Uni brain presentation niabi 2012 funding and sustainability of agribusines incubators
Transcript of Uni brain presentation niabi 2012 funding and sustainability of agribusines incubators
SVCDC - KenyaIDPA - UgandaCURAD - UgandaCAF - MaliAgBIT - Zambia CCLEARr - Ghana
Ralph von KaufmannUniBRAIN Facility Coordinator
Forum for Agricultural Research in Africa
7 February 2012 NIABI 2112, New Delhi, India
FUNDING AND SUSTAINABILITY OF OF AGRIBUSINESS INCUBATORS
FUNDING AND SUSTAINABILITY OF AGRIBUSINESS INCUBATORS
• Background to UniBRAIN
•UniBRAIN’s purpose, objectives, outputs
•UniBRAIN Agribusiness Incubators
• Functions of agribusiness incubators
• Types of incubators and nature of financing
• Sources and nature of incubator financing
• Financial management
• Take home messages
Content
FUNDING AND SUSTAINABILITY OF AGRIBUSINESS INCUBATORS
• Wide scale investment in agribusiness and agro-industry in Africa is presently constrained by: Human and institutional capacity deficits
• African universities are not sufficiently geared to meet the needs of industry
• Graduates often cannot find employment while many small businesses lack staff with the education and skills needed to drive innovation
• Essentially the relationship between the demands of the private sector and what universities teach is too weak
• Nowhere are the these deficiencies more critical than in agriculture, Africa’s dominant industry
• However, studies show that when university graduates do business they create more jobs than those without university education
Background to UniBRAIN
UniBRAIN will break the barriers and foster collaboration between universities, business and research to create cultures and environments that will:
• value, encourage and enable innovation
• produce graduates who are problem solvers
• who are potential entrepreneurs • especially women and youths
UniBRAIN will establish agribusiness incubators to accelerate the creation of successful enterprises by providing them with comprehensive and integrated support, including incubator space, business support services and clustering and networking opportunities
FUNDING AND SUSTAINABILITY OF AGRIBUSINESS INCUBATORS Purpose of
UniBRAIN
Activity Line B:Improving
agribusiness teaching learning and research
Activity Line C: Exchanging experience,
resources and knowledge
UniBRAIN’s unique synergies of the interactions between the partners
Activity Line A: Fostering agricultural innovation
More efficient & effective
innovation in African
agriculture
Access to hands-on learning
and stakeholder guidance in changing
curricular and improving teaching and learning
Access to high level
human and institutional
capacity
Opportunities to acquire and share
experience in promoting innovation
FUNDING AND SUSTAINABILITY OF AGRIBUSINESS INCUBATORS
The Consortium for enhancing University Responsiveness to Agribusiness Development (UniBRAIN-CURAD) focusing on plantation cash crops Specific value chain: Coffee
The Incubation and Diversification of Banana Products for Agribusiness (UniBRAIN-ABP or Afri Banana) focusing on staple food and cash crops Specific value chain: Banana
The Sorghum Value Chain Development Consortium (UniBRAIN-SVCDC) focusing on smallholder dry land food grains Specific value chain: Sorghum
The Creating Competitive Livestock-bias Entrepreneurs in Agribusiness (UniBRAIN-CCLEAr) focusing on Smallholder livestock Specific value chain: Livestock
The Innovative Centre for Agro-forestry (UniBRAIN-CAF) focusing on agro-forestry products Specific value chains: non-timber forestry products, cereals and fruits
The Agri-Business Incubation Trust (UniBRAIN-AgBIT) focusing on tropical fruit Specific value chain: Mango
UniBRAIN Agribusiness Incubator Consortia
UniBRAIN CAF
UniBRAIN CCLEAr
UniBRAIN AgBIT
Uni
BRAIN
SVCDCUni
BRAIN
ABP
Uni
BRAIN
CURAD
FUNDING AND SUSTAINABILITY OF AGRIBUSINESS INCUBATORS
Locations of UniBRAIN agribusiness incubators
Why and how will African universities link with agribusiness
UniBRAIN will support universities, businesses and research institutions to establish agribusiness incubators, which will provide:
• facilitation for creating competitive agribusinesses through technology development and commercialization
• handholding services starting from business conceptualization to implementation and scaling up
• support for realising business concepts from university faculty and graduates, researchers and agribusinesses
