Benchmarking of Business Incubators Section

Dublin Business Innovation Centre and Guinness Enterprise Centre, Dublin.

1. National Context:

Governmental support of SME promotion and entrepreneurial development in Ireland is a

relatively recent phenomenon, compared with other European countries. Government
policy until the early 1990s was primarily focused on attracting Foreign Direct
Investment (FDI); multinational blue chip companies such as Intel and IBM to Ireland.
However, national policy vis-à-vis SME promotion has changed considerably over the
past 10 years, as has the public perception, visibility and pervasiveness of
entrepreneurship.

There is a growing recognition of the need to support the development of indigenous

industry in order to service the large number of high-tech multinational corporate inward
investors that Ireland has succeeded in attracting. Business incubation is one of the
important tools available to assist new business development and catalyse the value
creation process. Consequently, incubation activity in Ireland is today considered as an
essential economic development tool in both the local, regional and national contexts to
promote early stage business creation, accelerate the entrepreneurial process, encourage
SME innovation and create new jobs.

There are five EC BICs (Business and Innovation Centres) in Ireland, most of which have
business incubation facilities (Galway, Waterford, Limerick, Cork, Dublin). There are
seven business incubation centres in Ireland.

2. Background and Regional Context:

Central Dublin has a population of 500,000 with a further 1,000,000 living within
commuting distance of Dublin. Until the mid-1990s, there was high unemployment in
Ireland and the economy suffered considerably from the European economic downturn of
the early 1990s. Over the past ten years, Ireland has successfully modernised,
transformed and revitalised its economy, resulting in a period of unprecedented growth
and development, particularly over the past five years. Thanks to a favourable fiscal
climate (low corporate taxation and tax incentives to stimulate capital investment), the
availability of a highly qualified and young workforce and the development of a major
sectoral clustering of IT-related multinationals, Ireland’s economy is booming and it has
become a major destination of Foreign Direct Investment.

Ireland has developed sectoral strengths particularly in the IT industry (especially

software-related and highly skilled IT outsourcing/ call centre operations) and the
biotechnology sector. Governmental and EU-supported infrastructure initiatives together
with ERDF and ESF Structural Fund interventions have also played an important part in
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stimulating overall business activity. After a number of years of unprecedented growth in

national GDP (average 7% / year), economic activity has slowed in pace, reflective of
trends in the wider global economy.

3.1 Incubator Operations – Dublin BIC

The Dublin Business Innovation Centre (Dublin BIC) was established in 1987 to assist in
the creation and development of enterprise and innovation in the Dublin region. Dublin
BIC is a not-for-profit organisation initially funded by the Irish Government's
Operational Programme for Industry, by the EU and then the European Regional
Development Fund and contributions (both cash and in-kind) from local private and
public sector organisations. The private sector provided half the set-up costs of Dublin
BIC whilst the European Commission provided the remainder. There has been a strong
private sector ethos to the incubator and its operations since the inception of Dublin BIC.

Dublin BIC’s key objectives, as set out in its mission statement, are to ‘increase the level
of entrepreneurial activity and innovation within the region and improve the survival
rates and growth prospects of new and existing small enterprises’. The BIC provides
practical help and assistance to entrepreneurs involved in developing innovative
activities.

Over the 1994-99 period, Dublin BIC supported 218 new start-up companies, of which
177 are still trading, a survival rate of 81%. Since it began incubation operations in 1988,
Dublin BIC has helped to create 1500 jobs with a further estimated 1800 jobs created
indirectly. The BIC currently has £5m of funds under management spread across 3 seed
capital funds.

Dublin BIC manages the Dublin Enterprise & Technology Centre Ltd., t/a the Guinness
Enterprise Centre. Dublin BIC is an active member of both EBN, the 150 strong EC BIC
network and of the UK Business Incubation Association (UKBI). Dublin BIC is also a
member of the Irish Venture Capital Association (IVCA) and the European Venture
Capital Association (EVCA).

