eoincostello

Archive for the ‘My views’ Category

The benefits for a startup of being on an Incubation/Accelerator Programme

In My views on June 3, 2013 at 8:08 am
I am nearly a year in my role at DIT Hothouse and put together a short guide to startups about our service.
About DIT Hothouse entrepreneur programmes
Hothouse has a track record of 20 Years of startup support in Dublin. Prior to the launch of New Frontiers in 2011 DIT operated Hothouse Enterprise Platform Programmes since 2001. Before that again  DIT ran Enterprise Development Programmes from 1991 to 2000. Hothouse has a proven winning formula in running programmes.Of the 272 Hothouse participants since 2001, 171 are still trading and 8 have been acquired.
Since 2001 Hothouse has:
•Supported 272 entrepreneurs. 66% are still trading.
•10 out of 80 Enterprise Ireland HPSU companies in 2010 were DIT Hothouse companies.
•180 sustainable businesses created.
•Those 272 entrepreneurs created 1,252 new knowledge intensive jobs.
•€98.5m in equity investment.
Benefits of being on an Incubation/Accelerator Programme
There is somewhat of a distinction between incubators and accelerators. Incubators typically engage with earlier stage business opportunities whereas accelerators seek teams with a clear product/service offering that are at a phase where they are ready to ramp up their offering. Shorter duration accelerator programmes suit teams with a well developed investor proposition seeking initial funding for a technical build or beta phase, but do not offer an individual entrepreneur the same developmental opportunity as the incubator type programme. Our New Frontiers programme has elements of incubator (we do not take equity in the startup for example) and accelerator (our Phase 3 seeks to accelerate the growth of our participants). Many of the accelerator’s in Dublin recruit for their programmes from the alumni of our Hothouse New Frontiers programme.
In terms of the benefits of being on the Hothouse New Frontiers programme they include:
 
•Hothouse offers an extensive period of intensive support both for the development of the participant as an entrepreneur and for the refinement of their business proposition.
• Phase 2 in particular combines developmental supports with a salary stipend that ensures that the entrepreneur is able to commit full-time to the development of their enterprise.
• Phase 3 pro-actively assists participants to progress onto the most appropriate avenues and supports for the further development of the enterprise (engagement with investors, accelerators etc).
 
The specific supports offered in Phase 2 include:
•Training workshops facilitated by successful entrepreneurs and industry experts.
•Office space and facilities at Docklands Innovation Park.
•Business counselling inputs and a number of evaluation and feedback sessions.
•Investor showcase events and fora.
•Access to significant DIT Research available to license through the Hothouse Tech Transfer Office. A number of Hothouse companies such as OptiWifi, DecaWave, Brim Brothers and Aries have successfully commercialised DIT Research.
•Support via practical projects from DIT staff and students from departments such as Business, Science & Engineering.
•Access to the Hothouse Alumni network of successful entrepreneurs.
•Access to Enterprise Ireland supports and, upon meeting relevant criteria/milestones, appointment of an Enterprise Ireland Development Advisor.
How the Hothouse New Frontiers programme works
The programme breaks down into 3 distinct phases. Progression to each phase involves success at competitive pitching by the participants.
Phase 1 -Testing the business idea
The first phase is part-time over an 8-10 week period and helps participants to validate the market potential of their business ideas. These weekend and evening workshops provide information and general start-up training, allowing them to tease out their idea’s feasibility and to see whether a viable proposition exists.
Phase 2 – Business Planning
Between 50-60% of Phase 1 participants make it to Phase 2 following a competitive selection process.
Phase 2 participants receive intensive support for six months to develop both their own entrepreneurial skills and to build their business proposition. This phase entails participation in workshops, mentoring  clinics and regular reviews.
Using these supports participants detail and validate their business propositions and identify potential customers, sales channels and funding options.
Phase 2 participants must be available for full-time participation in this six month course. To facilitate this they receive up to €15,000 in supporting funding subject to satisfactory performance and development reviews at 2 monthly intervals.
The aim of this phase is to support the participants in the development of an investor-ready business plan.
Phase 3 – Business Development
Businesses emerging from Phase 2 will be guided to the most relevant supports that can best help them accererate taking in to account their particular stage of development.
Further incubation facilities and support may be available to participants for a limited period, in conjunction with ongoing support from the Incubation Centre Management team.
Is it difficult to get on one? 
 
