Erasmus IP European Wilderness Entrepreneurship Rural Business Incubator An unique opportunity for rural socio-economic development! Clara Ruby Pérez Fernández Milos Van Leest Emilian Stoynov Tea Mazić 14
Table of Contents INTRODUCTION... 1 BACKGROUND... 1 BUSINESS DESCRIPTION... 2 WHAT IS A BUSINESS INCUBATOR?... 2 IMPACT ON THE TARGET AREA.... 3 WORKING MODEL OF A RURAL BUSINESS INCUBATOR... 4 THE BUSINESS MODEL CANVAS... 6 CUSTOMER SEGMENTS:... 6 CUSTOMER RELATIONSHIPS:... 6 VALUE PROPOSITIONS:... 6 KEY ACTIVITIES:... 7 KEY RESOURCES:... 7 KEY PARTNERS:... 7 CHANNELS:... 7 COST STRUCTURE:... 7 REVENUE STREAMS:... 7 RESOURCES:... 8 WEBSITES:... 8
Introduction In late March and early April 2014, a group of 38 students from all over Europe attended the European Wilderness Entrepreneurship Intensive Program of the European Union. This course is developed to connect wilderness with entrepreneurial activities. In the first part of the program we as students had to do research in the area called Western-Iberia in order to get inside knowledge about the current economic, social and environmental situation. In the second part of the program, 8 groups of students had to come up with an business idea for local stakeholders. We as group 2 had the idea to create a project idea rather than a clear business plan. We did so because we believe this idea has to be something for people living in the area instead for outsiders like us. The idea is not a direct business but a service providing organisation. This service can be a non-profit, not-for-profit or a profit focussed organisation. It is up to the initiators which template they are going to use. What is more important is the way the project is carried out and by whom. We think the rate of success lies in the multi-stakeholder approach. To gain trust amongst the participants it has to operate independently and with a vision to strengthen the target area. A possible composition of the project team can be with Universities, NGO s, local authorities and most important local communities and entrepreneurs which has a common interest in local economies with an ability to sustain the environment and rural population rather than only financially(which is important as well). The idea described in the following report is free to use for people interested. We can only advice to implement it in a project base way in cooperation with knowledge institutes like universities and NGO s. Background Western-Iberia is a border area in North-East Portugal and the West of Spain, and is known as an area of rich cultural heritage, traditional agriculture and varied landscapes. One of their trademarks is the production of Jamon Iberico, the famous smoked ham from Spain, and olives and almonds. The landscape is unique in the world due to the endless Dehesa s orchards/pastures(stone-oak and Cork-oaks) where livestock is kept in combination with trees. For hundreds of years people from Western-Iberia made a living with the production of crops and livestock. In this way the area kept its shape, economy and natural value. Nowadays the area is a famous destination for tourists from all over the world to visit medieval cities and landscapes, prehistoric art, Nature reserves, a good climate and delicious local products. On one hand, tourists bring in many opportunities for entrepreneurs, on the other hand, the area awareness is brought back to the homes of the visitors which creates awareness and is in a way beneficial for economic development and related economic survival. A threat nowadays is a changed economic climate of Spain and Portugal which has an influence on the state of economic perspective in the entire Iberian peninsula. Due to many reasons such as the financial crisis and global warming (traditional) Enterprises, agriculture and tourism came under pressure. However, tourism is on its way back to normal or is even growing again. Another, and fast emerging change is a rapidly growing dependency on global trade in the entire European Union. Where in the past village communities could be mainly be self-sufficient in food production and job creation local economies have to deal nowadays with 1
a competitive global market where the production of quantities is a must to survive. Unfortunately, in case of Western-Iberia, the area is partly not capable to adapt to the new situation. Especially, smaller enterprises are not able to keep up. As a result, many small and medium farmers disappear and leave the area, and younger generation seek their fortune in larger cities to study or to find jobs, and are not turning back to their roots. The migration of human capital to outside regions has lead to a weaker economic perspective for the entire region due to loss of high educated potential. Furthermore, an increase in intensified agricultural activities are a risk in preserving the areas identity, the environment, and relating tourism. The dependency on touristic activities can be seen as a monoculture and is mainly based on the areas main strength; cultural heritage and biodiversity. In order to strengthen the survivability of communities, biodiversity and agriculture situated in the area a new initiative is necessary. Not only to focus on economic development, but also to create new opportunities for young people. however, for many starting companies