Lessons on Virtual...

Lessons on Virtual Business Incubation Services

Final report

This report on lessons learned from virtual business incubation is to provide insight into the potential of virtual incubation services and tools and to improve the cost-effectiveness and outreach of business incubation services. These lessons can be used by new business incubators (including virtual ones), as well as existing conventional and/or virtual business incubators.

What is virtual business incubation (VBI)?

For the purposes of this study we broaden the definition to capture the full range of business incubation tools and services that are not (necessarily) provided to clients residing inside the facilities of a business incubator. As a form of shorthand, in this report we use the term “virtual” in the sense of location-independent.

We distinguish virtual service concepts from virtual tools:

  • Virtual service concept refers to a service that is offered to non-resident incubatees.
  • Virtual tool: a virtual tool is a way of delivering a service to a dispersed group of users (using ICT-based or other means), where the service provider and service recipient are not in the same physical location.

Service concepts

This report identifies three groups or types of service concepts:

  • Incubators offering mainly business development services: “hand-holders
  • Networking focused business incubators: “network boosters
  • Finance-focused business incubators: “seed capital providers”.

“Hand-holders” offer an incubation service concept that emphasises training and mentoring, as opposed to access to finance or networking, even though these are typically also parts of their service package. They address the challenges entrepreneurs face in developing their entrepreneurial capacities to be able to get their business off the ground.

Typically, VBIs that fit this description are conventional business incubators that have expanded their services to non-resident/remote clients.

“Network boosters” are incubators whose main aim is to bring entrepreneurs, investors, volunteers, and service providers together and help them to provide added value to each other‘s businesses, rather than focusing on delivering services themselves. In this case the incubator is a facilitator.

There are two types of network boosters: the “business-plan-competition-plus” (BPC+) network boosters and the ”2.0” network boosters. The first group are in effect “advanced” business plan competitions (BPCs), where the incubators spend a great deal of energy on launching BPCs, but continue to service and support a selected number of BPC participants after the competition. Examples include Endeavor and the BiD network.

A second group: the “2.0 network boosters”, do not organise competitions, but rather focus on bringing people together, typically by hosting regular events. Examples include the HUB and Mobile Monday.

Thirdly, we distinguish a group of incubators that focus on providing seed investment capital, combined with (short or long-term) mentoring support. Again, we found two types of seed capital providers, namely those with a commercial mission (often called ‘venture accelerators‘) and those with a social mission. Social seed capital providers typically combine provision of capital (grants, loans and equity) with a long-term mentoring support programme. Venture accelerators typically provide a short-term programme (3 months) of training, mentoring and networking support designed to prepare companies for external finance. Examples included in the research are Parquetec, Villgro, Y-combinator and Founder Institute.

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