Competition for places on the Hothouse New Frontiers programme is high, reflecting the track record of our programme. For the 23 places on Phase 1 we typically receive in excess of 100 applications. However this should not deter people from applying, quality applications will always do well in our assessment process irrespective of the numbers applying.
 
In terms of the where our applicants come from 82% of the two most recent cohorts of participants were referred by a partner organisation or a current or past participant – including 45% from Hothouse Alumni referrals and 25% from Enterprise Ireland referrals. We also actively work with Inventorium’s Swequity and Enterprise Ireland’s Start programmes in seeking applicants to our programme.
 
How best to boost your chances of getting on one, ie, what it is we look for in an application
 
Our application process is straight forward and requires information about:
 
1. Details about the entrepreneur.
2. Details about the business opportunity.
3. The stage it is at (we emphasise that we are interested in working with entrepreneurs even if they are only at the concept stage).
4. Any market research that has been carried out.
5. Approximate Financial projections (we know that at this stage these will be very approximate).
 
In terms of the type of business opportunity we seek the Hothouse New Frontiers programme is well established as a destination for software and ICT focused ventures. However we are open to any commercial idea that is innovative, can generate employment in Ireland and has the potential for export sales within 2 to 3 years.
In addition to these criteria in terms of how we assess applicants we use the FIT model. According to Timmons and Spinelli the resources necessary to successful new venture creation include the entrepreneurial team, financial resources, outside people, legal and financial advisors, technology and patents. What their research has show is that on average the better fit there is between the components of Team, Resources and Opportunity the more likely it is that the venture will be successful. We make this model freely available in advance to applicants on our application form.

 

My piece on Irish Innovators on RTE’s The Business programme last summer

In My views on March 29, 2013 at 6:05 pm
The piece I did on this show was based on my work with the Info2Innovation programme ( SME Innovation Advocate ) – I have always been a big fan of what Colm Lyon has achieved with his business Realex Payments and was delighted to talk about his work in innovating (and creating jobs) in the financial sector.
RTE The Business with George Lee, 23rd June 2012 – Hacking Work
Josh Klein, a presenter on National Geographic and Eoin Costello from DIT’s Hothouse discuss whether rules need to be broken for innovation to happen.

Irish SME innovation does not have to = high risk – my piece on this in the Sunday Times

In My views on March 26, 2013 at 5:40 pm

My contribution to a piece in the Sunday Times on SME innovation….

My piece starts towards the end of the first column – Sunday Times SME Innovation

Here is an outline of what I covered:

Q. Do you think that Irish small firms (not so much the start ups, but the ones that have been around a while) are, in the main, fully aware of what innovation means  (ie, not just R&D or something tech firms do)?

A. Yes and no. SMEs in fast moving sectors such as ICT, bio technology and aerospace are. With honourable exceptions such as Realex Payments and X the average Irish SMEs (particularly those in traditional service industries) are in the main not.

While involved in the series of national Info2Innovate seminars (Enterprise Europe Network ran a series of fact finding workshops for Irish SMEs which contributed to the creation of the Info2Innovate directory of services that are available to Irish SMEs – http://bit.ly/XngUVH ) series my research with attendees found that the majority felt that the products and services that they offered were not innovative. They felt that ‘innovation’ was the preserve of labs, universities and the big tech companies. Indeed many SMEs rule them selves out at the mention of the word ‘innovation’ due to the misconception that it is a high cost and high risk. I suppose this is very understandable as for many SMEs innovation = time + money + risk with no guarantee of success which = fear for many SMEs

Also amongst Irish SMEs there is a misconception that ‘innovation’ is limited to product/service improvement. In fact successful innovation can take place across the spectrum of a firm’s activities, from finance, process, offering through to delivery. Doblin Group’s research found, contrary to expectations, that in the 10 years of data they examined business model and financial innovation had created far higher returns than product/service innovation.