the business risks in the first years are high due to a lack of entrepreneurial competences, lack of (financial) capital and a proper network. This can lead to early bankruptcy or a high barrier to enter the market. To overcome the first most risky years for a starter a plan is needed. The rural Business Incubator is a business initiative which focus on assisting start-ups via the provision of various facilities mainly focussing on low potential rural areas (in current perspective) like Western-Iberia. In the following chapters the incubator idea is elaborated. Business description What is a business incubator? Definition: A business incubator is a comprehensive business assistance program targeted to start-up and early stage firms with the goal of improving their chances to grow into healthy, sustainable companies. Thus; an incubator is an organization designed to accelerate the growth and success of entrepreneurial start-up companies through an array of business support resources and services that could include physical space, coaching, common services, and networking connections(source; entrepreneur.com, 2014) Main product of an incubator (Evans, 2010): A team of professionals which dedicate their expertise to support new and existing entrepreneurial ideas. Service provision(hardware); - Shared building (office for entrepreneurs) - Computers, Internet, Printers - Office furniture (optional) Service provision(software); - Entrepreneurship education and training - Technical assistance and counseling 2
- Access to capital - Entrepreneurial networking - Creating supportive culture and policy The business incubator idea is developed more than 20 years ago in the US already to stimulate healthy business development (Evans, 2010). In many cases it worked out as an success and the idea spread to other western countries as well. In the late nineties the incubator was more or less not interesting anymore due to easy access to loans and investors. Due to the financial crisis starting in 2007 many start-ups were not able to get loans and funds easily. The incubator idea was born again and made its return in market oriented economies. In our case we will use a rural version of the incubator since Western-Iberia is mainly rural in origin. In practice this means the participants are situated in villages or rural areas. The stages of the incubation process can be compared as the development of a human being. As we all know every adult developed from the stage of an infant or baby to child, teenager, adolescent into a full grown more or less independent adult. This process from baby to adult is guided mostly by parenting. In the early years a child needs almost permanently guidance to reduce the risks caused by physical boundaries and lack of experience. While growing older the risks are reduced due to maturing and increased experiences. Furthermore, the amount of freedom and responsibility increases during the same time. This is exactly what an business incubator is doing. Parenting or breeding an early stage business to become stronger and less vulnerable for risks to increase success rates. Impact on the target area. An successful rural business incubator will have the following out-put drawn below. The blue arrow shows in which way an incubator can support local communities in various ways. The orange arrow shows how it will support the environment, strengthening local initiatives, invest in culture, empower local economy, increase job opportunities and attract young people to rural areas. Supporting the environment in economic development is a not commonly addressed issue. In our opinion the environment is for rural areas one of the more important aspects for economic development. Especially when we make the connection with tourism and agriculture. Many tourist go to places with beautiful nature which contains many species of animals and various landscapes. Due to heavy industrial and agricultural exploitation many of the unique value of areas are lost in the last 50 years. Therefore, we want to insist that incubators who are willing to make use of this idea model are putting sustainability in regard to environmental protection in their core business values. In this way new enterprises will create a sustainable long term perspective for their new born companies and the nearby environment which lead to a sustainable use of resources, increased biodiversity. All in all, this way of doing business is important to maintain attractiveness of the area and relating tourism. 3
Support Strengthening Invest Empower Increase Attract Environment Local innitiatives Culture Local Economy Job Opportunities Young People Figure 1: Effects of Incubator on target area. Working model of a Rural Business Incubator The business incubator company is formed by a core-team of residents and business owners of a community or town who are concerned about the local situation. Together they will form in cooperation with knowledge institutes in how to set-up the scene. The team will form a task-force of professionals that will coach the start-ups for a couple of years (depends on type of start-ups and opportunities) by making use of networks in business world and partners. Core-team and Task-force will form together smaller task-forces that fits each different tenants. This increase the rate of success. Task-force will guide the process of starting up new enterprises of tenants. The task-force is busy with the support shown in the model below. Start-ups will leave after a period of time when task-force decided the enterprises are strong enough. The core-team (incubator company) can decide on current situation to move and start-up a new incubator somewhere else if the new enterprises are better off in the current building. Via this system the benefits of the incubator company can be implemented at another place in the area and the strong collaboration between the new enterprises will not be damaged (Evans, 2010). 4
