11 - 17 May 2000

Backbone for European incubators

Europe's leading incubator companies recently joined forces to set up a pan-European association. Managing director JAN ØRSTED spoke to David Kelleher about the newly-formed association and its supporting role for incubators

The business environment in Europe has never fully embraced the entrepreneurial spirit for which North America is renowned. While US businessmen were ready to take the plunge and invest despite the high risk factor, European investors have preferred to support established business concepts rather than new, unproven business models. This resulted in initial or "seed" funding hard to come by.

The figures, in fact, speak for themselves. The vice-president of the European Patent Office, Jacques Michel, speaking at the European Invention Competition last year, said that while the amount of capital earmarked for new business ventures in the US was similar to that in the EU, the major difference was in how this money was invested.

In 1998 the amount earmarked for new business ventures in the US was about US$9.4bn and in the EU US$8.5bn. However, while in the US 50 per cent of the money was allocated to the information technology sector and online ventures, in Europe the figure was seven per cent.

"Incubator companies in the US have been around for nearly 10 years, however the European scenario is very different," Jan Ørsted, managing director of BIAEurope told The Malta Business Weekly.

"In Europe we are far behind the US, yet this is changing. More and more start-up companies are being created all over Europe, and interest is being shown by entrepreneurs in South Africa who want to invest in the region," he added.

According to the US Small Business Administration about 80 per cent of companies that have benefited from incubation survive successfully, whereas 75 per cent of non-incubated companies fail.

With the number of European incubators on the increase, the need was felt to set up a forum and association which worked for the common interests of its members. "The mission of the Business Incubator Association Europe is to help foster a new entrepreneurial culture and spirit throughout Europe. It will aim to develop and establish the business incubation concept in Europe to ensure that start-up operations have access to professional, full-service, quality incubators. The association will help 'young' incubators to settle in an environment which is conducive to success," Mr Ørsted explained.

The association will have its head offices in Malta and Mr Ørsted's main aim is to create a greater awareness on incubator companies in Europe and to increase membership of BIAEurope.

"Our short-term aim is to create awareness and to increase membership. We have had a very positive response and the number of inquiries has boomed. Companies have shown eagerness to know more about the association and how to join as fast as possible," Mr Ørsted said.

Mr Ørsted said that although the funds and human resources existed, there is still a certain amount of scepticism and fear among entrepreneurs.

"The risks are relatively high and this factor is hindering investment from reaching these companies. The association will be working hard to change this mentality and explain why incubators are important," he added.

New companies wishing to join the association will, however, have to meet certain criteria. A quality incubator will have to provide seed funding, business plan development and advice on strategy, office facilities and technical infrastructure and operational and management support.

"Other criteria to be met include brand development, marketing & PR support, recruitment and HR services, easy access to web design agencies, technology advice and financial, legal and tax planning. Companies that only invest or just offer a few of these services are not incubator.

"Certainly they provide a valuable service to entrepreneurs but are not fully involved in the creation of the business or facilitating the day-to-day challenges facing newly minted start-ups," Mr Ørsted said.

The Association is also considering associate membership. This will be open to companies or groups that offer a range of services but are not incubators. They could include universities and consultancy firms.

There is also a possibility that a similar set up for Euro-Mediterranean incubators is created and Malta has the perfect facilities.

"A Euro-Med Incubator group is one possibility. Malta has the perfect set - not only is it strategically positioned but it also has the expertise to communicate with countries in the region especially in North Africa," Mr Ørsted said.

The association was set up two weeks ago at the Tornado-Insider.com's Upstart Europe event in Paris, where over 2,000 people working within the digital economy met to examine the challenges facing high-tech entrepreneurs, demonstrating how to position e-businesses at the cutting-edge of high-growth Europe.

The challenges facing European incubators is not investment capital or human resources.

"There are dozens of funds with a lot of capital to invest. However, this capital is not being invested in incubators because of the high risk factor. Investors tend to play say thus certain ideas cannot be developed.

Another factor, especially in Europe is that top-level experts are not geared towards sharing knowledge. This is detrimental to progress. There has to be a change in the mindset," Mr Ørsted said.

"There is a huge potential for the European economy, and the BIAEurope has been set up to meet the challenges of developing and supporting entrepreneurial initiatives," he added.

Corporate offices of the BIAEurope will be in Malta. The Association will be headed by Mr Ørsted with daily operations in the hands of an operations manager. The founding fathers include locally-based iWORLD Group, Cell Ventures/New Media Spark, CIR Lab, Gorilla Park, MSC and StartUp Factory.

More information about the association and incubators can be found at www.BIAEurope.org.