Therefore from my personal experience of working directly with many SMEs innovation needs to redefined in as straightforward a way as possible. In fact any action taken on converting new ideas into new ways of doing things should be considered innovation if such activity has a positive impact on your business.

Why is it such an important concept?

A: A long term study of the stock exchange companies found that less than 20% survived 100 years, therefore companies must continuously evolve and innovate to survive. The strongest, most successful companies in one decade can be rapidly undermined in the next (look at Dell Computers for example).

Why it is important to SMEs is that SMEs are our dominant form of business organisation in Ireland (97% of business in Ireland employ less than 50 people). Furthermore research has found that SMEs are disproportionately higher creators of innovative in business (particularly those disruptive innovations that change whole industries).

Innovation is also an important concept due to the fact that innovative firms gain up to 30% growth in sales consistently, have far longer longevity (28 years on average) and are more profitable that the non-innovating firms in the sample (according to the ICE Innovation benchmark survey of Irish companies – http://www.iceprogramme.com/fs/doc/publications/ice-benchmark-survey-report.pdf ).

Furthermore innovation cannot be divorced from strategic planning, a company has to ask itself what is it doing today that will create the sales growth in 2014. Without a growth aligned pipeline of innovation in their core processes and services/products most SMEs are trapped in a plateau of flat, reactive sales and fail to scale.

Innovation is also an important concept at a national level. Currently Ireland lies 10th on the EU’s ranking of Innovation Performance (called the Innovation Union Scoreboard – http://bit.ly/YmdHZU ) trailing what are termed the Innovation Leaders of Sweden, Denmark, Germany and Finland. To create the next upswing in jobs we need to move from the ranks of the innovation followers to innovation leaders as innovative companies on average scale successfully and create more jobs as a result.

What would your advice be to them as to where to turn for help on becoming more innovative?

A: Now is a key time for SMEs to implement the discipline of innovation as in the coming 24 months as it is predicted that the level of technological innovation in the next 10 years will be greater than the last 100 years, many companies will be left behind.

The starting point for SMEs is to understand that ‘innovation’ does not have to be high risk. Without terming it innovation the majority of Irish SMEs are working on changing and improving their businesses every day. Therefore I would argue that the engine of innovation is in place in many SMEs and the prime source of successful innovation is the customer interface.

We need Irish SME’s to see it as what they are already doing, working on a daily basis to improve across all their activities and become continuously market focussed.

A key starting point I would suggest starting with is the Info2Innovate directory here – http://bit.ly/XngUVH . It is maintained by the Enterprise Europe Network and contains all the key resources available to SMEs that wish to become more innovative.

Institutes of Technology need to be the keystones of Ireland’s national innovation ecosystem

In My views on December 28, 2012 at 8:31 pm

The Keystone question

The following post is based on research I carried out for my recent dissertation  ( http://www.eoincostello.ie/msc_ulster.html ). My post looks at a model I developed for an Irish national innovation ecosystem which I believe may provide the best long term benefit to the Irish public purse.

Early models of innovation ecosystems quoted in Irish policy documents place government policy-makers at the centre as the keystone of the innovation ecosystem. However, while policy makers are an essential component of any innovation ecosystem, often their role is facilitative, and to a degree reactive, in nature. When one looks at biological ecosystems at the heart is typically the keystone species (i.e. the species that has a disproportionately large impact on its environment relative to its footprint) which is a key driver of ecosystem activity. Studies have found similar keystone firms (look at Apple for example) in business ecosystems.

More recent innovation ecosystem models featured in Irish government policy documents place the entrepreneurial firm in the keystone position of the ecosystem. Forfas (Review of supports for exploitation of Intellectual Property from Higher Education Research 2010) uses an ecosystem formulation that features multiple constituents. Venture Capitalists and Entrepreneurs are placed in the keystone role while the Higher Education sector is placed in a facilitating role. This innovation ecosystem is described as a ”web of highly iterative processes involving multiple actors in an innovation network or ecosystem.” .

forfas formulation

Forfas formulation of the innovation ecosystem

The innovation ecosystem envisaged by the Innovation Taskforce (2010) places entrepreneurs and enterprise in the keystone position within the ecosystem again with Higher Education Institutions (HEIs) placed in a facilitating role. Similarly IntertradeIreland state that within the ecosystem the intention is that the central component, the firm, “will improve its innovation performance through the promotion of higher and more efficient levels of knowledge flow/sharing in an open system of innovation”.

innov task

Main elements of the Innovation Taskforce National Innovation System

HEIs are attributed key roles in the formulations discussed above but not the keystone role.

