e-business incubation: Testing big ideas

The dawn of the millennium saw the boom and doom of many a venture. Many big

ideas bombed with the downturn in the economy. However the tide of events,

enterprising entrepreneurs have never hesitated to risk everything to make their

ideals a reality. Now things are changing for the better. We have a growing

number of incubators today who are ready to support and nurture big ideas. So

making a big idea a reality is no more a risky business.

e-business ventures have been a risky terrain to enter as we have the dot-com

bust to prove this beyond doubt. However with the increasing number of

e-business incubators in the fray, there’s hope for startups in the new

economy.

e-business incubators — A new breed of investors



e-business incubators are specialist companies that invest in, support and
nurture "dot-com startups". They offer a very wide range of support

services to all types of electronic business entrepreneurs.

Nature of their work



They build early stage Internet and related technology companies, taking
them from business idea to launch and potentially beyond IPO. They do this in

partnership with leading corporates from the IT or Telecom sector, management

consultancies, industry experts and legal and accounting firms. The most

comprehensive incubators offer a broader range of services than the traditional

venture capitalist fund, or "investment angel", which traditionally

only provided financial investment and some professional advice. The support of

the e-business incubator includes capital, industry research and analysis,

strategic advice, business plan development, wired,

full-service office facilities, e-focused marketing and public relation.

Target audience for e-incubation



In a nutshell, all of the following players can ultimately benefit from
e-business incubation. The numerous start-ups, both new types of e-businesses

and the rush of me-too companies who are candidates to follow the success of the

first wave of Internet entrepreneurs. Another potential target would be

small and medium "brick-and-mortar" companies that need to

become "click-and-mortar", fast.

Investor viewpoint



e-business incubation is yet another example of how IP, the Internet and
e-commerce have radically changed not just the way in which companies address

their markets but also the whole way new companies are created and run and the

way they interrelate with the supporting financial community.

e-business incubation is therefore not just influencing the way start ups are

initiated and flourish, it is potentially challenging the traditional venture

capital funds in the same way that e-commerce challenges traditional brick and

mortar businesses.

Choosing e-incubators



You should exercise caution when weighing up incubators. There are now so
many incubators jumping on the bandwagon that it is becoming more and more

difficult to sort the ones which really have the resources, market and industry

knowledge and experience to effectively support start-ups from the ones that

don't.

When weighing up its options, a start up should assess which of its own

business function capabilities will do and which ones will really need external

help to be successful. e-business incubators differ widely in the type of

support services they can really offer. The start up should ideally measure up

three points against its own requirements when deciding which incubator to go

for.

Key questions include:

• Which e-Business incubator gives me the best strategy advice for my field?

Is its support "global" from day one (both geographically and with

respect to all the right support services) or will they have to "go

somewhere else" to guarantee this?

• What about infrastructure? Office space, the domain of the traditional
  
  incubator, is by far less important than providing the right underlying
  
  networks and web hosting infrastructure)
• What is their growth strategy? Are they going at the speed the Internet is
  
  going? For instance, will they be able to support my business in the mobile
  
  commerce arena?

And finally the two fundamental questions:

• What and how much do they want back? Payback can range from a fixed fee to
  
  be paid at the start from a participation in the equity of the company
  
  (sometimes up to 49 per cent)
• Are they nurturing our competitors too?

e-incubator checklist

Prior to approaching the e-incubators, a start up needs to identify a

shortlist of the ones that better match its requirements. A prospective

e-start-up needs to:



1. Research the incubator: What services does it offer? Which ones can it offer
by itself? Which ones does it need a partner for? How committed is the partner

to the incubator?



2. Analyse its capabilities: What strategy advice can the incubator offer? What
about network support?



3. Investigate beyond the finances: Does the incubator go beyond just providing
money? In the current climate, money is the easy bit.



4. Examine the track record: What is the track record of the company? Who have
they supported already? Have they a real track record with start-ups or do they

just invest in proven ventures or already quoted companies? Choose what

"type" of e-incubator is the one for you: Many e-business incubators

are start-ups themselves, so track record can be a problem. In the absence of

that, what is the background of the companies and or individuals involved? Can

they show that they've "done it before" in e-commerce?

e-business incubation is here to stay, but that does not mean that all

e-business incubators are. Incubators need the right mix of resources to attract

the start-ups in the first place and to carry them to a successful and

profitable future. Attributes that will attract start-ups will include financial

muscle, track record, web hosting and network capabilities and the right

professional connections.