ICT Facts and Figures Globally 3.2 billion people used the Internet end 2015 with 2 billion from developing countries; For every Internet user in the developed world there are 2 in the developing world; However, 4 billion people from developing countries remain offline, representing 2/3 of the population residing in developing countries; Of 940 million people living in least developed countries (LDCs), only 89 million use the Internet, equating to a 9.5% penetration rate;
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ICT Facts and Figures
Globally 3.2 billion people used the Internet end
2015 with 2 billion from developing countries;
For every Internet user in the developed world there
are 2 in the developing world;
However, 4 billion people from developing countries
remain offline, representing 2/3 of the population
residing in developing countries;
Of 940 million people living in least developed
countries (LDCs), only 89 million use the Internet,
equating to a 9.5% penetration rate;
Evolution of business
incubators
Relationship between different
incubator modalities
Performance of Existing ICT
Incubators Misalignment between incubators & ICT challenges & dev objectives
Based on best practices, interviews, observations, the NDP vision of
ICT sector & DTPS’s ICT Policy Review, the Seda ICT incubators are
rated as:
“Less than Satisfactory” – with applicable ratings as follows:
Highly Satisfactory (fully according to plan or better)
Satisfactory (on balance according to plan, positive aspects outweighing
negative aspects)
Average (In the ball park with some criteria partly fulfilled, something
happening but not where it should be)
Less than Satisfactory (not sufficiently according to plan, taking account of
the evolving context; a few positive aspects, but outweighed by negative
aspects)
Highly Unsatisfactory (seriously deficient, very few or no positive aspects)
Inadequate ‘bankable’ business plans - development & implementation;
Insufficient staffing and funding;
Unsatisfactory selection, representation & functioning of Boards;
Less than satisfactory ICT service delivery & market reputation;
International Best Practices
1. Setting up & Operating Incubators
Design - should support & be part of a broader strategic framework. Should not be stand-
alone entities but work alongside other organisations / schemes to promote broader strategies
Public Private Partnerships (PPP) - should be promoted by inclusive partnership
of PPP stakeholders & partnership structures & reflect technology & business support strategies.
Market Testing & Bus Plan Development - markets must be tested and a
business plan developed to provide framework for incubator operations. Business plan to set out
the target market, expected levels of demand, detailed operating framework, infrastructure and services, capital investment & running costs, sources of funds, incubator management and more
Funding Model - best practices show public support for the establishment of incubators will remain critical. Public funding accounts for high proportion of most incubators’ set up costs i.e. around 37% of operating revenue.
Subsidies to Cover OPEX – there are different ways incubators cover their operating costs and whilst many incubators rely on public subsidies, there is a strong argument to minimise dependence on this source of revenue.
Best Practice - Continued
2. Business Incubator Functions
Rental Space - physical space is central to incubator models. EU incubators typically have around 5,800 m2 space for tenants to accommodate +- 18 firms at any one time in variety of units
Value Proposition – the value added of incubator operations lies increasingly in the type & quality of business support services provided
Charging for Support Services – must charge clients for the support services they provide
Target Market - essential for clearly defined target market and reflected in admission criteria
Occupancy Rates vs Income Generation - achieving high occupancy rates is important to generate income, but must be balanced against importance of maintaining selective admission criteria
Turnover of Client Companies - must limit length of time companies can remain as tenants
Aftercare & Networking - aftercare and networking with firms that have left an incubator is equally important as providing services to incubator tenants.
Quality of the Management Team - the quality of management team & adoption of a business-like approach to running incubators and monitoring clients, is crucial to performance and reputation
Technology / Knowledge Intensity of Activities - the type of activities client companies are pursuing, in particular the technology/knowledge intensity of these activities, is the key factor (rather than physical features or operating modality) used to differentiate one type of incubator from another.
Best Practices continued
3. Evaluating Incubator Services & Impact
Incubator Performance - the key is to judge incubator performance on long-term impacts achieved
rather than short-term measures such as occupancy rates or failure rates.