I believe that there are a number of arguments as to why placing the business enterprise in the keystone role (while acknowledging that defacto this is typically the case on the ground) is not ideal from a national interest point of view. State resources (in the form of subsidies, grants and other state enterprise policy instruments) are in short supply and need to be allocated in a manner which maximises the long term benefit to our state and its citizens.

The disadvantage to Ireland’s ”public good” of such a enterprise keystone formulation of the innovation ecosystem model include in my opinion:

  • Company ecosystems develop around the objectives of the keystone firm. In Ireland a large proportion of  keystone firms are foreign multinationals. If the  national conditions no longer suit the operations of the keystone firm it will exit the ecosystem in which it was keystone (for example Dell moving assembly to Poland).
  • Diversity is a key feature of a healthy innovation ecosystem. Company ecosystems develop to serve the technology and other needs in a very specific usage in a particular industry. Therefore company keystone driven ecosystems reduce diversity and reduces robustness in the event of a systemic shock (for example the downfall of the integrated Nokia/Symbian ecosystem).
  • Knowledge spillovers are key to the benefits of an efficiently operating innovation ecosystem. However  in commercial ecosystems the control of knowledge (through non-disclosure agreements and contracts) is a key feature and is commonly used to control the behaviour of ecosystem constituents.  Contrast this with the fact that a key role of HEIs is to disperse knowledge as widely as possible.
  • The role of intermediaries in an innovation ecosystem: Intermediaries play a key role in facilitating networks and brokering collaborative relationships thereby contributing to stability and diversity in the ecosystem. A HEI is in a better situation to play the intermediary role given its non-aligned nature. 
  • Public policy cannot induce enterprise to behave in any desired way apart from that which ultimately serves the profit motive and internal objectives. While HEIs are autonomous bodies the majority of their funding comes from public sources and, as such, gives them an agenda to address what is identified as desirable by relevant public policy.

An alternative formulation of a national innovation ecosystem that places the Institute of Technology at the keystone is outlined in the image below. The constituents in this model are those identified in my winning entry in the Festival of Innovative Practice at University of Ulster’s Centre for Higher Education Practice.

This model contains many of the constituents identified in the Hunt Report’s (the National Strategy for Higher Education to 2030) model for our institutes of higher education. In recognition of the key role played by entrepreneurship and SME start-ups in innovation, the Incubation Centre constituent is added to this model. Most HEI campuses in Ireland now have an incubation centre embedded within their campus. Also the Alumni constituent is added in this formulation due to their connection to the keystone HEI and potential to be active participants in the inward and outward flows of knowledge, staff, students and ideas.

ecosystem 

 

 Components of a National Innovation Ecosystem for Ireland

Business Development and Innovation Coaches potential key to jobs growth in sustainable SMEs

In My views on March 5, 2012 at 12:39 pm

Here is a piece from today’s Irish Times concerning my proposal – click on image below for readable version

Ireland’s start-up focus – another day another programme launched

In My views on February 27, 2012 at 10:11 am

Today sees the announcement of “New Frontiers” described as a six month intensive course in business which will be rolled out in 13 Institutes of Technology and is being funded by Enterprise Ireland.

http://www.independent.ie/national-news/15k-each-on-offer-to-new-generation-of-entrepreneurs-3032313.html

The programme will “focus on giving individuals the entrepreneurial skills needed to set up and run a business.”

Cost to the state – Based on 150 participants in the second phase at an individual payment to the participant that equals a state investment of a minimum of €2.25 million. This does not include the cost of teaching and the first phase when 250 participate.

A couple of questions occur to me –

1. What happens to those participants at the end of the programme that do not make it onto Enterprise Ireland’s High Potential Start Up unit programme.

