“The nine most terrifying words in the English language are ‘I’m from the government, and I’m here to help‘” – Ronald Regan
Whilst Mr Regan was clearly an extreme proponent of small government, I believe he had a point. In my view, government’s role is to create a stable, efficient, open and positive environment that enables entrepreneurs to rapidly try out new business ideas with minimum cost and hindrance. But how does this apply to the world of business incubation?
Incubation, as we know, is an extremely cost-effective way of creating sustainable employment. Well-run incubators support the establishment of new companies in innovative fields that have a significant chance of still being in business five years after they started. They do this by having smart entry evaluation criteria that picks winners. They provide the right support at the right time, but let the entrepreneurs take the responsibility for their own decisions. They coach, mentor and train as necessary, without stifling the new-born company.
Government can help by enabling incubators to be established more easily, with public funding for capital set-up costs but then allowing the incubator company to run its own affairs as a commercial entity. The best model I have seen is where a new building is built or refurbished at government cost, and then handed over to the (not-for-profit) incubator company for one euro or at a peppercorn rent. The incubator then rents out two-thirds of the building at commercial rent levels as a exciting space for established SMEs and retains one-third for the incubation of new start-ups. The rent generated from the SMEs subsidises the cost of incubation. And with good management, no further public funding is required.
Such a model, replicated across a country, would initially stimulate the traditional construction industry, and then leave a legacy of entrepreneurial support infrastructure that would continue to benefit the economy for many years into the future. The real power is the elimination of continuous budget support which in times of economic austerity will continue to be hard to come by. Many governments are considering capital projects, and I would argue that the support for new incubators could be a project with significant long-term return on investment.