• consultancy services to agribusiness
• help in accessing financing for SMEs and start-ups approaching impact investors and social capitalists
FUNDING AND SUSTAINABILITY OF AGRIBUSINESS INCUBATORS
Functions of the Agribusiness Innovation Incubators
Example Incubator Client Categories and Services
Start Up Growth Expansion MatureNetworking
(domestic and International)
Technologically capable, Productivity driven and Globally
competitive
Assistance in Brand
Development
Assistance and linkages to funding and market
Handholding through business coaching, mentoring, consultancy and training on mindsetting, Business plan,
Accounting, marketing, communication skills etc
Biotech; Agribusiness;
Production assistanceIncubation
services and shared facilities
Selection/ Assessment
Pre-incubation/ Preseed
• Technology commercialization• Product and process improvement• Technology Transfer Office• IP Management
FUNDING AND SUSTAINABILITY OF AGRIBUSINESS INCUBATORS
Diagramme by ANAFE
Functions of the Agribusiness Innovation Incubators
The mission of the incubator is to facilitate the creation of competitive agribusiness enterprises through technology development and commercialization
The incubator, helps new entrepreneurs and enterprise clients with handholding services starting from business
conceptualization to implementation and scaling up
It is up to the clients to choose the kind of services they want from the incubator
The agribusiness incubators will provide institutional frameworks for:
the realisation of business concepts from university faculty and graduates, agricultural research and agribusinesses of all sizes
consultancy services to agribusiness
help in accessing financing for SMEs and start-ups by approaching banks, impact investors and social
capitalists
FUNDING AND SUSTAINABILITY OF AGRIBUSINESS INCUBATORS
FUNDING AND SUSTAINABILITY OF AGRIBUSINESS INCUBATORS
The nature of the incubator determines its prospects for local or international funding:
Type 1: provide a physical location in which a new business can access facilities, support services and business advice
Type 2: provide high-tech facilities and high- level skills that the firms need from time to time but cannot justify tying much of their own capital
Type 3: provide in situ institutional support to enable firms, entrepreneurs and
inventors to access resources, which they do not have in house
This is the UniBRAIN model
FUNDING AND SUSTAINABILITY OF AGRIBUSINESS INCUBATORS Type 1: Will appeal to local investors and lenders
They serve local needs
They are not easily up-scaled
Type 2: should appeal to international public & private
investors if they: offer services that are undersupplied in developing
countries offer scope for collaboration in training, equipping and
usage can serve clients nationally and regionally promise high impact breakthroughs
Type 3: should attract international public and private donors if they: are public – private partnerships leverage existing human and physical resources offer international collaboration in business and training will be financially self sustained in a relatively short time
FUNDING AND SUSTAINABILITY OF AGRIBUSINESS INCUBATORS
Nature of BusinessActivities
Current businesses New businesses
ExistingBusinessActivities
EnhancementFunctionsQualtity
Development of new enterprises
Training Problem solving
NewBusinessActivities
ExpansionNew productsNew processesNew markets
Agro-sector enlargement
New business lines
Source: John Kuada Centre for International Business, Department of Business Studies, Aalborg University
THE NATURE OF THE BUSINESS WILL DETERMING THE SUPPORT AND TYPE OF FUNDING
FUNDING AND SUSTAINABILITY OF AGRIBUSINESS INCUBATORS
Source: John Kuada Centre for International Business, Department of Business Studies, Aalborg University
Degree of Creativity
& Innovatio
n
Necessity-based Growth-based
Imitation-oriented
businesses
“Entrepreneur among others” Crowded low-end business segments Low profitability Limited organic growth
“Giants in the crowd” Good positions in social and political networks Dependent on social capital to leverage resources
Innovation-oriented
businesses
“Orphans” ”lonely entrepreneurs” May go unnoticed High entry barriers Success difficult to achieve Require support & mentoring
“Eye – catchers” Persons with unusual talent Seeking venture capitalist support Want to attract public/journalistic attention
