Feasibility Study for establishing Agri Business Incubator in

IIAM

By

SM. KARUPPANCHETTY Manager, Agri Business Incubator &Deputy COO, Agri Science Park – ICRISAT

FEBRUARY-2007

WHAT IS THE GOAL OF THIS STUDY ?

The GOAL is to prepare Business Plan which is essential stage for incubators. Goal comprises of

1.Executive summary.

2.Vision, mission, objectives

3.Business Model.

4.Marketing Plan.

5.Operational Plan

6.Administration/Organization Plan

7.Financial and Investment Plan.

Introduction

The various approaches of supporting enterprises are

Business Development Centre

Business Incubation

Technology Park Convergent or hybrid models

Industry Cluster

Business incubators have been proven to be an effective way of fostering sustainable business growth and stimulating entrepreneurship

Local Economic Development Incubators

Academic and Scientific

Incubators

Corporate Incubators

Private Investors’ Incubators

Goal Non-profit Non-profit For Profit For Profit

Main Activity Mixed-uses High-Tech High-Tech High-Tech

Objectives Job creation

Reindustrialisation /revitalisation

Economic development

Support t

o particular target groups or industries

Development of SMEs and clusters

Commercialisation of technologies

Development of entrepreneurial spirit

Civic responsibility

Image

New sources of finance

Develop entrepreneurial spirit among employees – keep talents

Monitoring - access to new technologies and to new markets

Profits

Profits by selling stocks from a portfolio of companies allowing risks to be spread

Co-operation between companies within the portfolio

Targets Small commercial craft or service companies.

In some cases, high-tech companies

Projects internal to institutions prior to company creation

External projects

Internal and external projects, generally related to the activity of the company.

Technological start-ups generally ICT related

Offering Hosting and shared services

Administrative assistance

Consulting

Eventually:

Coaching –training- networking

Access to finance

Concept testing

Technical advice and support

Intellectual property advice

Seed capital

Basic management advice

Eventually:

Access to business angels and venture capitalists

Financial resources

Prototype and market testing

Access to commercial markets

Eventually:

Long-term strategic partnerships

Eventually:

Access to business angels and venture capitalists

Management and strategy advice

Supply of one or several types of finance and search for complementary financing

Personal networks

Eventually:

Hosting and administrative assistance

Access to industrial networks

Strategic advice

Coaching

Hosti

Access to industrial networks

Strategic advice

Coaching

Hosti

Legal services, public relations, recruiting, etc

Key Problems Durability –lack of resources stability

Quality of management and provided-services - dependent on the quality of the manager

Governance, risk of conflicts about the objectives, bureaucratic red tape, time spent in negotiating with the different partners

Legitimacy inside the institution

Legal status, governance, independence and operational flexibility

Income sources

Management quality

Access to external resources and networks

Strategic position of the incubator for the corporate structure

Management independence and ability to mobilize internal resources

Durability of the of the incubator’s mission

Conflicts about the objectives between the owners / the managers of start-up or the company

Quality of projects & sourcing

Level and conditions of the incubator payment in comparison with provided services

Valuation of the incubator’s participation at entry and at liquidation

Durability of the incubator

Trends Regular development

Increasing territorial coverage

Rapid development under the aegis of public programs

Testing the concept in numerous companies

Likely to develop

High levels of consolidation and restructuring of the sector

Still looking for a successful model

Is Business Incubation The Right Tool for IIAM?

Business incubation is adopted as a tool for innovation and entrepreneurship for varied reasons, the most common of which are:

•Technology transfer•Technology commercialization and adaptation •Economic diversification, or to grow a particular sector •To reduce business failure rates – typically, in quality business incubation environments, up to 85%+ of firms that have been incubated survive •To create employment and wealth •As a test bed or catalyst for SME development

When establishing the incubator, the management institution should be clear about the program benefits expected by stakeholders and the community. It is also essential that the institution is well aware of the reasons or motives prompting the incubator’s establishment

Objectives

The initial planning stage for the incubator consists of the collection and preliminary study of information on the social, economic, political, business and cultural situation in the region. The influences of these factors on the incubator are considered. Awareness of these variables will help define the general strategies and objectives for the incubator

• To identify institutions that could be partners of the incubator, i.e. the stakeholders;

• To ascertain acceptance of the program among the community;

• To survey sources of funds; • To define the most appropriate model for the incubator; • To analyze the main local requirements.

