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 he
new business incubator is an innovative approach to
economic
development. It is one facet of a technology venturing
process that should
be an emerging Cuban response to changing economic
conditions. Technology
venturing is an entrepreneurial process by which
institutions,
universities, government, and the private sector take
and share risk in
integrating and commercializing research, new
technologies and business
opportunities.
It will link public sector initiatives and private
sector investments to
spur economic growth and technological
diversification. The Cuban economy
will be undergoing considerable upheaval and change.
These changes will
significantly alter the way new government officials,
economic developers,
and firms think about the way business operates.
Although they will be important, large corporations
and older
manufacturing concerns, as we see it, will not
dominate the economic
landscape of Cuba. Rather, entrepreneurship and small
business development
will have a significance increase as a factor in the
economic
reconstruction of Cuba. The result will be that Cuba
will have an economy
that will be innovation-based and dynamic.
Incubators can contribute to and benefit from a set of
building blocks
that make the technology venturing process- possible.
These blocks include
a healthy venture capital industry, a solid financial
base, adequate
public and private infrastructures, a sound
educational system, and an
extensive business network.
The basic concept behind the new business incubator,
whether technology or
non technology oriented, urban or rural, non-profit or
profit, public or
private, locally owned or part of a chain, will be to
leverage
entrepreneurial talent in Cuba.
The primary driver of technology-based new business
venture will be
neither the availability of funds nor the rate of
technological advance;
it will be the entrepreneur. New business incubators
will maximize the
potential of entrepreneurship talent within Cuba by
providing the
entrepreneur with services and support that
complements his natural
talents and will enable him to expand his potential.
The incubator will be a significant link between the
entrepreneur,
especially when he is technology oriented, and the
commercialization of
his product or service. This gap will have to be very
short in Cuba if we
want to expand and grow the economy at the pace of the
modern countries.
B. Objectives
and Characteristics
A business incubator has one major purpose, to nurture
and develop
fledgling firms into healthy small businesses. The
focus in Cuba should be
not as much in start-ups as it should be in helping
ensure a business
succeeds once begun. The period spent in the incubator
will give
entrepreneurs the time to develop the needed
management and business
skills to survive on their own.
Although incubators in the United States are quite
diverse, we must define
some core characteristics for the ones to be
established in Cuba.
Incubators will rent physical space and will provide a
set of logistical
and management services to the tenants. Tenants will
also be provided with
access to some type of financial consulting and
professional business
services.
Entry policies will be set by the sponsoring
organizations. However,
usually these criteria include net job potentials, net
profit, space
requirements, environmental considerations, and
economic diversification.
Incubators should have also exit policies, typically a
time limit set on a
tenant's occupancy in the facility. After a period of
time a tenant will
no longer need the support services and should leave
in order to make room
for new start-up businesses. An exit policy will also
prevent no growth or
failing companies from squandering incubator
resources. .
Organizations who will sponsor incubators in Cuba can
be quite diverse and
they can include local governments, non-profit
economic development
agencies, educational institutions, and private
companies. In Cuba,
specially during the first few years of the
reconstruction, it is
recommended that incubators be mainly sponsored by the
private sector,
with the assistance of universities, and a minimum
participation of local
governments, only when it becomes absolutely
necessary.
C. The Role of
Incubators in the Economic Reconstruction of Cuba
The first few years of the economic reconstruction of
Cuba will generate
many people with talent and ideas for new businesses
or services. The wave
of entrepreneurship will be the result of 52 years of
suppressed economic
initiatives. Despite their desires, and their talents,
many Cuban
entrepreneurs will fail in their quest to build a
successful surviving
small business.
Statistically, in the United States, 70% of such
businesses fail within
five years. We can expect perhaps a greater rate in
Cuba due to the
incipient economic conditions and the lack of
technological assistance and
capital funds. The business incubator will play a
significant role in
improving the survival rates of business start-ups, as
they do in the
United States. In the United States, 85% of the small
businesses which
have been through the process of incubation succeed
and become
established, healthy firms, which are the largest
beneficial contributors
to the economy of the United States.