THE NATURE OF THE BUSINESS WILL DETERMING THE SUPPORT AND TYPE OF FUNDING
FUNDING AND SUSTAINABILITY OF AGRIBUSINESS INCUBATORS
There are few international donors and investors who are specifically dedicated to supporting agribusiness incubators
But if the incubators are themselves businesses there is a huge number and variety of potential donors and investors amongst which to search for compatible mandates, interests and cultures
Whether agribusiness incubators can attract business investment is still to be tested and will depend on the merit of their business plans and how well they can mesh with not just the official policy of the potential investor but also with the personal convictions of the investors’ staff and decision takers
Funding Prospects
FUNDING AND SUSTAINABILITY OF AGRIBUSINESS INCUBATORS
Governments• Most governments are keen to support start-ups and SMEs but
research is required to find the schemes criteria and what kind of proposals are most likely to succeed
Development Partners• Promoting public private partnerships is a popular development
objective but it is almost a requirement for success to find a champion in the development agency who is not only interested but can actually help
Banks• Bank interest can be high but the incubators can reduce there
transaction costs and risks and they should respond favourably. Islamic banking may be more appropriate for start-ups
Sources of financing
FUNDING AND SUSTAINABILITY OF AGRIBUSINESS INCUBATORS
Impact investors Impact investors seek to enhance social structure or
environmental health as well as achieve financial returns. They ay take an active role mentoring or leading the growth of the company similar to a venture capital firm assists in the growth of an early-stage company.
Social capitalists Social capitalists believe that a strong social support network for
the poor enhances capital output and that by decreasing poverty, capital market participation is enlarged. Social capitalism accept that government regulation, and even sponsorship of markets, can lead to superior economic outcomes.
Venture capitalists
Venture capitalists invest in early-stage, high-potential, high risk, high growth startup companies. They make money by owning equity in the companies it invests in, which and usually have a novel technology or business model in high technology industries
Sources of Financing (contd)
FUNDING AND SUSTAINABILITY OF AGRIBUSINESS INCUBATORS
There are 3 main revenue models for business incubation environments:
1. Income from incubated enterprises – payments for facilities and services
2. Returns to equity - sharing in client success by rising value of equity or royalty agreements on gross sales
this can be a very good way to receive payment for business incubation services once the company succeeds, rather than up front when the company has little income
It only applies to high growth companies which have clear exit strategies otherwise royalties may be a better approach
it takes up to 10 years to realize returns and a portfolio of at least 20 companies is required to spread the risk, not to mention the high level of management expertise that is required
3. Generate revenue from non-business incubation activities such as consulting, collaboration and access to facilities to ongoing businesses
At different stages different amounts and combinations of financing may be needed
Incubator Financing
FUNDING AND SUSTAINABILITY OF AGRIBUSINESS INCUBATORS
The incubators should have well developed business models for itself and for its clients that together form its Business Plan
These identify the main funding requirements in ways that can attract the interest of financiers
These have to be supported by surveys to find potential partners, sponsors and financiers to know and understand their objectives, operating modes, contact persons etc.
Know the projects they already support to identify their priorities and opportunities so that the incubator can make a targeted presentation
Prepare a succinct funding proposal aimed at clearly establishing the project concept, principal benefits and requirements in line with the financiers interests
Raising Funds
FUNDING AND SUSTAINABILITY OF AGRIBUSINESS INCUBATORS
Incubators need to 'walk the talk' and demonstrate high levels of financial management capability to incubated enterprises.
