I agree the incubation marketplace is in for a shake up.

There is a good article on this in the sep-oct 2000 edition of Harvard Business Review.

The key point is what value can you add and how do you finance the cost of providing incubation services - both investment in the ventures and the management support you provide them with.

E-souk's problem was that the anticipated exits didn't happen fast enough and their investors didn't want them financing the costs of incubation services out of the investment fund.

More and more will face these issues as sources of funding dry up and exits don't materialise. The anticipated stock market correction won't help.

Consolidation is inevitable. those who've provided purely propoerty based services for equity are also likely to struggle if they don't secure sources of income soon.

A final and possibly most damaging issue will be tax and regulation.

Few of the incubators have thought through the tax and VAT implications of providing services for equity.

Many have also gone way beyond what they are legally allowed to do under the financial services act.

On the positive side I believe that there are a number of incubation businesses from the virtual to the full-service providers who will survive and thrive because they have good people, experience, contacts and a sound process for taking an in idea from birth to launch and beyond.

On 16:8:52 21 October 2000 ashley wrote:
>Incubators, accelerators or whatever you want to call
>them, seem to have been as hard hit by the reversal in
>favour towards dot coms as the dot coms themselves with
>many, such as eSouk, having to lay off most of their
>staff. Consolidation is already under way - Internet
>Indirect has been bought by NewMedia Spark, JellyWorks
>was bought by Shore Capital, and so called 'vulture funds'
>like Chrome Technology are circling over the VC carrion
>increasingly littering the e-business landscape.
>
>A few, such as Gorilla Park, still seem to be getting
>funding themselves but not that many.
>
>What is the way forwards for these organisations? Invest
>more wisely? Only invest in bricks and mortar ventures?
>Try always to predict and ride the next wave of hype (B2C
>to wireless to B2B to bricks and morter etc.)? Focus more
>on providing screening services to the more established VC
>houses (e.g. e-start http://www.e-start.com/ )? Focus on
>selling their services on a fee basis more than on
>investing money for equity?
>
>One thing is for sure, there is still a huge lack of
>knowledge and skills in the marketplace and this is
>unlikely to change for the forseeable future. It must also
>be a truism that competition in the e-space will only hot
>up as big US players enter the UK space more aggressively
>(cf. iVillage's deal with Tesco...how must beme,
>charlottestreet and handbag be feeling?) and the bigger UK
>players compete head to head. The incubators should have
>at least 2 things to their advantage: 1. a good network of
>contacts in the industry 2. a good idea of how / how not
>to go about things from painful experience. Surely they
>have an opportunity to sell this experience and knowledge
>as a service? Maybe a few should get together and set up a
>recruitment consultancy? There's definitely money in
>that...