Feasibility Study for the ABI IIAM

Defining the Incubator’s Focus

Definition of the incubator’s focus determines the structure and types of services offered. An incubator can be classified as

Traditional IncubatorTechnology-based Incubator Mixed IncubatorSocial IncubatorAgribusiness IncubatorSectoral Incubator

Key Issues

Definition of the incubator’s focus must consider the local circumstances in which the incubator is to operate and the region’s strategic objectives

Vocation Weaknesses Potential Leading Institution Entrepreneurial Culture:

IIAM Technology Prioritization

•Maize QPM•Nutrition block•Sweet potatoes – orange flesh Cassava – yellow flesh •Animal traction•Vaccines “New Castle”, •Tissue culture “in vitro”•Artificial Insemination•Forage blocks Vinegar production from bamboo charcoal.•Canapan•Conservation agriculture•Rale production (dry cassava)•Chemical food analysis•Microbiological food analysis •Micotoxins &pesticides residues. •Antibiotics in animal tissue and food & feed•Diagnosis of animal diseases

Business opportunities : ABI IIAM Consumer Food BiscuitsBread & buns PopcornsCashew appleJamsSquashesRoller Flour Mills Tomato Sauce & Ketchup Desiccated CoconutIndustrial ACTIVATED CARBONACTIVATED CHARCOALANIMAL GLUEMODIFIED STARCHHYDROGENATEDCASTOR OILCASEINEthanolAgro InputsBIO-PESTICIDESBIO-FERTILIZERSFertilizer mixturesSeed Industries

Phase 1 – Strategic Decisions • Purpose• Focus• Operational Mode• Locality• Stage of the Enterprises

Phase 2 – Tactical Decisions • Legal Status• Documents• Organizational Structure

Modeling a IIAM Business Incubator

Defining the Stage of Enterprises to be supported through ABI IIAM

The process of creating and developing Businesses

Conception

Emerging

Growth

Consolidation

Defining the services to be provided in ABI IIAM

I a. Consultants and Advisers b. mentoring group c. The advisers

II Management/Strategic Support Programs a. Assistance/Consulting in Specific Areas – List of Services

Access to databases and networks Joint purchase of materials Business diagnostics Publicity and marketing Information on lines of incentives and financing Market information/research Business guidance and consulting Legal and accounting guidance Registration of trademarks and patents Support for the preparation of business plans Testing services, validation

b. Training III Infrastructural services a. Office b. Lab/production space c agricultural land d. equipment access

Defining the ABI IIAM Location

The best definition of the preferred location is choosing an area that satisfies the incubator’s current and future needs. The location depends on the incubator’s focus, since the companies’ activities may demand characteristics found in few of the region’s localities.

Urban Suburban Rural

Key Issues

Infrastructure Flexibility: Focus: Master Plan

Defining the Organizational Structure of ABI IIAM

To define a structure that makes management ofthe incubator possible. There are two groups of activities generally present in an incubator:

Those related to operation of the incubator as an independent organization (a business); and Those related to developing the incubated companies.

This normally composed of three managerial levels

Board of Directors:Incubator ManagementConsultant Committee:

The various options of funding a incubator are

• Reengineering operations & optimization of existing resources

• Government & Local City development partnership

• Public private partnership ( Professional company management )

• Grant in aid from Multilateral funding agency/Philanthropist

• Corporation with equity investors from bank, government etc.,

a

Financing the incubator

Revenue Model for ABI IIAM

Revenue from tenants Rents/lease

Revenue  from sharing in client success-equity/royalty

On-going government or donor funding

Membership fee/Franchisee fee

Service charge- Consultancy/Testing etc.,