2. How is success measured: What are the outcomes that will be reported on by the delivery agents (number of businesses established, their continued existence after two years?).

3. Is information shared across the programmes with participants encouraged to pool resources and pursue jointly the most commercially viable opportunities that arise?

4. Rather then re-invent the wheel are the participants introduced to the wide range of “IP for sale or lease” that is available to the participants to take advantage of at the Institutes of Technology tech transfer offices?

I have argued for some time that there is a key piece in Ireland’s business development and innovation ecosystem that is missing – the Business Development & Innovation coach ( see https://eoinkcostello.wordpress.com/2012/02/23/the-proposed-new-local-enterprise-offices-must-be-innovative-in-the-services-they-will-provide/ ). Their main role would be to capitalise on the investment made in start-ups by the state in the Enterprise Platform Programmes and the Enterprise Board programmes in order to give Ireland a healthy cohort of sustainable businesses that create jobs beyond the owners’ job and survive the first 5 years.

More information on this programme from Enterprise Ireland – http://www.enterprise-ireland.com/en/Start-a-Business-in-Ireland/Supports-for-High-Potential-Start-Ups/New-Frontiers-Entrepreneur-Development-Programme.html

The proposed new Local Enterprise Offices must be innovative in the services they will provide

In My views on February 23, 2012 at 8:20 am

Last week’s Jobs Action Plan included a plan for setting up of a new “One Stop Shops” for Micro Enterprise in the Local Authorities in place of the Local County/ City Enterprise Boards.

My views in respect of the structure of the proposed Local Enterprise Offices (LEO)

From my experience of mentoring startups perceptions are key, the perception of confidentiality, independence and impartiality is of the utmost importance. A key strength of the County Enterprise Board structure is autonomy, flexibility in response to local needs and the trusted advisory function of the board of directors(which gives the Boards the ability to tap into local knowledge and energies). These are core values that need to remain in place within the proposed LEO structure.

While the detail of the proposed entity structure for LEOs is not clear any step that involves the loss of the involvement of hundreds of locally-based  business people, and others, that  participate on a voluntary basis in the work of CEB Boards and Evaluation Committees, should be avoided.

Potential conflicts of interest: While completing my Dissertation I interviewed a number of local authorities. They referred to the fact that if those paying commercial rates see any support/preferment  by the County Council of individual SMEs (that have the potential to compete with them) there is a significant backlash. While CEBs currently observe the requirement to avoid displacement as much as possible it can be a fact of life in supporting the growth of innovative micro-enterprises.

The One Stop Shop has to be about focussing expertise where it can have most impact

In speaking to contacts in the enterprise support sector the introducation of the “One Stop Shop” concept is generally welcomed and the associated expectation of joined up thinking on enterprise and innovation is also welcomed. However the “One Stop Shop” policy does has potential downsides, namely dilution of expertise and focus. While attending the annual conference of a prominent EU enterprise support agency last year, I attended a debate on whether the agency should move from its stated policy of being a “One Stop Shop” to specialisation in prioritised sectors and activities. Speakers felt that the “One Stop Shop” policy had stretched resources too thinly and prevented in depth specialisms developing within the agency.

What services should the Local Enterprise Offices offer?

Resource limitations may force the proposed “One Stop Shops” to make a decision on operational specialisation (for example becomming specialised in offering advice and referrals as opposed to filtering applications from start-ups for grant supports). While the overall level of start-ups in Ireland is in line with the norms of economies we wish to emulate, the quality and sustainability of many of these is questionable and could be improved. In talking to my mentees they receive ample supports when on the incubation programmes but at the end of the programme are somewhat cut loose. Unless they fit into Enterprise Ireland’s pre High Potential Start up support programme the roadmap for their growth is not defined.

Indeed perhaps current policy is excessively focussed on the startup phase as opposed to the development phase of micro businesses. While the “Action Plan for Jobs” identifies “Better support for indigenous companies to improve their performance” as a priority it cites the Enterprise Ireland Lean programme as catering for this priority. However this programme is limited to current EI clients and quite specific in its application.