Impact of Incubators – need to obtain feedback directly from client companies and greater priority should be given to this than before
Assessment of Incubator Impacts - obtain client feedback on the role played by incubator in development of their business and to ensure right services are being provided.
Sharing of Know-how - real value added of business incubation approach lies in the sharing of know-how rather than physical aspects
Incubator Model - there are variety of different business incubator models & precise modalities should reflect local, regional and national circumstances and priorities
Different Incubator Functioning - although limited comparisons are possible, best practice confirms significant differences between the way incubators operate and scope for sharing of
experience & know-how
Cost Effective Instruments - best practice confirm business incubators are cost-effective instruments for the promotion of public policy objectives. The relatively low cost per job and other benefits demonstrated show that they are effective method of promoting knowledge intensive, new technology-based activities.
Key Incubator Performance Statistics and
Suggested Benchmarks
Feasibility Study
Feasibility FactorsStudy covered the following factors:
Core Expertise & Sphere of Influence
ICT Product /Service Idea Generation
Stakeholder Involvement
Public Private Partnerships
Establishing a Pool of External ICT Service Providers
Location
ICT Incubation Model
Target Markets
Market Viability & Opportunities
High-tech ICT Service Portfolio
Operational Funding Requirements
Human Resource Requirements
Physical Infrastructure Requirements
Seed Fund Requirements
Soft Landing Services
Incubator Managers
Core Expertise & Sphere of Influence
The high-tech ICT incubators must have
access to core ICT expertise and skills. This
should extend to both soft expertise and
availability of hardware and relevant testing
facilities.
ICT Product /Service Idea Generation
The lesson from best practices is that ideas come from people and amazing ideas come from amazing people.
So from the outset of implementing the high-tech ICT incubator model the generation of innovative new ideas need to be stimulated.
It is necessary and proposed that the ICT incubators should play an active part in idea generation rather than waiting for entrepreneurs to apply for incubation.
Requires a “pull” marketing strategy & approach to link & match ideas with potential candidates.
Stakeholder Involvement
The involvement and support of stakeholders (consisting of sponsors drawn from the business community, government, the local society, venture capital providers, entrepreneurs, etc) and incubator management are vital for incubator success.
Important that there is clarity, consistency and cooperation from all stakeholders. There should be consensus on a mission that defines the incubator‘s role in the community & quantifiable objectives to achieve the mission. Incubator programs should develop stakeholder support, including a resource network and capacity building initiatives.
Public Private Partnerships (PPP)
Strong cross-sector partnerships – (PPP’s) create important value for incubators by filling gaps in the organization's service model, mitigating operational risk and creating a platform for influencing the broader business environment. PPP models should be promoted either in the ownership or in the governance of incubators.
Four principal roles for the private sector involvement in a PPP are to:
provide additional capital or services to subsidise cost of ICT professional services;
provide alternative and supplementary management and implementation skills;
provide value added to the ICT incubates and the public at large;
provide better identification of ICT needs and optimal use of incubator resources;
Establish a Pool of External Skilled ICT
Service Providers
Establishing an external pool and integrated network of skilled and experienced ICT practitioners is a key feasibility and critical success factor for the remodeled high-tech ICT incubators.
This is to stay at the cutting edge of technology. Also if well sourced & managed, they can assure incubates of high quality ICT services and guidance at low or no cost to the incubators.
Location
Location has a direct and strong bearing on an incubator model as it affects both an incubator’s ability to get the right kind of incubates deal flow and its ability to easily and adequately support the incubated companies.
Best practices indicate that ICT incubators do not work effectively or efficiently in ‘far flung’ locations or small towns as these areas normally lack readily accessible technology and ICT experts, mentors, equity investors, angel investors and venture capitalists.
