Incubator bubble: Why some start-ups don’t last

In 2015, Tumuhirwe was able to start on her own. “I took up what they were doing and started making paper bags, candles, chalk, sandals, liquid soap, briquettes, fabrication of machines and offering training as well. Before incubation, I was lecturing part time at Management Training and Advisory Centre (MTAC) and running a retail shop but I was motivated to learn, add more value to what I was doing already and get out of my comfort zone.”

Aidah Tumuhirwe’s late husband who used to work at Afri Banana Products Ltd shared an opportunity with her which she grabbed. As a result, it has birthed the United Innovations Development Centre Limited that has been operating for the last five years. Incubation centres provide marketing platforms and networking forums for its incubatees.

“I have grown contacts through networking forums and exhibitions where we share what we do and different ideas. This has boosted sales for mainly locally fabricated machinery for paper recycling and briquettes and expanded the business,” Tumuhirwe said.

Luckily, she was selected among many to attend a conference in Burkina Faso which has opened new markets for her.

“My market has increased with clients ranging from schools, hotels to restaurants at the regional and continental level in Kenya, Tanzania and Cameroon respectively,” Tumuhirwe justifies.

She explains why kick starting a venture is a personal initiative.

“I have former colleagues that attended the incubation programme, who are operating at a much slower pace than me. It depends on one’s passion for what they are willing to do about the skills they have received. If you go with willingness to learn and apply, then that attitude pays off.”

Tumuhirwe is one of the many that has reaped from such programmes. However what guarantees the mushrooming numbers undergoing incubation to seemingly respond as expected to attain business growth in endeavours.

Mr Denis Dokoria, the communications manager at Uganda Industrial Research Institute (UIRI) explains that an incubator supports start-up enterprises during their initial development. Many enterprises don’t survive because at the beginning, they are still very vulnerable.

Some of the challenges he says are costs of operations involved and sometimes they don’t have the technologies.

He further explains that some entrepreneurs don’t have a business mindset at the beginning, technology; so incubators nurture them.

Many start-ups don’t survive long after leaving the incubation centre because they have not built a good client base that will be willing to pay for their products.  Others lack the capital beyond the incubation centre.

UIRI is a technology incubator that supports enterprises in value addition; they have pilot processing plants where people can use their technologies, equipment and personnel.

“Just like a chicken does its young ones know what an incubator is; incubators protect businesses until they become mature; we create an environment that makes enterprises survive during their initial baby steps,” Mr Dokoria explains.

He adds, “At UIRI, incubation starts from the concept where someone comes with an idea and it’s incubated; we do the trials, come up with prototypes, pilot production and that is when someone is ready for industrial production.”

According to UIRI, the industry is a process but not an event; young entrepreneurs want to come and immediately start running yet every enterprise needs to be nurtured from somewhere on the ground just like a baby.

“People like doing what they call machine shopping where they set but end up failing. That is why incubation is important so that by the time it goes to industrial level it has a stronger foundation,” he says.

Leaving incubation centre

So what happens when one exits the incubator? Mr Dokoria says different organisations have their own modes of incubation and the ideal for one to exit the incubator is when someone is able to stand on their feet.

Incubators have to give them the necessary technical support that is required like human capital and technology.

“An incubator will provide working space because many don’t have networks.  At the incubator there are people who can support legal, human resources, all these help businesses under one roof,” he says.

He adds; “The period in which one is supposed to graduate depends on the organisation. So each incubator should know the milestone.”

Mr Dokoria says, “The success rate at UIRI is around six-out-of-10 and when they succeed they go do business. But UIRI does not cut ties, we continue nurturing them.”

Although some don’t succeed, Mr Dokoria says  some don’t have that entrepreneurial acumen and some people just grab opportunities as they present themselves.

“Some people donot take the business to the next level because it is just a hobby so they fizzle out in the business. If the person does not pick up, we cannot keep them forever,” he says.

UIRI monitors businesses on a monthly and quarterly basis. It has in-house technologies like energy, cosmetics, paper making from natural fibre, textile, ICT, carpentry and metal fabrication.

Mr Tony Otoa, chief executive of Stanbic Business Incubator, says in 2018, Stanbic Bank took up the challenge to address these handicaps by setting up the Stanbic Business Incubator.

“The facility is the centerpiece of the bank’s Enterprise Development Program (EDP) intended to support SMEs to become more sustainable and scale up their operations,” he says.

By the end of 2020, a total of 1,216 SMEs and 2,146 individuals had benefited from the Stanbic Incubator programme. Of significance last year, is the fact that the Stanbic Incubator also reached out to SMEs in 10 districts of Uganda.

 Mr Otoa says the three-month incubator programme also allows for networking and peer-to-peer learning as well as opportunities to gain greater insight from subject matter experts.

 “Partners from across the business world help in the training, capacity building and e-learning; Participants are placed in an enabling environment that focuses on up-skilling them with knowledge to make these SME owners more competitive,” he says.

 According to Mr Otoa, entrepreneurs go through sessions ranging from compliance, corporate governance, business planning and analysis, financial literacy, business ethics and seven- habits of highly effective people,

 Others include human resources, joint ventures, contracting, risk and insurance, bid management, procurement and negotiation, quality management, branding and image building among others.

Stat-up failure

Mr Otoa says some companies dropped off due to the failure in adapting to online training.

 “Restrictions on movement also halted in-person sessions which are crucial for networking, the transition from classroom-based training to online delivery saw the training of 300 SMEs and the eventual graduation of 186,” he says.

 “We support them to thrive and become better but it is up to them to go out there and make more money. For us to say they are succeeding is how much money they are making,” he says.

Beyond incubation: Why some start-ups fail

Market problems

Some run into the problem of there being little or no market for the product that they have built.

Poor Business model

Some entrepreneurs are too optimistic about how easy it will be to acquire customers. They assume that because they will build an interesting web site, product, or service, that customers will beat a path to their door. That may happen with the first few customers, but after that, it rapidly becomes an expensive task to attract and win customers.

Running out of cash

Some startups fail because they ran out of cash.