence to
  participate actively in the development of the
  companies
• Avoid running incubators that are under-staffed
  and just have an "incubator manager"
• Avoid building lots of small incubators where the
  staff become office administrators instead of
  business developers
• Successful incubators start 1 or 2 companies per
  business developer per year
• Avoid setting unrealistic goals in relation to
  staff numbers and potential

Best Practice for Incubators
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Best Practice - Deal Flow and selection

• The incubator must be adapted to the prevailing
  conditions of the region in which it operates
• Smaller regions (population lt200,000)
• The smaller the region, the broader the approach
• The incubator should not be targeted at narrow
  market niches
• Find out the best companies in all industries
• The smaller the region, the more limited the
  selection and flow
• Look for potential companies from different
  sources - industry, academia, etc.
• The smaller the region, the more work is required
  to create and develop a Deal Flow
• City regions (population gt500,000)
• Deal flow potential is high from RD and other
  sources
• Sufficient data for niched incubators

Best Practice for Incubators
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Best Practice Funding

• Smaller regions (population lt200,000)
• The incubator companies need more customer-funded
  activities during the development phase, e.g.
  through consulting assignments
• Important to make use of funding sources for
  early phases, such as pre-incubator funds
• All regions have potential private financiers
• Creation of structured business angel networks
  can speed up access to venture capital
• Metropolitan City regions (population gt500,000)
• The incubator companies can be funded by venture
  capital
• Important to make use of funding sources for
  early phases, such as pre-incubator funds
• Creation of structured business angel networks
  can speed up access to venture capital

Best Practice for Incubators
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Best Practice Networks

• "Grey eminence"
• Experience of the business

• Capital/
• Business angels
• Structured and operational

• Incubator
• gt 4 employees
• Broad skills base
• Operational work
• Deep commitment
• Varying roles over time
• Starts up 1 or 2 companies per person each year
• Coaches up to 5 companies each year

• Board pool
• Active Board pool with extensive selection

• Industrial development resources
• Easy access

• Universities/Colleges/RD
• Change according to the potentials

• Public funding
• In the backbone of the incubator's business
  developers

• External consultant/
• e-school
• Swift access

Best Practice for Incubators
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List of contents

• Background
• Description of processes and structures
• Interviews with incubators and conclusions drawn
  from these
• Summary
• Conclusions and recommendations to achieve best
  practice
• Discussion
• Appendix

Best Practice for Incubators
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Unexploited potential in Gothenburg - discussion
Tough selection technological sophistication
Incubator companies
Successful companies
Technological sophistication
?
Where do they go? Room for Gothia-style incubator
in Gothenburg?
3 years
Best Practice for Incubators
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Unexploited potential in Gothenburg - discussion

• Chalmers captures just a fraction of the ideas in
  Gothenburg
• Gothia has shown good results with a very broad
  selection
• Several of the companies in Gothia would not have
  been accepted by Chalmers because their level of
  technological sophistication was too low
• Considering the success of Gothia's working
  model, there ought to be room in Gothenburg for
  another incubator with broader selection criteria
  and less focus on technological sophistication.A
  focus on business benefits.

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List of contents

• Background
• Description of processes and structures
• Interviews with incubators and conclusions drawn
  from these
• Summary
• Conclusions and recommendations to achieve best
  practice
• Discussion
• Appendix

Best Practice for Incubators
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AppendixQuestionnaire
j




Phase 1

Phase 2

Phase 3

Capital




Coach




Consultant




Other





Best Practice for Incubators