France Case Study 2002

Benchmarking of Business Incubators

Incubator: Bordeaux Productic 1. Background and Regional Context There are an estimated 150-175 organisations in France that undertake business incubation activities of one form or another. Of these, however, only around 50 meet the ‘minimum standard’ definition set out in the French definition (norme française) of a business incubator, which stipulates that an incubator is essentially a physical entity whose primary objective is to provide both physical workspace and high quality business advisory services in order to facilitate and accelerate new business creation. The French ‘minimum standard’ was devised by ELAN, the French national association of business incubators (pépinières d’entreprises). ELAN is a national association comprised solely of incubator managers. ELAN worked over a three-year period to try and establish an agreed minimum quality standard and common definition of the role and scope of business incubation. The standard was developed as a point of reference for business incubators based on the principle that incubators should strive to attain certain minimum benchmarks based on the provision of a predefined range of basic services. In France, responsibility for incubation policy and implementation falls under the Ministry of Trade & Industry. According to the French definition of business incubation, an incubator by definition must have a physical entity - otherwise it cannot be regarded as an incubator au sens propre but rather as simply another type of business support organisation. The value-added of incubation is perceived as deriving very much from the provision of localised management advisory services on-site (services de proximité), and the inter-firm networking opportunities which arise from being located in an incubator environment. Incubation in France, by definition, is focused on the business of actively nurturing new SME start-ups within the four walls of the incubator. Outreach projects and follow-up of graduates is very much a part of the post-incubation process however the essence of what the incubator is and what it can achieve stems from the building itself – through which it provides a range of services and organises a variety of activities. The French definition states that new SME start-ups have two main developmental needs that an incubator can help meet: ·

Physical space (managed workspace)

·

Human Resources (business support services e.g. secretarial, administrative, business advisory, consultancy and managerial services – guidance, nurturing, strategic advice)

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Benchmarking of Business Incubators

Given that business incubation is considered as an extension of the business support infrastructure provided by the State, reaching breakeven is not an objective of regional and national stakeholders. Incubation in the French context is about harnessing the resources of local and regional public economic actors (Chambers of Commerce, regional authorities, municipalities) and providing entrepreneurs with the means to grow and develop: which essentially boils down to the incubator support network (human and advisory) and the physical infrastructure (office or factory space). The average survival rate of incubated firms in France, based on the French definition1, is about 80%. Bordeaux Productic is situated in Cestas, near Bordeaux in the Southwest of France. As well as being renowned for its wine-growing and other agricultural activities, Bordeaux is also a major logistics centre with a dynamic high-tech industry. Bordeaux is also home to the Commissariat à l’Energie Atomique, (CEA), a state-owned national research facility which conducts research on applications for nuclear, laser and optical technologies. Whilst central Bordeaux is relatively prosperous thanks to activities such as viticulture and tourism, peripheral areas of Bordeaux have suffered in recent years from the decline of traditional heavy industry. Some of the outlying industrial areas qualify for Objective 2 status. The incubator was set up in 1989 to help catalyse the regional economic development renewal process. The incubator is situated in close proximity to CEA (Commissariat à l’Energie Atomique), a state-owned, nationally renowned research institution. The incubator has developed strong links with CEA including an agreement that enables startup companies at Bordeaux Productic to have access to CEA’s highly sophisticated research laboratories. 2. Incubator Operations Bordeaux Productic began its incubation activities in 1989. In the twelve years since the incubator was founded, 80 new companies have been successfully created and nurtured, 72% of which survived for 5 years and longer. Over the longer term, 55% of Bordeaux Productic’s new start-ups were still in operation after ten years. The incubator currently houses 20 start-up companies (employing 70 people) with one office permanently kept vacant for prospective tenants/ pre-incubation services. The incubator has five full time employees of whom two are managerial level and the remainder secretarial and administrative support. Key partners include the local mayor,