The business incubator in Cuba will promote enterprise
success in several
ways. First, the incubator will provide access to a
pool of centralized
services. Cost of these services will be part of a
fee. Second,
entrepreneurs with similar needs and frustrations will
work in a close
proximity that will enable them to share their
experiences.
The presence of other firms and service providers will
create a strong
opportunity for trade relations to develop. The
incubator will also help
aid business start-ups search for capital. An
incubator run by a local
government will predicate on creating employment
opportunities for that
local region. University-related incubators, while
sharing that goal, also
will look to transfer academic research into new
products and technologies
as well as to create opportunities for students.
For privately run incubators, the purpose will be
slightly different.
They will expect an incubator to provide profit or
investment
opportunities, but they will also contribute to the
betterment of the
economy and the community. The private incubator will
also be a vehicle
for technology transfer to larger firms, to add
property development, and
a way to contribute to the community.
Private firms running incubators can vary from large
manufacturing
companies to venture investment groups. Presently there are
some 210 incubators operating in the United States.
Possibly, and this is our recommendation, Cuba should
have a maximum of 6 incubating centers operating in
the long term planning.
An incubator is not only an organization or a
corporation, but a physical
entity. Incubators in Cuba, due to the scarcity of
appropriate space, will
have to start functioning in single buildings where
the participating
entrepreneurs will be housed and where, due to the
physical proximity,
they will spontaneously interact, which represents a
definite advantage.
Another advantage will be if the incubator can be
located near or on a
University site. If so, they will have the following
advantages: library
facilities, exposure to certain state-of-the-art
technology and thinking,
undergraduate students in science and engineering that
form a very useful
source of technical labor/assistance, a creative
environment, etc.
Industrial parks are related to the incubator units. They
act as lightning roads for technology -based companies
and will be an area's lure for attracting
companies.
D. Private
Owned Incubators
Due to the special conditions in Cuba during the first
few years after
Castro, we propose that incubators, where private
ownership be the
principal one, be the ones to promote.
Private incubators should have a median size of 50,000
square feet. The
average number of tenants, based on experience from
the United States, and
taking into consideration the conditions in Cuba,
should be 20 tenants
per center. This, of course, will depend on the
availabilty of space, and
the space needed by each tenant. As mentioned earlier,
with a maximum of 6
centers, there will be an average of 120
new-to-be-companies in constant
stage of formation.
The primary motive in funding the incubator by a
private sector is to
make profit. In this sense, private sector incubator
units can apply
venture capital techniques. Therefore, capital gains
should be emphasized
over dividend income, and the incubator's parent
corporation will
distribute income to its investors on a variable
basis.
The incubator will distribute income; it will provide
access to further
investment in successful incubator firms, and/or it
will reinvest the
proceeds of its investment in new companies. The
incubator should be taxed
as a corporation.
When the incubator's facilities are full, there is no
room for future
growth. The only investment available through the
incubator unit then will
be follow-on financings, financing of new firms that
will replace the
incubator's business failures, and successes that will
move on to larger
facilities.
The incubators will take a substantial position of the
company's equity in
return for the services offered. But, in this form,
companies will have
assured a portion of their needed post incubator
financing.
E.
Purposes/Benefits Summary
Incubators have become an innovative approach to help
entrepreneurs in the
United States in their start up phase with reduced
overhead costs, expert
assistance, and financial banking. We are sure that
they will perform a
very useful function in the new Cuba's incipient
economy.
People with raw energy and a productivity for risk
taking built Cuba
before Castro. We will have to rebuild it, in new
ways, with new
approaches. The entre-and-intrapreneurs will have to
break tradition and
provide dynamic sources of creative and innovative
enterprises.
Mechanisms for providing seed capital as well as an
expanding venture
capital industry will help to build new ventures in
Cuba. It is essential
then for the entrepreneurial process to succeed to
continue to support and
expand the formation of capital and its innovative
utilization in business
development. Within the context of these major trends
in economic
development, new business incubators will play a
unique role in Cuba.
Incubators will help to create jobs by increasing the
chances of success
for emerging companies, especially in the high-tech
areas. In other words,
the new business incubator -capitalism in action- is
an innovative
mechanism for linking talent, technology, capital, and
know-how.
We recommend the promotion of incubation centers in
Cuba to speed its
industrial development.
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