The main attributes of quality incubator financial management are:
• planning, overseeing and controlling the incubator funds, whether they are brought in through services or provided by partners and investors
• Having mechanisms that enable the incubator manager to know accurately the amounts available, the needs and the investment capacity
• Financial management also involves bringing in new sources of funds for the incubator
• Preparation of Investment Spreadsheet
• Preparation of Costs and Expenditures Spreadsheet
• Preparation of Revenues Spreadsheet
Financial Management
FUNDING AND SUSTAINABILITY OF AGRIBUSINESS INCUBATORS
Reliable cash flow projections are crucial to the successful financial administration and they must be linked to the budget in order to monitor the financial performance of the incubator
Despite the simplicity of the cash flow concept, its application to a business may result in some difficulties, arising from the following aspects:
In a new business, it is hard to forecast the income and expenditures resulting from some activities
It is hard to foresee future cash income and expenditure amounts, due to the uncertainties of the projected scenario
It is hard to quantify the impact on the cash income and expenditures due to the business risks
Cash Flow
FUNDING AND SUSTAINABILITY OF AGRIBUSINESS INCUBATORS
Agribusiness incubators are businesses worthy of commercial, donor and social capital investment
The funding is there but you have to find an appropriate source and justify why it should invest in your incubator
Good business models and plans, a sound funding strategy, and flawless financial management are essential for both funding and sustainability
Take Home Messages
Thank you
FUNDING AND SUSTAINABILITY OF AGRIBUSINESS INCUBATORS
UniBRAIN’s development objective is:
• to contribute to enabling African countries to create jobs and raise incomes through sustainable agribusiness development.
UniBRAIN’s Immediate Objective, which is also its value proposition, is:
• to enable universities, business and agricultural research institutions to commercialise agricultural technologies and produce graduates with entrepreneurial and business skills through agribusiness incubator partnerships.
FUNDING AND SUSTAINABILITY OF AGRIBUSINESS INCUBATORS
UniBRAIN’s objectives will be realised by:
Output #1: Commercialisation of agribusiness innovations supported and
promoted
Output #2: Agribusiness graduates with the potential to become efficient entrepreneurs produced by tertiary educational institutions
Output #3: UniBRAIN’s innovative outputs, experiences and practices shared and up-scaled.
FUNDING AND SUSTAINABILITY OF AGRIBUSINESS INCUBATORS
Sources of funding: Development Partners
Several Development Partners have schemes for supporting start-ups and SME’s such as:
Danish Small Business grants
Norwegian Investment Fund for Developing Countries (NORFUND) is supporting Uganda's Small enterprises with Shs20 billion fund channeled through Dfcu Bank
It will boost SME programmes including agro processing and market research among other ventures
A recent study commissioned by Sida concluded that:
“Existing knowledge suggests that public sector development support should be integrated with other types of support, address clusters of factors and take linkages between them into account.”
This seems to fit with the mandates of agribusiness incubators
FUNDING AND SUSTAINABILITY OF AGRIBUSINESS INCUBATORS
Sources of funding: Development Partners
The incubators should seek donors and investors with mandates, interests & cultures that are consistent with their business models (not vice versa)
UniBRAIN incubators’ business models will be consistent with the Africa
Commission’s criteria including:
Gender balance in beneficiaries
Fostering innovation and competitiveness along whole agricultural value
chains to create sustainable growth, jobs for youths and reduce poverty
The depth, quality and contextual appropriateness of proposed changes
in curricula and in teaching and learning methods
Fostering collaboration between African institutions and with institutions
in other countries and regions
Having sound governance of the institutions and programmes
FUNDING AND SUSTAINABILITY OF AGRIBUSINESS INCUBATORS
Sources of funding: Impact investors
The Global Impact Investing Network (GIIN)
GIIN Investors' Council is a diverse group of leading impact investors committed to building a coherent industry that effectively channels investment capital to address social and environmental challenges at scale
Impact investment which is intended to create positive social or environmental impact beyond financial returns
This should apply to:
- agribusiness incubators dedicated to addressing social (poverty alleviation) and
- environmental challenges (adaptation for climate change)
- amongst entrepreneurs not reached by ‘normal’ business support systems and
- at scales beyond that of individual firms
FUNDING AND SUSTAINABILITY OF AGRIBUSINESS INCUBATORS
Sources of funding: Impact investors
GIIN members include:
ACCION, Acumen Fund, The Annie E. Casey Foundation, Armonia, The Bill and Melinda Gates Foundation, Calvert Foundation, Capricorn Investment Group, Citigroup, Deutsche Bank, The DOEN Foundation, Equilibrium Capital, The Gatsby Charitable Foundation, Generation Investment Management, Gray Ghost Ventures, IGNIA, J.P. Morgan, Leapfrog Investments, Lundin for Africa, Morgan Stanley, National Community Investment Fund (NCIF), Omidyar Network, Packard Foundation, Prudential, The Rockefeller Foundation, Root Capital, Sarona, Shorebank International, Skoll Foundation, SNS Asset Management, TIAA-CREF, Trans-Century, Triodos Investment Management, W.K. Kellogg Foundation, and Wolfensohn & Company.