The admissions procedure for Guinness Enterprise Centre involves a number of stages.
The total number of enquiries through to the total number of enterprises actually assisted
is rigorously monitored. Details of the stages are shown below. The performance
indicators for Dublin BIC provided cover the years 1994-99.

Dublin BIC – Key Data

Category of Enquiry/ Support 1994 – 1999
Total Project Enquiries 4394
Initial project counselling, training etc. 4076
Preliminary Planning Support 2599
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Business Planning Assistance 1477

Contractual Assistance 170

Dublin BIC – Services

Dublin BIC offers its clients a comprehensive range of business support and consultancy
services ranging from project evaluation, business plan guidance through to advice on
business expansions. The public sector business support structure in Ireland is well
resourced. Whilst Dublin BIC offers its clients a comprehensive portfolio of business
support services, it is difficult for an incubator in Ireland to get new start-up firms with
limited resources to pay the full cost of such advisory services, firstly because new start-
up companies by definition have limited resources and secondly because of the plethora
of publicly funded organisations offering business support services in the Dublin area and
throughout Ireland.

However, there are a number of state-led initiatives such as the Feasibility Study grant,
available from the Dublin City Enterprise Board, whereby companies pay a percentage of
the cost of support services with the remainder of the financing being grant-based. This
enables incubation management to recoup some of the costs of the provision of high
quality business advisory services and other SME support activities.

In terms of relationships with the Higher Education sector, the BIC has instigated a
relationship with a number of HE institutions in Dublin including University College
Dublin, Trinity College, Dublin City University and the Dublin Institute of Technology.
A number of initiatives have been set up to promote entrepreneurship and innovation and
encourage familiarity with the BIC concept on HE campuses in the Dublin area.

3.2 Incubator Operations – Guinness Enterprise Centre

The Guinness Enterprise Centre (GEC) was inaugurated in January 2001. The Enterprise
Centre is a £7.8m (€10 million) joint initiative between Guinness Ireland, the Guinness
Workers Employment Fund, Dublin Corporation (public/ private sector org.), Enterprise
Ireland, and Dublin City Enterprise Board. The incubation centre is set within a 64 acre
site. It covers 60,000 sq feet and houses 77 units ranging in size from 10m² to 160m² for
new and established small businesses. In terms of the sectoral make-up of incubator
tenants, companies are primarily concentrated in the following industries: software
services, small-scale manufacturing, light hi-tech engineering and
international/technological traded services.

Occupation rates are high given that GEC was only officially opened in January 2001.
The Enterprise Centre currently houses 66 firms that collectively employ 286 people.
GEC Tenants pay a ‘license fee’ that includes both the rental element and access to
shared services provided by the incubator. Another equally important factor, however, is
that GEC considers its primary role is to assist fledgling businesses get started,
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established and move on so that vacated space can be used for other new start-up
businesses.

Although the Guinness Enterprise Centre is a mixed usage facility housing tenant
companies from a wide range of sectors, there is a degree of sectoral focus. During the
consultation process prior to construction of the incubator site, it was decided that the
incubator would develop a high-tech orientation to support a wider urban development
strategy. The incubator is situated close to an area designated the Digital Hub, which
forms part of the Dublin Area Development Plan, a strategy which aims to regenerate
areas of central Dublin by encouraging sectoral specialisation in high-tech, multimedia
and cultural / arts-related activities. In order to ensure that tenants have access to the
latest category 6 communications technology and support the development of high-tech
start-up firms, broadband access was installed prior to completion of the building work.
Subsequently, the Enterprise Centre completed an upgrade to provide access ranging
from ISDN to provide a 2Mbit broadband leased line.

The capital cost of building the incubator was wholly covered by funds provided by a
public private partnership of six partners. Whilst securing public and private sector
funding was critical in terms of getting the Guinness Enterprise Centre project off the
ground, the medium term objective of the incubator was to achieve breakeven and
subsequent financial self-sustainability. Without the burden of paying interest on the
entire capital cost of the building, GEC management expects the centre will break even
within 18 months of its official opening. This has been achieved through cost control,
high quality management, high occupancy rates and a solid rental stream.