Figure 2: Working model of incubator. Source; blog.earthgrid.com, 2012 The model above shows how the core team of an Rural Business Incubator works and which core business activities of start-ups it will support. Tourism Nature Conservation Rewilding Europe Green Business Incubator Research New Projects Farmers ICT Figure 3: Composition of Green Business Incubator The model above shows how a rural business incubator can be arranged in a perfect situation. There is also a possibility to add an field research office for different universities who can do research in the area about the impact of the incubator, or collect and process data about various other research topics. For example; Climate change, water management, demographic research, agriculture etc. Furthermore, it can function to provide support to the start-ups and 5
vice versa. in already existing incubators most of the smaller circles are mostly filled in with more relating enterprises like retailers or service providers like ICT or web-design. This is something the core-team can decide depending at their situation. The Business Model Canvas To make the idea of a business incubator more clear and overview is given via the Business Canvas Model Customer segments: Customers of business incubator company: Early-stages companies, new entrepreneurs whether they are locals or not, lone eagles people who are well-educated entrepreneurs, often times they are tired of dealing with the ills of the urban environment such as crime, traffic congestion, smog, burdensome taxes, and the high cost of living. These people tend to be drawn to rural areas by natural beauty, outdoor recreation, and lower crime rates. Student entrepreneurs Local entrepreneurial initiatives Farmers Customer relationships: Supportive culture and policy. create an enriched environment. After incubation coaching. Linking with partner businesses in other region. Value Propositions: A business incubator is a comprehensive business assistance program targeted to startup and early stage firms with the goal of improving their chances to grow into healthy, sustainable companies. Entrepreneurship education and training; Technical assistance and counselling; Entrepreneurial networking; Access to capital. Services: - Help with business basics - Networking activities - Marketing assistance - High-speed internet access - Support with accounting/financial management - Access to bank loans, loan funds and guarantee programs - Support in presentation skills - Links to higher education resources - Create linkages with strategic partners - Access to angel investors or venture capital 6
- Advisory boards and mentors - Management team identification - Marketing support - Technology commercialization assistance - Support on legal aspects - Intellectual property management Key activities: Daily management of incubator Form and facilitate professional task-force teams of volunteers Business assistance Creating coaching teams for each individual start-ups (formed out of task-force of volunteers) Key resources: Task-force of professionals. Facility or building. Start-up businesses. Starting capital. Key partners: European Union, Spanish Government, Portuguese Government Task force derived from: Finance, Marketing, Advertising, Insurance, Legal, Real estate, Universities and colleges, Chamber of Commerce, town and local, county government, Economic development, Small business, management sector, rural development, environmental science, Channels: Partner s communication channel, media (e.g. Social media) Cost structure: Capital expenditure, administration costs, staff salary,building rent, Utilities, Insurance, Maintenance Revenue streams: Rental fees, fees for services, royalty agreement with client company, subsidies from European Union, Investment percentages 7
Resources: Evans, M., (2010), Rural Community Finds Small Business Incubator Leads to Downtown Economic Development Success, Rural Research Report, Volume 22, Issue 2, Illinois Institute for Rural Affairs, available at: http://www.iira.org/pubs/publications/iira_rrr_725.pdf Adkins, D., Sherman, H.D., Yost, C.A., (2001), Identifying Obstacles to the Success Of Rural Business Incubators, National Business Incubation Association, Contractor Paper 01-08, available at: http://www.rural.org/publications/nbia01-08.pdf Kansas state university, PPT; Rural Business Incubators, Effects on Rural Economic Development, available at:http://aalto.arch.ksu.edu/jwkplan/ruralsem/student%20reports/rural%20business%20incu bators.ppt Websites: http://blog.earthgrid.com/accel/the-institutions-of-business-development/ Definition Business incubator: http://www.entrepreneur.com/encyclopedia/businessincubator 8