Incubation Model
Business incubation is a concept which involves multiple stakeholders, dozens of “building blocks”, various types of resources and several service categories.
Consequently, it requires a high level of conceptualization for better defining, analyzing, designing, calibration, performance evaluation and thinking about ICT business incubation models.
Important to highlight that researchers, consultants and practitioners have been developing models of business incubators and incubation processes since 1985 and created around 20 different models.
Defining the operational model establishes how the incubator will be organized & operated as it “defines the structure of the incubator, scope of services offered, funding possibilities & external alliances.
Incubation ModelThe proposed high-tech ICT model is based on the application of the
following criteria that is used internationally as guiding principles:
Relevance: Addressing ICT challenges, problems and needs
Effectiveness: Achievement of purpose
Efficiency: Sound ICT service delivery and value for money
Impact: Achievement of wider effects
Sustainability: Likely continuation based on desired results
Service Delivery: Quality, knowledge and service skills
Value-Added: Up-skilling, turning out ICT experts & fast tracking SME’s into the ICT arena
Marketing Visibility: ICT incubator visibility and brand awareness
Remodelled ICT Incubator
Inputs
Entry
criteria
Strategic dimension
Process Outputs
Pre-
incubation
Exit
criteriaIncubation
Post-
incubation
Target
market
TrainingBusiness
advice
Financial
support
Graduation
Effectiveness
Sustainability
Efficiency
Operational dimension
Relevance
Impacts
Pool of Skilled ICT
Experts & Champions
Funding
Stakeholders
Roles & Objectives
Board/Governance
Selection, Role &
Functions
Incubator
Management
Staffing, Skills &
KPA’s
R&D Idea
Generation
Broadband
Services &
Infrastructure
Development
Sustainability and
the Environment
Grand
Science
Industry
Applications
The Service
Economy
Enterprise Development
ICT Services
Elements of new ICT Incubator ModelRemodel not a “one-size-fits-all” model & services will differ for each stage of the start-up and level of incubates.
The main differences & elements of the remodelled ICT incubator revolve around:
Stronger Public Private Sector Partnerships (PPP) to leverage resources;
Ongoing research and development to identify opportunities;
Shift to identify and link ICT opportunities with new intakes and candidate parties to enrol;
Closer cooperation between Seda and TIA to be formalised through signing of an MoU;
Establish pool of skilled and experienced external ICT practitioners;
Upgrade ICT infrastructure i.e. bandwidth speed, R&D & testing labs;
ICT service portfolio more aligned to market opportunities;
Service portfolio that focus on 6 areas identified in the ICT Research Development and Innovation Roadmap;
Target Markets Successful incubators have a particular business focus clear target markets.
A clear target market enables incubator to develop appropriate marketing strategies to reach target audience & position with an appropriate value proposition.
The CSIR’s (DST) 10 year ICT Research Development & Innovation Roadmap outlines target markets which are applicable for ICT incubators.
Target markets should include the following segments:
SME start-ups
School leavers
University graduates
Post graduate students
Seda branches
Development agencies
• ICT incubators to apply a “pull” marketing strategy with R&D, matching and linking incubates with new opportunities identified that will ensure “pipeline” of projects.
Market Viability & Opportunity
The consultation phase identified several opportunities that confirm the market viability of ICT incubators and common themes that emerged include: Gaming
Animation
Content development
Security
Cloud technology
APS development
Market Viability & Opportunity - continued
Success of high-tech ICT incubators dependS on recruiting and enrolling selected parties. A sound gate keeping process must stringently applied for this purpose.
Opportunities emanate from ICT Research Development and Innovation Roadmap (CSIR) AND confirm the viability and opportunities for high-tech ICT incubators.
The ICT RDI aims to strengthen the DST’s role in the growth of ICT sector.
It comprises 6 key clusters of opportunity i.e. areas of significant and attractive market needs in which entrepreneurs can respond by building on existing capability.
