Tuesday, February 2, 2010

Technology incubators, a slingshot to success!

I visited a Silicon Valley technology incubator(Plug&PlayTechCenter) a few months back and I remember returning from the visit simply awed by the level of energy and entrepreneurial buzz around me. Start ups were given a mere two minutes to pitch their ideas to venture capitalists and angel investors lined up in front of them ready to invest millions of dollars into the next Google or PayPal. I recently read about a new technology incubator (iHub) and technology park(Malili) in Nairobi which got me thinking about the potentially immense value of incubators to developing nations.

For those not familiar with the concept of an incubator. An incubator is a usually an office complex or building that hosts early stage start up companies and provides them with invaluable access to finance (venture capital, debt etc) as well as sales, marketing, HR and legal support. The key idea is that start ups get access to a large network of advisors that they would not normally have. Going through the selection process for an incubator also allows starts ups to fully vet their idea and get a preliminary 'stamp of approval' that their idea is viable. Technology companies are specially suited to incubators because of the remote and collaborative nature of the business. Technology incubators in Silicon Valley have been particularly successful at harnessing their power.

These projects in Nairobi show a great foresight and initiative on the part of the goverment and local technology community since the vast majority of the impact from an incubator is intangible and extremely long term. InfoDev an NGO affiliated with the world bank has done a number of studies (available for free) on technology incubators as a means to promote sustained growth. One of the key findings is that incubators in developing nations must be formed on a sustainable financial as well management model to ensure that the long term value is derived from the investment. It also stresses the importance of corporate partnerships/sponsorships to bring in local stakeholders who would benefit from the incubation. The report also analyzes multiple case studies of incubators in developing nations in South America and the Middle East.

Technology incubators should be on the roadmap for all countries in Africa as an integral part of their plans to ecourage entrepreneurship and boost job creation. With the recent fiber optic connectivity to Eastern Africa a major infrastructure hurdle has been resolved leaving just the initiative to be taken.

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