The rental rates paid by incubator tenants at GEC are set somewhat below the prevailing
commercial rate. In addition to the provision of physical space, the incubator also
provides management support services such as a business planning and financial
modelling, basic shared services (i.e. fax, photocopier, etc.), higher value added services
such as broadband internet access and video conferencing.

Admission criteria: In terms of admission criteria, the incubator conducts a rigorous

assessment of the viability of a prospective tenant’s business plan before granting
admission. Admission to GEC is not targeted on a sectoral basis. GEC is a mixed usage
incubator although Dublin BIC, which manages the centre tries to encourage sectoral
clustering of tenants and the derivative catalytic effects. The incubator was purposely
built for mixed usage to reflect the need for economic diversification and the
development of indigenous small industry in the early 1990s, a period when the Irish
economy was stagnating. In terms of exit criteria, the incubator imposes a maximum
tenancy length of 33 months on incubator tenants. The 33 months deadline is determined
both by legal constraints and by the belief that the incubator’s role is to assist early stage
ventures only.

4. Good Practice Examples

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There are several aspects of the incubator’s operations that demonstrate good practice:

Provision of Intensive Support Services: The Dublin Enterprise & Technology Centre
Ltd. t/a the GEC offers the full range of business support services to clients from
feasibility studies and business planning through to marketing, access to finance and
strategic development plans. The breadth of services available and the quality of
managerial support provides an environment conducive to accelerated SME growth

Business Innovation Fund,Dublin Seed Capital Fund, the Irish BICs Seed Capital Fund –
the leveraging of private sector support: In 1991, Dublin BIC launched the Irish Business
Innovation Fund, followed in 1997 by the launch of the Dublin Seed Capital Fund and in
1998, the Irish BICs Seed Capital Fund was launched by Dublin BIC This Fund operates
on a national level. These Dublin BICs-managed seed capital funds were set up with a
mixture of public and private sector money, with additional financial support from the
EU. The fund is designed to help commercially viable businesses with an innovative
focus to get started and set up their operations. Dublin BIC is a member of the European
Seed Capital Fund Network, a European Commission initiative. The BIC was a key
founding partner of the Irish Seed Capital network. Dublin BIC is a Council member of
the Irish Venture Capital Association.

The Funds have proved very successful and have been expanded. The maximum amount
a start-up firm can borrow has increased steadily over time. Dublin BIC has built up a
close relationship with financial institutions that has enabled the BIC to ‘leverage up’ its
seed capital facility in order to provide SMEs with additional finance over and above the
size of the seed capital fund. The leveraging facility enables the BIC to provide access to
loan financing of up to £5m to selected projects meeting predefined criteria.

Public Private Partnership (PPP): Dublin BIC initiated a relationship with Guinness, one
of Dublin’s largest employers, which led to the setting up of a public private sector
partnership called the Dublin Enterprise and Technology Centre Partnership. The
resulting enterprise centre, built on the site of a disused former Guinness warehouse, was
subsequently renamed the Guinness Enterprise Centre. The PPP was critical in enabling
the project to become a reality, with each partner organisation bringing a different area of
expertise to the table. The partner organisations were united by a shared desire to
stimulate enterprise development and business innovation within the Inner City area, an
area suffering from both social and economic deprivation. The shared desire to play a
role in the urban regeneration process of partner organisations in the PPP ensured a
mutually cooperative approach leading to the fruition of the project without state funding.
Financing came exclusively from project partners - Guinness Ireland Group, Dublin
Corporation, Dublin BIC, Dublin City Enterprise Board, Enterprise Ireland, and Guinness
Workers Employment Fund (GWEF).