Opportunities
Drivers
Global
· Individualism
· Green conscience
· Spend on entertainment
· Interaction on the move
· Urbanisation
· Wealth creation
· Aging population
South Africa
· Penetration of mobiles
· Spend on entertainment
· Bottom of the pyramid
markets
· Importance of social issues
· Affordability & localisation
· Younger population
Capabilities
Research
Organisations
Adjust own strategies to
align more closely with
opportunities, intent and
direction
Academic
Institutions
Create basis for more
coherent cooperation
between institutions in
the interests of increased
investment efficiency
Industry
With roadmap as unifying
plan opportunities for the
participation of industry
and of ICT sector players
in RDI activity are clear,
well-directed remain
always attuned to
delivering benefit &i and
managed.
In particular industry input
with respect to drivers of
demand and needs – both
for technology and for
skills – is essential to
ensure ICT. RDI activity &
education remain always
attuned to delivering
benefit & impact
Enablers
Monitoring &
Management
Implementation of a BV folio
Management Office (PMO)
enables coordination &
Management of all strategic,
tactical & operational activity in
transparent & integrated
manner.
Feasibility &
Planning
Structured & time-boxed
evaluation of developing and
new opportunities leads to rapid
& sound investment decisions
and prioritisation
Education &
Training
Through the introduction of
mechanisms to make visible the
nature & trajectory of forward
demand for ICT skills future
students shape & complete
their education with greater
success
Industry
Collaboration
Earlier, more active and
targeted engagement of
industry in the RDI value chain
strengthens the national
ecosystem
Government
Action
The structured evaluation of
market opportunities highlights
areas where policy and
regulation inhibitors can be
lightened or removed
Broadband
Infrastructure &
Services
Development
Sustainability and
the Environment
Grand Science
Industry
Applications
The Service
Economy
Opportunity
Areas
The roadmap developed on 4 pillars
Roadmap
Opportunities Drivers Capabilities Enablers
ICT Research Development & Innovation
Roadmap
Opportunity Clusters
It comprises 6 key clusters of opportunity i.e.
areas of significant and attractive market
needs in which entrepreneurs can respond by
building on existing capability.
Opportunity Clusters
Opportunities were identified where the application of ICT can help respond to needs. These opportunities were grouped in six clusters that represent areas of significant & attractive market need as follows:
Broadband Infrastructure & Services
Development
Sustainability and the environment
Grand science
Industry applications
The service economy
Six key clusters of opportunity
Market Opportunities Identified
Broadband Services &
Infrastructure
Future wireless technology
Broadband service
infrastructure
Development
E-inclusion
Development
Agriculture
Sustainability and the
Environment
Green & ICT
Global Change
Geo-spatial Applications
Grand Science
Astronomy
Bio-medical Sciences
Industry Applications
Smart Infrastructure
Mining
Manufacturing
Future internet applications
Content creation & delivery
Supply chain optimisation
Asset management
The Service Economy
M-Health
E-services
Education
Business model, Innovation
Payment solutions
Outsourced SA capability
Systems integration
Mobile enabler
Trust & security
High-tech ICT Service Portfolio
The stage of a business or start-up has a bearing on the type of service offered and required. The process of creating and developing ICT businesses has four distinct stages as follows:
Conception: the entrepreneur identifies a market niche / need on the part of a specific target public and decides to open a company. The focus of this stage is development of a consistent business plan.
Emerging Company: based on the already elaborated Business Plan, entrepreneurs begin developing the product and/or service to be offered. The objective at this stage is to have at least one prototype of the product to be offered. The legal formalization of the company may also occur in this stage.
Consolidation: the next stage in the evolutionary process of the company is consolidation in the market in which it has opted to function, with growth in the number of clients.
Growth: as of the companies’ consolidation, the business will seek out new markets and expand its field of activity.
Remodel Funding Requirements
The revised model will require the following funding:
Capital expenditure:
R8million to upgrade ICT infrastructure and to create an enabling environment entailing improved broadband speed, R&D and testing laboratories.
