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David Bream, centre director, Setsquared's business incubation, University of Southampton

David Bream, centre director for Setsquared's business incubation at the University of Southampton explains what's on offer for young technology businesses

It's now less risky to start a company within a business incubator than be employed in the corporate technology sector, according to experts at Setsquared. While large companies have been battered by the downturn, David Bream, centre director for Setsquared at the University of Southampton, noted: "Research by UK Business Incubation, the body responsible for business incubators, shows that over 90% of companies that go through the incubation process are still in business after three years. This compares very favourably with government statistics for start ups in general, which suggest that only 41% remain afloat over the same period. So there's a compelling case for trying to get into an incubator to get your business up and running."

Bream continued: "Clearly, a company that's taking advantage of business incubation services is going to be a more attractive proposition for potential investors too. However, business incubators are a bit fussy about the companies they take in; they have to be, they're spending tax payers' money. As a result, only about half the companies that apply finally make the grade. But for those that don't make it, there are still substantial benefits to be gained from having gone through the process. They will have been asked the kinds of questions that they should be asking themselves, and they would have had perhaps three months of free guidance and advice during the selection process."

A joint venture between the universities of Bath, Southampton, Bristol and Surrey, the Setsquared Partnership Programme has established a number of high profile businesses. The centres provide business mentoring, coaching and access to university expertise, investment readiness training and subsidised office space. "We focus on three factors," Bream observed. "Business planning, management team development and funding. Clearly, a company that's taking advantage of business incubation services is going to be a more attractive proposition for potential investors."
The Setsquared network offers free professional advice, mentoring by experienced entrepreneurs, introductions to potential investors and, where appropriate, access to university research facilities. A common misconception is that university based incubators are there to help commercialise academic ideas. However, according to Bream, only around 10% of the companies being incubated within Setsquared fall into this category. The vast majority come from outside the academic world.

While the centres actively welcome applications by high quality technical business, Bream warned: "We apply a very strong filtering process." So, what do Setsquared directors look for in companies that apply for incubation? "The first thing is a clearly differentiated technology." Bream asserted. "It's also ideal if a viable commercial application for the technology has been identified but it's recognised that this is not always possible. Part of the application process may involve the incubator director exploring potential applications hand in hand with candidate companies and bringing in experts who can advise on the viability of these applications. The incubators will look for businesses ideas that are scalable and those that can be developed into valuable companies; they're not equipped to support lifestyle businesses for one or two individuals. They'll also want to understand the skills of the individuals running the business and will try to identify what skills are missing."

Bream explained that it is rare for a technology inventor to have all of the abilities needed to build a successful business and his research has shown that the skills involved in developing new technologies are different from those required to commercialise them. He observed: "In practice, around 90% of technology creators elect to employ a CEO to run many aspects of the their companies within the first year; the incubator director can sometimes help in the search for the right candidate. It's important to grasp this idea before applying to join an incubator. Recognising that you need help is an attribute that centre directors will view positively. If you do join, the quality of the relationship between yourself and the centre director will be a crucial factor in how much you benefit from what the incubator has to offer."

The Setsquared centre at the University of Southampton has 15 companies in incubation today. Around a third of these are in the clean technology sector. Their activities range from developing materials and components for fuel cells – sources of clean energy – to energy harvesting, battery management and systems for harnessing wave power. The companies will typically stay in the incubator for around 18 months before the need for more staff and more space encourages them to move on.

Bream explained: "The process of incubation is now well established and its benefits have been demonstrated. If you consider entering a business incubator, you need to see it as a process, not just a way to save money on office space, if you are to derive the most important benefits from it. The incubator will contribute a framework within which you can develop your business, it will introduce proven processes to help you identify the most viable market opportunities, and the centre directors will provide what is, in effect, free senior level consultancy to help guide your decisions as you business develops. You'll be surrounded by a support network of experts that have no other motive except to help you succeed but, perhaps most important of all, it will remain your business, with you in control."

Author
Chris Shaw

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