1

The ‘survival rate’, according to the French definition, is measured as the percentage of SME start-ups which remain in business for longer than a 5 year timeframe

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Benchmarking of Business Incubators

the local and regional councils, the Centre for Nuclear Research (CRE) and representatives from the private sector. The rent paid by incubator tenants is set marginally below the local commercial rate. The incubator’s pricing strategy is to pitch the rent slightly below the prevailing commercial rate in order to attract new tenants and ensure a high occupancy rate – the incubator avoids pitching the level too low to prevent displacement. Another admission criterion is that a prospective tenant’s sectoral specialisation must not directly overlap that of another tenants – i.e. they must not be direct competitors. In terms of admission criteria, the incubator conducts a rigorous qualitative assessment of a prospective tenant’s business proposal. Only new start-up firms are admitted – existing firms are not eligible to apply for incubator tenancy. Incubator management then assess the viability of the business plan (over a two-three week period) and the skills and credibility of the prospective entrepreneur. The lease arrangements between the incubator and its tenants are very flexible and there is no minimum period that a start-up company must remain a tenant of the incubator. As far as exit criteria are concerned, the incubator conforms to the French norm – tenant companies are allowed to remain as tenants for a maximum of four years. In terms of revenue, the incubator has a turnover of approximately € 183,000 annually. As far as revenue breakdown is concerned, the incubator derives approximately 50% of its turnover from rent, which includes a package of business support and specialist advisory services. The remaining revenue comes from subsidies and external funding sources. Whilst the incubator does not have any formal links with the University sector, it has developed informal links with one of the Universities in Bordeaux, with whom it has negotiated access to an IT laboratory for its tenant companies. It also has excellent links with CRE, which can provide tenant companies with grants towards the cost of research assistance from highly qualified CRE researchers. The incubator also provides pre-incubation services to prospective tenants, many of who arrive at the incubator with no more than a vague notion of how to transform a business idea into commercial reality. Pre-incubation services include advice on strategy, validation and evaluation of the business plan. Potential tenants are not charged for preincubation services - the incubator management takes the long-term view that cultivating entrepreneurs before they enter the incubator will pay off and minimise the risk of failure. In terms of education and training, management provide generalist management support, training and administrative and secretarial support services in-house. Specialist advisory services, such as legal and patents advice, is provided by a network of external consultants.

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Benchmarking of Business Incubators

3. Good Practice Examples There are several aspects of the incubator’s operations that demonstrate good practice: Rigorous evaluation and monitoring systems: The tenancy agreement devised by Bordeaux Productic makes provision for ongoing evaluation, monitoring and guidance both during the incubation period (1-4 years) and equally importantly, post-incubation when tenant companies graduate into the wider business community. Graduate companies are monitored for at least a year post-graduation, which enables the incubator to assess the longer-term impacts of its activities in terms of new job creation, multiplier and other indirect effects. Effective monitoring of graduate firms has also improved the accuracy of monitoring data on incubator performance – many incubators elsewhere in Europe lose track of their fledgling ‘incubatees’ once they have ‘flown the nest’. The incubator also conducts an annual survey of its members to assess demand for services and evaluate the performance of its tenants over the course of the year. Highly developed links with local research institutes: Bordeaux Productic has developed strong links with the Commissariat à l’Energie Atomique (CEA), which conducts research on civilian and military uses of nuclear technology and other high-end technologies. CEA, as a state-owned research entity, is obliged, as part of its mission statement, to provide support to the local SME community – it does so by working directly with small firms who wish to solve particular research problems, for example, in areas such as laser technology and optical technology. It works directly in partnership with some of the small firms currently tenant, providing laboratory space, human resources and research expertise to SMEs at the CEA nuclear research centre located nearby. Inter-firm linkages: There were some good examples of inter-firm collaboration between firms in the incubator. Inter-firm collaboration has developed, sometimes spontaneously, sometimes encouraged and brought about by incubator management wherever there is evident symbiosis between the business activities of tenant firms. There were good examples of complementary synergies between different firms, for example: co-operation between a CD-ROM and multimedia producer and an aerial photo company on joint projects for large commercial clients. Similarly, an SME working on a Global Positioning System had aligned itself with an optical company and conducted a joint project with CRE, the Nuclear Research Centre. Regular networking events: The incubator is proactive in organising networking events for their tenants. Such events provide opportunities for intra-firm networking and informal social contact. Each new tenant, as part of its tenancy agreement and general management contract with the incubator, has to agree to make a presentation on the business to all other incubator tenants as part of their induction. This provides an opportunity for new entrepreneurs to build up social and business contact networks within the incubator and accelerates growth and development.