Operational Expenses:
Additional incubator staff costs are projected at R2,28 million per year for four ICT incubators based on engaging a central ICT researcher at Head Office and appointing internal ICT managers or “Entrepreneurs in Residence” at each incubator. They should be purely focussed on advising start-ups and making sure they are getting the support they need. It also means that there is someone who is fully focussed on the success of the tenants/incubates with lots of experience in building high growth start-ups.
The alternative is to up-skill or re-skill and train enterprise development managers to manage both portfolios of ED and ICT related service delivery and development.
Conference facilities, meeting rooms and break-rooms.
General office services are provided and include: telephone, receptionist, copy services and internet access.
The existence of a good infrastructure in the locality may not have a direct influence on the incubator’s demand; but a deficient infrastructure may reduce the number of companies interested in the ICT incubator’s support.
To have a successful ICT incubator there must be reliable, high speed Internet connectivity, a supportive banking and finance community, adequate numbers of service providers to work with the entrepreneurs and premises that can be developed, renovated or acquired.
The most pressing challenge for creating an enabling high-tech ICT environment is to upgrade broadband speed to 100 – 150mgb and making available laboratories properly equipped with software and tools for developing new technologies.
Seed Funding Seed funding will be a key requirement for the successful launch of the remodeled high-
tech ICT incubators.
Seda and the Technology Innovation Agency (TIA) are in an advanced stage to sign a MoU and agreement to make available up to R500,000 for innovation-oriented projects.
The following activities can be supported by TIA for seed funding: Initial proof of concept (note that this assumes some level of proof of concept has been
achieved using research funding).
Product, Process (comprehensive technology package) and Prototype development.
Sourcing of IP opinions.
Production of market samples and/or associated testing, analytical data and method development and specification sheet development.
Refining and implementing designs.
Conducting field studies.
Support of certification activities.
Piloting and scale-up and techno-economic evaluation.
Detailed primary market research, or specialist consulting.
Business Plan Development.
Soft Landing Services
Refers to discussions between Stp and French Embassy to collaborate by offering soft landing services for SA companies interested in French market. Looking at cooperating on opening ICT incubator in Cape Town as have a laboratory called ‘French Tech
Hub’.
The top five soft landing services identified through consultations with Embassy representative are: providing easy access to networks i.e. relevant
The following conclusions are made from the study: Overwhelming evidence of need & viability for high-tech ICT incubators
Strong need to develop ICT skills, up-skilling, import replacement of ICT products and services and to better serve the needs of the ICT sector.
Ideal locations of ICT incubators are main cities and metros
Most important feasibility aspect is availability of a eco system to support the incubators.
Proposed remodel is aligned with DST’s ICT RDI Roadmap
Key success factors for the new modelled ICT incubators are: Creating an enabling environment at each incubator
Upgrading infrastructure i.e. broadband speed, R&D and validation laboratories
Creating a pool of external skilled ICT service providers
Stakeholder involvement and Public Private Partnerships
Implementing a ‘pull’ incubation recruitment strategy to create a pipeline of ICT projects linked with opportunities identified
Securing and providing access to seed funding for incubates
Quality of incubator management
Conclusions - continued
Value proposition - Seda ICT incubators not aligned with ICT needs and opportunities
Gap in ICT service delivery as more of an ED approach, hence relevancy questioned
Competitive ICT incubation landscape, so reputation & performance is important e.g. GGDA to convert Nazrec Media House into ICT Smart Hub as all infrastructure available.
Present reputation and image of Seda ICT incubators is less than satisfactory
While Business plans are in place they not ‘actionable’
No matter how well plans have been developed it will be futile if right people with right competencies, capacity & management abilities are not engaged or trained
Additional incubator staff costs are projected at R2,28 million per year for all the incubators.
