USAID/RAISE Ecotourism Enterprise Incubator Concept Paper

Prepared by Conservation International and the George Washington University

Definition A business incubator is a facility to assist new businesses in overcoming the difficulties of the early years of business life.
The word incubator comes from the medical jargon: just as premature infants are put into an incubator to be nurtured to the point where they can survive, a business incubator nurtures businesses, generally small and medium-sized enterprises.

Structure A business incubator traditionally has two aspects: v A physical facility in which a select set of enterprises can be housed. v A variety of support services to help the enterprises survive and develop.
A business incubator is a hybrid economic development tool embracing both property development/ management and small business development/management. The incubator provides a microenvironment for an enterprise whose activities accelerate the process of enterprise development and increase the likelihood of business growth by: v Conserving entrepreneurs' most scarce and precious resources, time and money, through cost-sharing, time-saving and capital-conserving access to affordable space, services and equipment all in flexible and timely ways tailored to entrepreneurs' needs. v Helping entrepreneurs overcome constraints to enterprise growth that arise from their macro-economic environment, such as regulatory barriers, lack of information, and lack of access to capital. v Accelerating the rate at which entrepreneurs learn core elements of business planning, by providing informational interchanges, mentors, technical and management assistance, and workshops. v Providing ready access for entrepreneurs to learning resources on design, management, and networking in an incubator environment.

What is an ecotourism enterprise incubator? An ecotourism enterprise incubator is a hybrid instrument for economic development. The incubator supports small and medium-sized tourism businesses in the establishment, growth, or restitution of ecotourism in regions where the private sector is underdeveloped and a high potential exists for nature-based tourism.
The incubator comprises a network of tourism enterprises with complementary products and services. Potential participants include: v Private nature reserves v Local operators v Lodging in local communities v Conversion of hotels/inns into "ecolodges" v Scuba diving operations v Conversion of fishing vessels for tours

v Rental agencies for bicycles, horses, special vehicles v Souvenir shops and artisan products v Associations of specialized guides, artisans, among others

Objectives and expected results Based on the principles of sustainable development, the goal of an ecotourism enterprise incubator is to promote the creation and strengthening of strategic new businesses and related industries. The incubator likewise serves as an instrument for the conservation of biodiversity and the creation of jobs. Expected results:
v A network of competitive ecotourism enterprises that conserve biodiversity v A pioneer model for incubators in ecotourism, potentially replicable in other regions v A mechanism for financing protected areas in the region v Greater harmony between the financial sector and entrepreneurs in ecotourism, creating possibilities for other interested entrepreneurs v Sustainability of a nucleus of synergistic enterprises with a united commitment to environmental and social issues

Methodology Phase 1: The implementation of an ecotourism business incubator will be carried out in two stages. The first stage includes the elaboration of a business plan, the establishment of criteria for the selection of businesses and participants, and initial training in entrepreneurial skills for proprietors and administrators. This process will take approximately six months. During Phase 1, professionals involved in the project will develop criteria for the selection of a manager for the incubator and will begin a search for a suitable candidate. Following is a summary description of Phase 1 activities:
Elaboration of the business plan: The plan determines project viability, goals and objectives, time frame for completion, criteria and parameters for evaluation and monitoring of incubators, and a business diagnosis. Criteria for the selection of businesses participating in the incubator: Businesses must meet criteria established for evaluation, selection, and recruitment. An estimated 15 to 25 businesses will participate. Recruitment: Project coordinators will establish recruitment criteria. Training in entrepreneurial skills for selected participants: Managers and proprietors will receive preliminary training prior to implementation of the incubator. Phase 2: The second phase involves the implementation of the incubator. Norms of cooperation and relations among incubator enterprises will be established and the physical space to house the incubator headquarters will be prepared. This main office will function as an "ecotourism center" where all incubator businesses may be permanently or temporarily represented. Tourists may obtain advice and information there about ecotourism products and services. This ecotourism center will have installations for receiving and attending tourists and other parties interested in the project, office space/representation of member businesses, and meeting rooms. The center will have telephone lines, fax machines, computers, printers, Internet access, and a secretary to aid the project manager and business representatives. Creating a space committed to public outreach and the sale of ecotourism products will increase project visibility and effectiveness.

Ecotourism Enterprise Incubator Concept Paper

At the start of ecotourism center activities, the incubator will promote training courses for businesses in financial management, product development, use and maintenance of equipment, customer service, marketing and sales. Institutions directly involved in the project and other supporters will provide regular technical assistance. Project coordinators and institutions will focus on obtaining credit lines and financing under special conditions in accordance with the Phase 1 business plan protocol. The current proposal covers the first six months of the preparatory stage and the first year of implementation. This second phase will begin after the six-month preparatory phase and will last two to three years. The goal is the solidification of the incubator, which will be evidenced by the progress and results of the first 18 months. A demonstrated commitment to conservation of natural resources and landscapes along with high-quality goods and services can introduce long-term sustainability to ecotourism destinations. Businesses that have "graduated" after two or three years of the first phase may collaborate with the project in the future, ensuring continuity and multiplying the effects of this proposal.

