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Incubate for growth

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Pub Games director Chris Murphy (right) with his business incubator program manager David Williamson. Picture: Eugene Hyland

H&Y has been a strong supporter of business incubators, consulting to many businesses based in these unique environments.

The industry has come a long way since the first incubator, thought to have had a previous life as a poultry warehouse, opened in New York in 1959.

There are now an estimated 7000 incubators around the world, and an estimated 80 around Australia, and some believe that a $14.6 million Federal Government investment in a new project in Melbourne's west may signal a new era for start-up support.

What to expect

Incubators charge low rents and offer an "easy-in, easy-out" strategy to help start-ups bridge the gap to commerciality. But the better ones provide much more than a receptionist and a board room.

Investor Kerwin Rae says ideas and networks of like-minded businesses make the difference but a new breed of venture capital-backed incubators offer a win-win situation.

"They are looking at it as a way of cornering the market but they are also linking them into a service contract," Rae says.

"I think that's going to catch a few people by surprise until the market is educated as to what to expect."

Where to start

Phillip Kemp says start-ups should interview the managers - especially where they are joining you as an owner of the business... Analysing costs is also important to ensure your new business is not counting the cost of every photocopy when cashflow is scarce.

What will sell?

Kemp says the interview process goes both ways as incubators look for the best opportunities to invest in.

"The venture capital-backed incubators are looking for deals because they need to generate a rate of return," he says.

"They are skewed to opportunities that are scaleable, that can rapidly grow into a global market from day one."

While the structure of deals will differ, an initial 5 per cent equity stake may underpin start-up costs - with additional investments for subsequent development stages.

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