Conclusions - continued
International companies in SA & see program for ICT build-out as a growth opportunity not just ED points
Success of incubation process in general depends on internal (incubator’s resources and processes of selection, mediation, and exit) and external factors (entrepreneurs and ideas flow into the incubator)
The proposed ICT service portfolio is based on retaining the ED services but expanding the ICT services
Practices / services to be applied with different intensity depending on degree of entrepreneur’s knowledge, mentoring, resources & team involvement needs
The intensity of services and practices applied also heavily depends on an entrepreneur’s capability
Best practices suggest the need for and ICT manager or “Entrepreneur in Residence” at high-tech ICT incubators
CAPEX required to upgrade infrastructure & create an enabling environment projected at R8 million i.e.infrastructure is required for improved broadband speed and lab facilities
Recommendations Adopt and implement the remodelled ICT incubation program as follows:
Accept remodel within 60days
Develop overall high-tech ICT incubator business plan within 90 days
Develop business plans for each Seda ICT incubator within 120 days
Review & reselect new incubator boards with greater private sector participation
Liaise with private sector to form PPP and sign MoU’s to avail pool of experts
Finalise acceptance of the model for implementation
Reposition the incubators as high-tech ICT incubators
Facilitate improved and more active stakeholder involvement and PPP’s
Create a pool of experienced and skilled ICT practitioners
Clearly define target markets and admission criteria
Offer portfolio of high quality ICT services (based on ICT RDI Roadmap opport’s)
Manage in business-like manner to maximise value for money
Develop high-tech ICT incubators in synergy with the ICT RDI
Apply Governance Structure to meet needs of the remodelled ICT incubators
Go
ve
rna
nce
str
uc
ture
Pre-Screening Process
Membership: Incubator Centre manager,
ED Officer, Private sector representatives
(as technical advisor)
Scope: Pre-screen/Prioritise applicants,
Projects. R&D needs, link with opportunities.
Management Committee
Management and Administrative:
- Incubator executive and staff
- Ensure enabling environment
Ownership:
- Managed by centres, under the
guidance of Seda Head Office
- Decision-making resides with executive
Seed Fund Management:
- Fund Management will reside with centres
- Funds will be invested to derive a return
and achieve commercial viability
Incubator and Project ‘Pipeline’
Development:
- Act as ‘clearing house’ in the introduction
of pre-screened projects to ‘marketplace’
- Identify and facilitate potential JV
partnerships and apply ‘pull’ approach for
prioritised key ICT innovation projects from
- Opportunity identification stage to completion
Strategic-level Board
Ownership: Co-Chair, Public & Private sector
- Selected members as participants
- Private sector – Big 5
- Public sector - DTPS, DST, Stp
Scope:
- Policy/Strategy Forum
- Annual/Bi-annual Review of Policy/Strategy and
Programme/Business Planning/Outcomes Review.
Operational-level Board
Membership:
- Private sector i.e. Bytes, Dimension Data, etc.
- Seda HO Nominee(s)
- Universities/Metros
- Funders – TIA
- Public sector
Scope:
- Governance and Steering Committee
- Monthly Review/Direct Project/Seed Funding
Assessment & Progress
- Overall Decision-making/Approval Body
- PPP Promotion
Impact Assessment Group
Membership:
- Seda Centre Executives & Stp
- Private sector representatives
Scope:
- Assess & monitor impact
- Technical assistance and Funding
assessments
- Assess projects for extent of seed funding
requirements
- Assess projects for R&D requirements
- Quarterly review with recommendations to
be submitted to the Ops Board for
decision-making/approval
Technical Advisory
External Pool of ICT Experts
- Private sector companies
- Service providers
- Universities
- Sector organisations and ‘think tanks’
Public sector:
- DTPs
- DST
- SEDA
- Other technical Advisory
Private sector:
- Sectoral/Industry Interest Groups
Seda ICT Incubators Softstart NMBSii SmartXchange Invotech