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Project USINE, funded by the DG Enterprise PAXIS action line, was an experiment in transferring the University of Bielefeld's pre-incubator model across national boundaries. Maggie Sheen, Strathclyde University, examines the pre-incubator concept.

Many technology spin-offs from universities fail to mature into sustainable companies. Incubators may be only part of the answer. Earlier preparation long before company formation may be a critical step that has been overlooked. That is what the pre-incubator concept first developed at the University of Bielefeld sets out to address. This article describes the testing and transfer of this model to universities in France and Spain in association with partners across Europe.

A model for near market technologies

Technology-based spin-offs from universities are a very mixed bunch. The ones that make the headlines are the high-risk/high reward type. In reality many potential university spin-offs are much closer to market, they use more developed technologies in novel ways/contexts and do not need round upon round of venture capital. What they do need is access to modest funding which often forces them to register as companies before they have any real understanding of their market. 

The 'Bielefeld' model is one mechanism that has been set up to address these difficulties. It puts in place up to two years of development funding and assistance before incorporation. It offers both the means to 'test the market' and also to find out what internal competencies are needed, so that a company once formed can 'fire on all cylinders'. The model therefore fills a gap between fostering the early development of advanced technologies still needing much research input and high-risk capital and the application of existing technologies to existing markets.

Unique characteristics of the \'Bielefeld\' Model

The aspects of the 'Bielefeld model' which distinguish it from other ways of fostering the early development of technology-based spin-off companies from universities mainly lie in its corporate structure where the whole pre-incubator, as an autonomous body, is incorporated. Within this, entrepreneurial groups develop their own identity for trading purposes but are not separate legal entities and can only act by power of attorney and with the agreement of senior management of the pre-incubator. 

Other features essential to the model are:

  • Management structure: staff with commercial experience who have overall control and responsibility. This avoids the difficulties, therefore, which public-sector universities would normally encounter if they were to start 'trading':in trading they would go beyond their legal liability and if trading profitably, they could lose their charitable status.
  • Market Test by Sale: each 'profit centre' develops its own distinct identity apart from the university. Entrepreneurs can design products and services that allow price, quality, and value to be tested. The market test by selling allows 'entrepreneurs' to build real sales networks that will help sustain the business once it trades beyond the pre-incubator.
  • Insurance: The insurance and 'power of attorney' arrangements are key to allowing entrepreneur(s) to test market their product (including services) and provides the best form there can be of market due diligence.
  • Independent Commercial Advice: The pre-incubator structure provides for independent advisors (some external) who work with the entrepreneur focusing on the development of products and services.
  • Clear separation of Intellectual Property and expenses incurred: Core management staff in the pre-incubator have a key role to play in negotiating a fair and reasonable settlement with the University, particularly over such matters as intellectual property.

Benefits and costs to stakeholders

The Bielefeld model thus offers specific benefits to all stakeholder groups:

For academic technical 'entrepreneurs':

  • they get the necessary knowledge when they need it.
  • they can 'practice' in a safe environment; find out what skills they have, what they lack and where to find them.
  • the model shifts some of the burden to a 'team'.
  • they are professionally advised in dealing with IP issues and other trans-boundary risks.
  • they can test their motivation and stamina (appetite) at an early stage in a safe environment where 'failure' is not an issue.

For universities, the Bielefeld model

  • takes some of the burden, costs and responsibilities of the shoulders of senior management.
  • offers universities a reality check on potential of emerging company - it is not the institution which has the difficult task of terminating support for one of their academics.
  • provides a screening process for entry, so it avoids difficulties of institution being seen to pick winners (or supporting unpromising candidates).
  • allows universities to take equity (eventually) in these embryonic companies and to retain and close relationship with their academic entrepreneurs.
  • allows intellectual property to be managed in a proper manner from the outset.
  • offers universities remuneration for facilities used.
  • provides accountability: renders visible costs of staff time.

For regional interests, the Bielefeld model

  • provides a mechanism for fostering the development of technology-based companies in which universities may have little interest (e.g. those where damage risk is higher than normal; those where technology is maturing and research content is minimal)
  • offers a managed, transparent and accountable process.
  • holds promise of sustainable company development, if done well.
  • develops more commercially capable technologists.
  • increases efficiency and effectiveness of current system by providing user links to available infrastructures.
  • develops a cadre of specialist expertise (P-I staff) in a region.

What the pre-incubator model provides is primarily a vehicle for an investment in people. As a mechanism for early rejection, it avoids the greater costs and the disappointments of setting up a company and then having it fail at a later stage. Individuals/teams have the chance to start all over again with a better idea, without becoming labelled as 'failures.

One size fits all: adaptability of the model to differing contexts

There are real and major differences between a pre-incubator, an entrepreneurship centre/programme and an incubator centre. The experience of translating the Bielefeld model across to two other universities in two other countries has highlighted a number of issues within the constitutional, political, legal, tax and insurance fields that need to be dealt with at institutional, regional and national level. So there has to be an element of 'local invention' and the need to take into account and exploit existing infrastructures as far as possible. While these may influence the detail of the model, they need not fundamentally undermine the key features of the model. 

Overall we see no reason why a pre-incubator should serve any single university. It could well serve several universities in a region and achieve economies both of scale and in scope.