FUNDING AND SUSTAINABILITY OF AGRIBUSINESS INCUBATORS
Sources of funding: Impact investors
Example:
Kilimo Trust Investors: Gatsby Charitable Foundation and the Rockefeller Foundation (and the Government of Uganda)
The Kilimo Trust has a Vision of Broad-based Wealth Creation in East Africa through agriculture and agribusiness
It removes constraints that limit the exploitation of business opportunities and increases the success rate of investments in agricultural enterprises
It provides grants directly to private businesses and disseminates the commercial experiences gained from this to support other interested parties
FUNDING AND SUSTAINABILITY OF AGRIBUSINESS INCUBATORS
Sources of funding: Social capitalists
Social venture capital is a form of venture capital investing that provides capital to businesses deemed socially and environmentally responsible
These investments are intended to both provide attractive returns to investors and to provide market-based solutions to social and environmental issues
Social venture capital can refer to debt or equity investments in socially-oriented enterprises, which includes BoP (Base of the Pyramid)-targeted efforts to stimulate economic development in the poorest regions of the world
Commercial banks also need to demonstrate “good corporate citizenship” and may support start-ups and artisan enterprises if the incubators prepare business plans and support them
FUNDING AND SUSTAINABILITY OF AGRIBUSINESS INCUBATORS
Sources of funding: Social capitalists
Among the firms that deploy "social venture capital" are: Acumen Fund, Grassroots Business Fund, Tandem Fund, Bridges Ventures, Citizen Capital, Triodos Bank, Calvert Group, Gray Ghost Ventures, The New Economics Foundation , Social Venture Capital Fund, Ventursome Fund, Social Venture Partners, VenturEast BYST Growth Fund, ennovent, Aavishkaar and Good Capita (Some of these are GIIN members)
Research will be needed to determine which GIIN members, Social Capitalists and commercial banks may be interested in supporting agribusiness incubators that pursue social objectives in developing countries
FUNDING AND SUSTAINABILITY OF AGRIBUSINESS INCUBATORS
Sources of funding: Social capitalists
Example:Endeavor Global, endeavor.org
Endeavor breaks down barriers that prevent emerging-market entrepreneurs from reaching their high-impact potential
Endeavor has supported over 320 entrepreneurs from over 190 companies
Endeavor Entrepreneurs have created more than 80,000 new jobs, paying on average ten times the national minimum wage, and generated approximately $2 billion in new revenue
95% of Endeavor Entrepreneurs' companies are still operating in countries where ventures typically close in 42 months
FUNDING AND SUSTAINABILITY OF AGRIBUSINESS INCUBATORS
Example: Venture Capital for Africa (VC4Africa)
VC4Africa.biz - Africa's largest venture capital community, investors and entrepreneurs, dedicated to building business on the continent
The VC4Africa Daily has + 1186 follower on Twitter - Next update in about 10 hours
VC4Africa organises Meetups at which aspiring entrepreneurs can meet venture capitalists wherever there is interest
e.g., University of California Los Angeles (UCLA) & Santa Monica
These are simply a place for members to meet share ideas
No speeches, no agenda, nothing planned
The loose structure allows for lots of networking
Just remember participants pay for their own drinks
FUNDING AND SUSTAINABILITY OF AGRIBUSINESS INCUBATORS
The prospects for local and international funding:
There are few international donors and investors who are specifically dedicated to supporting agribusiness incubators
But if the incubators are themselves businesses and there is a huge number and variety of potential donors and investors amongst which to search for
compatible mandates, interests and cultures
Whether agribusiness incubators can attract business investment is still to be tested and will depend on the merit of their business plans and how well they can mesh with not just the official policy of the potential investor but also with the personal convictions of the investors’ staff and decision takers