Case study of Startup Incubator
Startup Incubator (SuI) is working with early stage startup companies that have scalable business model, prototype of the product or service and full scale team to launch the product in international markets. SuI invests up to 10 000 euros’ worth of expertise to a startup company in 1-year program to bring the company to sustainable revenue (200 000+ euros annually) or seed round private investment (100 000+ euros). SuI is the only program in the region that has special tech-focus and competence build around the focus areas. Also, SuI is strongly linked to tone of the largest technological university on the region – Tallinn University of Technology. The program is designed to attract private capital to tech-based companies and provide access to global markets. Throughout the years of operations SuI has developed a set of services tailored for high-growth startup companies. The main components of the service portfolio are the following:
1. Hands-on coaching – SuI has more than 50 hands on business coaches working with the companies daily. On average the business coaches dedicate around 1000 hours to coach the portfolio of SuI.
2. Training program – SuI is organizing trainings, seminars, networking events, investor panels and business missions to the startups. . The aim of the program is to level the skills of startup entrepreneurs and bring the companies closer to the investment or potential client.
3. Co-working hub – Tehnopol has around 500m2 of open office areas.
The team of SuI is 4 people. Additionally marketing and comm, real estate and financial support is needed. Also, SuI has a mentor pool of more than 50 hands on mentors. The financial resources needed depends on the competences and current situations. But the average amount for SuI is 300 000 €/year.
Evidence of success
In Estonia 200 startups are created yearly. 100 of the created startups apply into SuI. SuI can work with 35 companies on a monthly average and approx 60 companies in 1 year. Through the years more than 220 companies have gone through the program and the survival rate of the companies is 65%. Additionally the amount of investments into SuI program companies' have grown year by year.
The biggest challenge that is still ongoing is how to reach the financial sustainability of SuI.
One of the first and longest challenge that now has been tackled was the poor quality dealflow into SuI. But the economical development and the growth in popularity of startuping solved the problem.
Potential for learning or transfer
Regarding the sustainability of business incubators, Startup incubator has a mixed funding scheme to keep the sustainability. The main components are:
• Fee from the companies – monthly fee the companies are paying for the program;
• Success fee – one-time fee the companies are paying based on achieving the revenue or investment goals;
• Sponsorship deals – private companies supporting the program to gain the visibility;
• Real-estate income – rental payments of the companies in the program.