Abu Dhabi, UAESaturday 19 September 2020

Incubators should be run by those with drive and daring

Thousands of business incubators have been set up around the world, mainly by governments and universities, which is probably one reason they do not succeed in creating viable entrepreneurial businesses.

Thousands of business incubators have been set up around the world, mainly by governments and universities, which is probably one reasonthat they do not succeed in creating viable entrepreneurial businesses. At least half of the incubators have traditionally been in the US, with the rest in Europe and Asia. In recent years, we have seen an emergence of business incubation projects in the MENA region, all trying to do something to help entrepreneurs.

The problem is that most of these facilities, wherever they are in the world, are administered and run by government officials and university academics. If someone chooses the path of public-sector work or academia, this implies in itself that the person is more cautious and risk-averse. Don't get me wrong. There is nothing wrong with caution. Not everyone is born to follow the SAS motto, "Who dares wins."

In fact, we want our government officials and academics to be cautious. Imagine what would happen if they started behaving like bankers; we would end up with toxic government regulation and subprime degrees - credentials with no value. No, I think we want our government officials and academics to be cautious, people who are a safe pair of hands and a little boring. But running an incubator for entrepreneurs is all about understanding and dealing with risk in a fast-paced, pressure-cooker environment. Entrepreneurs can't afford to be cautious. They have to leap first and work out where they've landed once they get there. The mentality of an entrepreneur is to break through comfort zones and not read the safety instructions. This is the antithesis of what government officials and university academics do.

Successfully holding down a government job or an academic post is highly correlated with not failing. Not having a black spot on the report card. Failure is not an option. But failure is part and parcel of entrepreneurial success. The most successful incubation environment in the world, Silicon Valley, is built on the failure of past attempts. Typically, business incubation centres pride and market themselves on services such as business incorporation, high-speed internet access, outsourced computing hardware and software, networking opportunities, legal assistance, reprographics and training. Most also give a good sales pitch about providing entrepreneurs with access to finance and offering a high-energy working environment. But very few deliver, especially on the former.

So why are government officials and university academics running and administering business incubators? Would it not be more sensible to let entrepreneurs run them? Why not hand them over to the people who can create a buzz and crank up the energy, build the excitement of the chase and offer rewards for closing that all-important first deal? One business incubator in the US that has taken this approach is the Plug and Play Tech Centre, which originated in Palo Alto, California. It has been the incubation centre for the likes of Google, Logitech and PayPal. It is less than a quarter of a mile from Stanford University and two miles from Sand Hill Road, where super-sharp venture capitalists are based.

Plug and Play provides all of the basics in terms of the facility management and infrastructure, but critically, it also creates a great networking environment for entrepreneurs to bounce around ideas and generate business with one another. Additionally, the incubator gives access to venture capital. The centre is run by the entrepreneurial brothers Saeed and Rahim Amidi. Their father moved to Silicon Valley from Iran and set up a successful rug business, which attracted venture capitalists and dot-com millionaires wanting to furnish their newly acquired luxury homes with high-end Persian rugs.

Plug and Play has built strong ties directly with university students. The company targets bright students graduating from Stanford, encouraging them to bring their ideas to Plug and Play for incubation. The venture capitalists also know they are dealing directly with these budding entrepreneurs who have been groomed with the right business jargon and sales pitch by Plug and Play. So it works for all parties.

There is no fear of failure or rejection; it happens all the time. The entrepreneurs just dust themselves off and get on with the next pitch with another angel investor or venture capitalist. Unfortunately, when incubation projects are run by government officials and university academics, bureaucracy and identity politics wash away any spark of entrepreneurial energy that did exist. It is worth watching an episode of the highly rated BBC series Dragons Den to get a feel for the kind of grilling that venture capitalists dish out to aspiring entrepreneurs. The entrepreneurs approaching the five Dragons (the venture capitalists) for investment have three minutes to make an impression. If they can't, they're out. It's a brutal environment. Not one that a government official or academic is used to.

Rehan Khan is a business consultant and writer based in Dubai.

Updated: October 4, 2010 04:00 AM

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