Model of the Ecotourism Incubator Process

Inputs
Technical Assistance Universities Technical institutes NGOs Government Physical Space Community NGO Government Financing Banks USAID Missions Cofinancing by participants

Incubator Small and medium-sized ecotourism enterprises

Outputs
Stable businesses Increased employment Increased household income Increased conservation incentive Increased tourism products Increased visitation to region

Ecotourism Enterprise Incubator Concept Paper

Further Information
Differences in Incubators and Small Businesses Development Centers The "physical facility" is an essential element of an incubator as it provides the enterprise tenancy. A small business development center (SBDC) is a facility that provides development services to small businesses, but no enterprise tenancies except in very rare instances. Sometimes SBDCs are referred to as "incubators without walls" but this definition is misleading. The same specifications can be made about small and medium-sized enterprise (SME) development centers such as agribusiness development centers. None of these should be called "incubators" if they do not allow small, new, or early-stage enterprises to occupy at least some part of their facilities. The physical proximity of entrepreneurs provided by an incubator environment distinguishes itself qualitatively from an SBDC or SME assistance center in these respects: v Entrepreneurs and their businesses receive extended and integrated assistance, in contrast to the brief, topical, fragmented doses of assistance provided by a typical SBDC. v Formal and informal interactions among entrepreneurs served by an incubator lead to informationsharing, trading and investment relationships that enhance the facility's economic development impact and increase its economic multiplier. v Incubators substantially reduce the probability of business failure by a factor of about four and substantially increase the likelihood of business survival and success. Networking and Benefits Sharing The support of a physical facility and services contribute to strong networking synergies. Participants should view the incubator as the center for implementation of a development strategy, thus forming a "business incubation system" (Bearse, 1995). The SBDCs will assist the development of small, new, or early-stage enterprises and will be essential components of this system. A well-managed incubator should: v Facilitate the formation of networks among companies so that they can amplify their producer, marketing, exporting, and supply-sourcing capabilities. v Identify, qualify, and certify sources of supplies and services outside the incubator to comprise an external network of quality services. v Establish an "affiliates" program so that entrepreneurs and businesses outside the incubator can use incubator facilities and services. v Help to focus and integrate small business assistance that may be fragmented, little known, or ineffectively deployed. Risks Business incubators are complex, risky projects that are difficult to create and manage successfully. The difficulties are direct corollaries of such projects' hybrid nature. Risk can be of three basic types: v Business risk: The high risk of failure exists for start-up or early-stage enterprises although evidence shows that business incubators substantially reduce the likelihood.

Ecotourism Enterprise Incubator Concept Paper

v Property development risk: Difficulties of developing and managing a commercial/industrial facility are compounded by property market risks. v Technological risks: Technology-based incubators face high risks in new product development. Business Incubators in Developing Countries The scope is greater for a business incubator in developing countries and nations with economies in transition than the scope in developed economies. Both "start-up" and "existing" enterprises benefit from business incubation services and some may even experience a radical restructuring from the ground up. To minimize risk factors during these circumstances, the following prerequisites are needed: v Governmental assistance to finance the early stages of incubator development with support such as a donated building, grants, and/or equity capital. v Official commitments that incubators created with government support will be managed in entrepreneurial, business-like ways by qualified persons who are not government employees. The incubators will operate semi-autonomously with relation to government agencies. v Decentralized and flexible project implementation with a solid base of community support in an area where an incubator is located. v Local in-kind and monetary commitments of resources for incubator development to match or complement those from international or governmental sources. v A market-oriented or entrepreneurial economic development strategy for the country or region where the incubator is located. v Full advance disclosure of the costs and risks of incubator development conveyed to potential project sponsors. v Promotion of project benefits.

Select Examples
Nigeria. After considerable delays following completion of a feasibility study by international consultants in 1989 with support from the United Nations Fund for Science and Technology for Development (UNFSTD), Nigeria's first incubator was established in 1993, spurred by donation of buildings by the Governor of Lagos State. Lalkaka and Bishop (1995) found that "the stated commitment of the federal government to incubator development is not matched by concomitant funding." The incubator is represented by a governing framework, the Nigerian Incubator System Foundation, established in 1993 as a non-profit umbrella association but taken over by the government in April 1995. The incubator at Lagos is about 50 percent functional, with 11 tenants and rental space of 3,561 square meters (71 percent of gross facility size). A second, smaller incubator (300 meters of net leasable space) started more recently, and had two tenants as of late 1995. A third has been planned but not yet created. The Lagos incubator cost a total of $1.63 million to develop and start up and still requires continuing operating subsidies. The incubator provides typing, photocopying, and a conference hall as services to tenants, which amount to minimal support by standards of other countries.

