Incubators can supercharge MSMEs

The Maldives is a nation with a very high concentration of bright, talented, and motivated people. MSMEs are almost commonplace, yet not all of the necessary ingredients are in place to ensure sustainability.

Armed with ‘the’ idea, and with people committed to bringing that idea to market, entrepreneurs can face a multitude of obstacles that need to be overcome to make it into reality. Simply putting together a presentation, grabbing the attentions of investors and building a working prototype does not guarantee success. In terms of technical know-how, the space needed to run the operation, and also the necessary skills to navigate the volatile free-market do not come cheap; this is where the concept of incubators come into play.

Incubators are collaborative programs for startup companies, with a physical central workplace — saving on office space rent — planned to give startups a leg up in their infancy. Along with a workspace, seed funding and mentoring are key aspects provided under the incubation program.

In the US, as well as in neighboring India, multiple nonprofit organisations often associated with universities and business schools conduct these programs as an extension of their educational services, to help their alumni develop concepts into sustainable business models. Incubators provide access to all the resources one would need to launch a business successfully, and on top of that, also deals with legal protection and mentoring, as well as accounting and auditing services.

Beyond these main resource aids, there are multiple benefits of subscribing to an incubator program. Networking, in this globalised world, is almost as important as the originality of the idea, and through an incubator and their multitudes of connections, an entrepreneur can be sure of both being introduced to various business partners, and also being represented and vouched for by the incubator program. This ensures sustainability in business as well as opening multiple avenues into expansion and collaboration — a factor that promotes economic growth locally as well.

Add to that, public relations and marketing is another benefit from the overall networking element, something most startups would be lacking when initially setting up.

Mentoring is another factor that promotes a startup into a profitable model by allowing the startup to not exactly grow through trial and error, but through wisdom of the incubator. This is a huge advantage, and could be the biggest stepping stone to becoming well established in a short time.

Complimenting the networking, support from other entrepreneurs under the same incubator is also a huge benefit. In the same working space, working towards individual goals, under the same wisdom of the incubator, these startups can build on their strengths and better identify, and address, weaknesses.

There are three main types of incubators; the first being for-profit incubators. These incubators invest in a startup to eventually monetise upon the success, and are preferred by startups willing to share equity. The second type are nonprofit organisations, whose main aim would be to promote the local economy. Third would be government and university-based incubators, and their approach and operation would also differ from the individual and private incubator companies.

Another similar program program that gives SMEs a leg up are accelerators. Accelerators are very distinct from incubators in the way they operate and also the durations of the program. Incubator programs typically last a year or two, while accelerator programs last six months to a year. The intention of an accelerator program would be to take an existing startup, with a Minimum Viable Product (MVP), or a provable concept, and then accelerate the growth of that company with equity invested into it. This is more focused and more restrictive than an incubator, and belongs in mature economies where startups are easier to establish and the market is highly competitive. For a place like the Maldives, the better alternative would be to first establish incubator programs before going in the direction of accelerator programs.

Specifically for the Maldives, the SME Development Finance Corporation (SDFC) has pointed out that while they have given out loans to MSMEs, none have been to established incubator programs — public or private. However, with their loan scheme, they provide advisory services on management, accounting, and legalities, which covers some key aspects of incubation, although it does not fit into that model entirely.

Currently, the market in the Maldives is in dire need of experienced business experts and companies willing to run serious incubator programs — and not just as an ancillary to their corporate image and public relations effort. There are multitudes of Maldivian entrepreneurs who have not managed to get their potentially amazing ideas afloat due to the many restrictions they face. In time, with a few major companies taking this idea seriously, and with focus and dedication, it might well be possible to usher in an unprecedented boom in startups and technology development.