Incubator To Nurture It Talent
The Age
Tuesday July 18, 2000
Entrepreneurs will have just six months to prove their worth under an IT business "incubator" program launched by Communications Minister Richard Alston yesterday.
Australian Distributed Incubator is one of 10 IT start-up incubators earmarked for $58 million in Federal Government support through the BITS (Building on IT Strengths) scheme. BITS is funded out of proceeds from the Telstra2 public offering.
Launched at a time when the investment community is increasingly discerning about which technology ventures to support, ADI will offer entrepreneurs a six-month customised program to help in the development of their business ideas.
``ADI putting a six-month target is really forcing the pace," Senator Alston said in launching the incubator. ``In many respects, it reflects the pace of change in the Internet industry, it demonstrates how critical it is in those early stages. It should become apparent fairly quickly whether you've got a very good idea or whether you haven't. Whether it needs support, whether it deserves support."
ADI - a joint venture between Ernst & Young, project financier Babcock & Brown, multi-media group Emerge, and consultancy greyhair.com - will receive $7million from the government over five years. The incubator has also attracted $13 million from private investors and institutions, and $1.2 million from the Victorian Government. It expects to be self-funding by the end of its fifth year of operation, largely through the sale of equity in the start-ups it has incubated, with additional revenue flowing from consultancy and success fees.
``We aim to deliver high-quality start-ups to the investment community," said Lex McArthur, chief executive of ADI. ``Of the projected 250 start-ups that will enter the Distributed Incubator over the next five years, we estimate that some 30 per cent will be star performers that will go on to obtain later-stage funding totalling in the order of $300 million."
Mr McArthur said the joint venture enjoyed a number of features, including its ``distributed" model. ``We recognise that in Australia not all good technology business ideas originate in the major cities, so we have purposely built a model which can also service regional and rural Australia," he said.
ADI combines two incubation types - traditional, face-to-face support and ``virtual" incubation through online support - offering entrepreneurs mentoring and consulting services.
Of the 10 incubators, only ADI offers national coverage. The other incubators that will assist Victorian businesses are Information City (which will receive $8 million in federal funding) and E-Park (which will receive $5 million and also service NSW).
``I regard this as the first in what I think will be a very successful experiment for Australia, certainly for the IT industry," Senator Alston said.
© 2000 The Age
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