Ecotourism Enterprise Incubator Concept Paper

Nigeria, however, is the only African country among four that completed incubator feasibility studies and plans with UNFSTD support, which succeeded in creating incubators. The Philippines. An incubator in the Philippines was created at very low cost by the Metals Industry Research and Development Center and became rapidly occupied by a variety of enterprises. This was accomplished by (1) simply subdividing an underutilized first floor of a building in the national research and development complex at Bicutan through the use of plywood partitions and (2) inviting entrepreneurs to use the facility at affordable rates. An employee of the center was designated to manage the incubator. Tenants could avail themselves of the office equipment and services of the Technology Application and Promotion Institute, which was housed in the building. Poland. An excellent example of a successful Polish incubator is in Knurow. The incubator is located in an old four-story hotel and restaurant complex. There are currently 36 businesses in the facility ranging from light manufacturing firms of plastic bags, garments and pickles, to a variety of service firms in construction, machine repair and printing. The firms receive assistance from the incubator manager and staff as well as from incubator tenants, some of whom are accountants providing tenants with services and counseling. The president of the board of directors of the local foundation that established the incubator is a dynamic entrepreneur in the community. He is a role model, champion, and resource person for the incubator program. An equally dynamic woman serves as incubator manager and complements his work. This incubator, like many in the United States, was created entirely through local initiative and resources. Moreover, it has become financially self-sustaining without continuing operating subsidies from the local government or other governmental sources. This incubator is one of 25 established in Poland during the period 1992-94. A large majority have received support from the World Bank, Government of Poland and/or the European Union (Phare Program). The Ministry of Labor is planning to support at least 12 more incubators that will be developed by local project sponsors selected (as 12 were earlier) through a competitive national solicitation for incubator development proposals (see Bearse, 1990a). Source: World Bank Intranet

References and Further Readings on Business Incubators:

Bearse, Peter J. (1990a, with others), "Report: Poland - Employment Promotion and Services Project." Washington, D.C., The World Bank, document 5POLPA019 (June 25, 1990) plus subsequent documents based upon appraisal missions. Bearse, Peter J., and J. Lavelle (1990b), Programme for the Promotion of Small, Technology Related Enterprises in Zimbabwe Using the Business Incubator Project: Report to the United Nations Development Programme, Regional Bureau for Africa, and the U.N. Fund for Science and Technology for Development, Programme on Technological Innovation and Entrepreneurship Development. New York, N.Y.: UNFSTD Project No. RAF/88/099/A/01/31 (August 1). Bearse, Peter J., and J. Lavelle (1990c), "Feasibility Studies for the Development of Business Incubator Facilities: The Main Features of a Dynamic Approach," presented at the 4th Annual Meeting, National Business Incubator Association, Denver, Colorado (April 9). Bearse, Peter J., and J. Lavelle (1992), "Incubator-as-Enterprise: High Risk and Hard Work (for sure) / High Return (maybe)," presented at the Senior Policy Seminar on Employment and Training Dimensions of Adjustments in Central and Eastern Europe, Turin Centre, International Labor Office, Turin, Italy (April 1). Bearse, Peter J. (1993), "Programme Review: United Nations Fund for Science and Technology for Development, Programme for Technology Business Incubation and Entrepreneurship Development." New York: United Nations Fund for Science and Technology for Development (UNFSTD), One United Nations Plaza, N.Y., N.Y., 10017. Also published in Leipzig, Germany: Proceedings, International Conference, Technology and Business Incubation Centres in Central and Eastern Europe and Their Role for Innovation Entrepreneurship and East-West Cooperation (February 28 - March 1, 1995), pp. 198-225.

Ecotourism Enterprise Incubator Concept Paper

Bearse, Peter J., and M. Tomaru (1994), "Guidelines on Establishment of Technology Business Incubation Centres." New York: United Nations Fund for Science and Technology for Development, One United Nations Plaza, N.Y., N.Y., 10017. Bearse, Peter J., (1994), Comprehensive Manual for the Evaluation of Business Incubation Projects. Washington, D.C.: Economic Development Administration, U.S. Department of Commerce and Athens, OH: National Businesses Incubation Association (December). Bearse, Peter J., (1995), "Strategic Paper on Business Incubation Systems." Vienna, Austria: United Nations Industrial Development Organization (October 31). Hawhow, Sally, ed. (1995), A Comprehensive Guide to Business Incubation. Athens, OH: National Business Incubation Association. Lalkaka, Rustam, and J. Bishop (1995), "Role of Business Incubators in Enterprise Creation and Economic Development." New York: United Nations Development Programme, One United Nations Plaza, N.Y., N.Y. 10017 (September). Rice, Mark P., and J. Matthews (1995), Growing New Ventures, Creating New Jobs: Principles and Practices of Successful Business Incubation. New York: Quorum Books. Also available through the National Businesses Incubation Association at 20 East Circle Drive, #190, Athens, OH 45701. Tornatzky, Louis, et al. (1995), The Art and Craft of Technology Business Incubation: Best Practices, Strategies and Tools. Athens, OH: National Business Incubation Association.

James Dunn Cognizant Technical Officer/Co-Manager G/EGAD/AFS Telephone: (202) 712-0136 Fax: (202) 216-3579 E-mail: jdunn@usaid.gov

Alan R. Hurdus Co-Manager G/ENV/ENR Telephone: (202) 712-0218 Fax: (202) 216-3174 E-mail: alhurdus@usaid.gov

Ecotourism Enterprise Incubator Concept Paper