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Benchmarking of Business Incubators

Stages/ training contracts: The incubator is active from collège level to University in encouraging SMEs to take on stagiaires, or trainees on a short-term basis. This scheme serves a dual purpose, allowing young people to get real work experience in a commercial environment and enabling SMEs to tap into the local human resources and skills base for a nominal sum. Similarly, the French social security ministry has sponsored a course organised between a local University and the incubator on entrepreneurship, which is targeted at adult learners. This scheme provides those who did not have educational opportunities first time round to benefit. Voluntary Mentoring Scheme: Tenants have access to a mentoring scheme whereby experienced business people provide business counselling and strategic advice to SMEs on a voluntary basis. The scheme relies on industry experts, some of whom are retired, some of whom are graduates of the incubator – ex-tenants come and make presentations / participate in seminars with existing tenants to transfer know-how and help new businesses to learn from the mistakes of more experienced business people. 4. Views on Key Issues In the view of the incubator manager the following points are critical in the successful setting up and management of business incubators: ·

Definition of Business Incubator: In France, business incubators, by definition, must have as a basic starting point a physical structure from which to provide services de proximité. According to the French standard, an incubator without physical premises is not regarded as a proper incubator.

·

Difficulty of Measuring Value-Added: Much of the value-added benefit of the incubator ‘experience’ is difficult to quantify. For example, one measure of valueadded identified as important was the extent to which the incubator enjoyed credibility in the wider business community. Another example, again difficult to quantify, was the extent to which former and existing tenants generated word-ofmouth referrals. Similarly, the extent to which graduates maintained contact with the incubator (informal and formal) and ‘put back’ into the incubator community through training seminars etc. was considered highly value-added but not possible to quantify. It is important to bear in mind the importance of qualitative analysis (evaluation and inventory of best practices) as well as purely quantitative performance analysis (estimated that the ratio between qualitative and quantitative in any benchmarking exercise should be 80:20

·

Realising Critical Mass: For an incubator to be successful, it is crucial that it attains critical mass for a variety of reasons. For example, the greater the number of tenants, the greater the number of networking opportunities and other indirect

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Benchmarking of Business Incubators

benefits such as symbiotic mutually beneficial inter-firm co-operation. Similarly, an incubator must have a minimum number of tenants to ensure sufficient revenue streams to undertake many of the activities that make the incubator environment unique and supportive: training sessions, proper management support, informal ‘animation’ events and intra-firm networking etc. 6. List of Interviews Name

Position

Françoise Boivert

Chief Executive, Bordeaux Productic Business Incubator

M. Réné Martin

Treasurer and Chief Financial Officer

Mme Virginie Basterra

Assistant Director

SME – graduate co. - M. Jean-Baptiste Courtine

Managing Director SME, graduate company

M. Pierre Ducout

Président du Conseil d’administration (president of board of directors, deputy mayor, MP.

SME - M. Cédrik Ferrero

Managing Director, Geosat, SME tenant

SME - Vertigo

M. Daniel Garcia, Managing Director, SME tenant

SME - Algory

M. Jean-Christoph Leducq, Managing Director, SME tenant.

M. Claude Pascal

Managing Director, Commissariat à l’Energie Atomique (CEA), Key Regional Partner and Research Institution

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