Urban Regeneration: Incubation plays an important part in the urban regeneration process
in Ireland. One good example of a successful regeneration initiative is the Guinness
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Enterprise Centre, a joint public private partnership (see above). Opened in January
2001, the incubator accommodates 77 units, employs 300 people and provides 3,500m of
space to client companies. The Guinness Enterprise Centre is situated in a deprived area
of Dublin with a high level of social and economic deprivation. The initiative has played
an important part in revitalising the local area and transforming wider public perception
of the area. Incubator management has actively engaged the local community in the
planning and consultation process and even at Board of Director level. Community
involvement has continued since the inauguration of the GEC, with participation on a
number of important committees, including the admissions committee, which evaluates
business proposals received from prospective incubator tenants.

Community Development Role: Guinness Enterprise Centre has played a central role in
community development by tackling some of the educational aspects of social exclusion
in the local community. The incubator has agreed to set up evening classes on basic IT
literacy skills for local people. The incubator has also lent managerial support on a pro
bono basis and has provided financial support to groups of local residents who wanted to
set up a horse-riding centre for local disadvantaged and disabled children.

Regular Monitoring and Appraisal: Dublin BIC has set up a comprehensive monitoring
scheme to evaluate the performance of its graduate companies post-incubation. This
enables the BIC to monitor the wider impacts of its activities in terms of wealth and job
creation in the wider community by ex-tenant firms.

Promotional Activities to encourage Young Entrepreneurs: The Guinness Enterprise

Centre plans to run a competition to encourage young entrepreneurship – the promotion
will help to raise the profile and visibility of the Enterprise Centre within the local
community.

Mentoring Scheme with the Dublin Chamber of Commerce: The BIC runs a mentoring
scheme for client companies with the Dublin Chamber of Commerce – this provides an
opportunity for incubator tenants to receive feedback on overall development and
strategy from an external organisation with business expertise.

Entrepreneurial Promotion and Training: Dublin BIC has initiated a number of initiatives
together with local colleges and has set up area partnerships to promote entrepreneurship
and training in the wider Dublin area. One good example of this is the ‘Campus
Initiative’ where potential entrepreneurs can learn about the benefits and practicalities of
entrepreneurship directly from tenant companies. The BIC also invites local private
sector players to the meetings, which provides networking opportunities for tenants.
Dublin BIC is planning a similar initiative at Trinity College Dublin. The aim is to bring
about a gradual change in commonly held perceptions about entrepreneurship.
Traditionally, the Irish have been reluctant to start their own businesses -
entrepreneurship has only relatively recently been perceived and portrayed in a
favourable light.
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5. Views on Key Issues

In the view of the incubator manager the following points are critical in the successful
setting up and management of business incubators:

Quality and professionalism of Business Support Services – Incubator management

emphasised the overriding importance of having a professional management team with
business experience. A commercial-oriented team builds credibility with the local
financial and business community and this ‘sheen’ rubs off positively on tenant firms.

Strong private public partnership – the need to leverage the support of the public and
private sector and the local community was regarded as critical. Dublin BIC has forged
strong links with local, regional and international partners. Close partnership was
regarded as integral to the success of the incubation concept, in that it facilitated the
leveraging of resources and the harnessing of the knowledge and contact networks
necessary to maximise the potential benefits of the incubation experience.

Importance of Community Involvement – Guinness Enterprise Centre is situated in an

area of Dublin suffering from severe social deprivation – encouraging community
involvement as a means of bringing on board the community was considered as an
essential part of the process. GEC continues to play an active role in Community
development and has supported Community-led education and training initiatives.

Importance of capacity building and achieving critical mass: The incubator is managed
on a commercial basis with a strong private sector management ethos. The management
argued that a commercial approach was essential to build credibility with the private
sector, achieve critical mass and generate sufficient revenue to provide high quality
business support services and build capacity.

6. List of Interviews
Name Position
Tony Prendergast Director, Guinness Ireland Group
Desmond Fahey CEO, Dublin Business Innovation Centre
John Mcinerney General Manager, Guinness Enterprise Centre
Fergal O’Byrne MD, Web Busters (tenant company)
John O’Donnell Prime Carrier (tenant company)
Joe O’Reilley IT Force (tenant company)