In contrast to when the CEBs came into existence, Ireland now has an infrastructure of  approximately 22 Incubation Centres located in strategic locations around Ireland. They provide considerable specialisation in terms of start up support.

Due to the focus of many CEBs resources on startups they often don’t have sufficient time or resources to focus on the business development aspect of their mandate. Arguably more “winners” in terms of employment will emerge from the support of sustainable early phase businesses as opposed to startups. However the provision of specialised business development supports are sparse in the Irish enterprise support landscape.

Therefore one could argue that specialisation should take place where the start up support mandate of Incubation Centres is broadened to the task of identifying sustainable, high growth potential startups from those referred to them by the LEOs. This would enable the LEOs to develop strength in capacity building/development of micro-businesses providing Ireland with a cohort of growth businesses capable of creating sustainable jobs. From my research I believe that the specific programme that could best aid LEOs in this objective would be the creation of a national Business Development & Innovation coaching programme.  

The opportunity should not be missed for LEOs to add value to the Irish enterprise and innovation ecosystem

Any new services facilitated by the LEOs must be about sustainable job creation irrespective of whether they are in prioritised sectors or not. In speaking to one SME owner recently (emplying 10 staff) she felt that the policy of “If you are not in certain sectors or exporting we are not interested in you” is a big challenge for her business.

The link between expert interventions in the area of small business development and innovation and sustainable growth is widely accepted. When I was working on a national project with the Enterprise Europe Network last year for DG Enterprise our goal was to identify the obstacles that prevent Irish SMEs from engaging in innovation.

Of the 33 individual recommendations that arose from our focus groups 14 concerned a need for a role best summarised as a “Business Development & Innovation Coach” and 8 concerned the lack of education provided to SMEs development of their businesses and innovation. Commercial business development & innovation consultants are too expensive for the majority of small businesses therefore there is a market failure in this space which the proposed LEOs could productively address in the national interest.

 How would it work: An outline of the role of Business Development & Innovation Coach

The objective of such a programme offered by the proposed LEOs would be to seek to engage as many companies as possible in the the sustainable development of their business and engagement in the discipline of innovation from an early stage. The coach would need to be a practitioner themselves as opposed to an advisor. The individual actions that the BDI coach would undertake under this programme would include:

  1. Get the message across to SMEs that innovation is not necessarily technology/R&D intensive. SMEs need to understand that innovation embraces a while spectrum of activities such as knowledge management, product design, management practices etc. Innovation that has an impact on their profitability can take place in any aspect of their business.
  2. SMEs want practical solutions that will contribute immediately. Many SMEs are  constantly told “In business you need to keep re-inventing yourself” however support in approaching this challenge in a structured way is lacking. The trained BDI coach would agree with the client which tools from the spectrum of BDI tools and applications now available would have the potential to have the most impact in the short term in the cleint business. The Coach would follow up over a period of months via virtual meetings on Skype (to save the “time poor” owner manager travelling time) to ensure that these tools become embedded in day to day work practices of the client.
  3. The programme would be available across the spectrum from post Incubation Centre start ups to non EI companies up to 50 staff. The key criteria is are they sustainable rather than the sector they occupy.
  4. The BDI coach would be familiar with the complete range of relevant supports across all the agencies and could help the client engage with the supporting agencies and get going successfully with relevant innovation within their businesses.
  5. The coach would be outcomes focussed. A key performance indicator for each BDI coach would be how many successful SME BDI case studies they generate per annum. This will help provide evidence to Ireland’s SME base that business development works and that innovation doesn’t have to be risky.

And finally, innovation in provision of services at LEOs

 When established in 1993 the CEBs involved two significant innovations, the formalisation of supports to micro-enterprise and a concommitant relaxation of the previous mainstream industrial policy emphasis on manufacturing and internationally-traded services in respect of these micro-enterprises.

In my opinion the introduction of LEOs must involve a simliar commitment to innovation in provision. This can be achieved through the introduction of a national programme of Business Development & Innovation Coaches interventions. There is a good case from a national competitiveness perspective to ensure that all small and micro-enterprise in Ireland receive training and coaching in professional business development practice and engage in continual improvement and innovation.