‘Incubator Hopping’ – Are South African Entrepreneurs to Blame?
By: Rick Ed is a mentor, advisor and trainer at DoBetter.Business, a business coaching and consulting agency
Why are so many SMME owners serial incubates? Why do so many South African entrepreneurs leave enterprise development (ED) and supplier development (SD) programmes feeling that it wasn’t worth the effort?
The big business of business incubation
The ANDE Entrepreneurial Ecosystem Map lists about 150 ‘Capacity Development Provider’ organisations in South Africa, and that list is not complete.
The CEO of a local Enterprise and Supplier Development business says that we have ten times as many ED companies in South Africa as India has, despite the fact that India has a population more than 20 times the size of ours.
Why is that so? Because ESD is big business. The South African flavour of incubation and ESD has been designed to give black business people a leg up to compensate for past discrimination. Corporates must maintain a high level on their BEE scorecard if they want to do business with the state or other big businesses. They achieve this by paying intermediary companies to do their ESD for them.
But, according to brainstorm magazine, the CEO of a private sector incubator said “‘charlatans’ are doing a lot of damage to the industry because they’re not providing entrepreneurs with guidance in things like sales, marketing, business strategy, personal development and finance”.
Government-run SEDA claims that about 90% of the participants in their 64 incubators are still in business after two years. What SEDA doesn’t tell you is that most of the businesses don’t increase their staff or grow their turnover while they are cocooned within the incubator. They are ‘resident’ incubatees that don’t become self-sustaining and graduate out of programme.
A couple of years back, Stephen Timm, editor at Ventureburn, noted that “only between 10% and 20% of young people who attend entrepreneurship programmes now run a business.”
When some startups find that it’s taking them longer to become successful than they expected, they start incubator jumping; hopping from one ESD programme to the next in the hope of stumbling upon the magic contract
Ed argues for education as a possible solution to the ‘incubator hopping’ phenomenon, starting with entrepreneurs in South Africa researching the following:
– What exactly incubators have to offer
– Whether there is business goals alignment
– Weighing the pros and cons
– Evaluating the credibility of each incubator
Ed on how entrepreneurs can avoid bad incubation and ESD programmes
1. Know what to expect from each incubator
Make sure that you know what incubators and ESD programmes actually are, and what are they supposed to provide, before you join one.
For example, is it an incubator or an accelerator that you are considering joining? There are SEDA officials who insist that there is a clear distinction between incubators and accelerators whereas in reality the boundary is rather fluid. But you don’t want to find yourself committing to one when the offerings of the other would be more appropriate to your business.
Is the programme an enterprise development or a supplier development programme, and what is the difference between them? This makes a big difference not just because of BBBEE legislation but to the success of your business. Some business development organisations are rather flexible when it comes to interpreting concepts like supplier development.
2. Consider if their programme aligns with your business goals
What do you want to get out of the programme? Do you want to be on the panel of preferred suppliers in a corporate’s supply chain or do you want to improve your own business processes? Are you expecting the sponsoring company to give you contracts in return for attending the programme? Is what the programme is offering what you want?
When some startups find that it’s taking them longer to become successful than they expected, they start incubator jumping; hopping from one ESD programme to the next in the hope of stumbling upon the magic contract, observes Marlon Green of Vizre.
3. Carefully weigh the pros and cons
What are you willing to commit to the programme? Are you happy to attend all day classes once or twice a month each month, in the city? Would you mind completing and submitting homework assignments? What about committing to time with a coach or a mentor every month?
How worthwhile is the programme that you are considering? Is it up-to-date and relevant to your business or is it a generic one-size-fits-all? I knofw of a couple who left their ED programme to join a Department of Public Works programme because it spoke to the construction work that they did.
4. Check the credibility of the incubator
How reputable is the business development organisation? When accreditation is introduced, will they meet the criteria to qualify? Are participants evaluated to see that they are suitable for the programme and vice versa? How competent are the people who deliver the programme? Do they or have they run their own businesses or are they highly qualified management consultants?
Marlon Green of Vizre bemoans the fact that “many incubators are using the wrong psychometrics when recruiting participants and unintentionally attract life-long incubatees.” He observes that “corporates and ESD providers [are] ticking boxes of the BEE scorecard and wagging funds around and market access that it’s so easy accessible.”
You don’t want to find yourself committing to one when the offerings of the other would be more appropriate to your business
Does the organisation monitor and evaluate the impact of their programmes on the participants? Do they take an active interest in the growth and development of your business? Do they track the business’ performance after the programme has ended, is there support when the programme is over.
What do other participants (“beneficiaries”) say about it? Does it live up to the promises that it makes on its promotional literature? How many participants stick with the programme to the end? Apart from the course, what other support doers the participant receive: guidance with access to finance, facilitating access to markets?
So, before you start asking yourself: Which programme should I apply to join? First consider whether joining an incubator or ESD programme will actually benefit your business.