Background:
The Venture Incubator is a small, fully privately funded enterprise based in Okazaki City. Established in 1999, the incubator usually houses 3-5 different projects which are initially established as a division or unit. When the project is sufficiently mature, it is spun off to form a new company sold or merged with partner companies. A key feature of the incubator is that mature operations do not need to leave the premises until their space requirements grow - maintaining their cost advantages during the early period of commercialization of news ideas and increasing the chance of longer term commercial success.Role and Value of incubation:
Although the situation has improved gradually over recent years, establishing a new venture in Japan is still a difficult process in comparison to other major markets in the OECD. Success in the Japanese marketplace requires a considerable investment of time to establish a product, service or brand name. Compared to establishing a market presence in North America, the European Union and elsewhere in Asia, operations in Japan are often characterized by a requirement for long term planning, a larger amount of cold calling and patience, and in the early stages are often vulnerable to budget overruns. Entrepreneurs in Japan (both Japanese and foreign residents) and foreign companies seeking to enter the market, frequently underestimate the cost of establishing operations. An additional problem is that new companies often encounter difficulties in obtaining affordable office and laboratory space, lines of credit, and have difficulty leasing essential office automation, IT infrastructure, telecommunications and ancillary services. Obtaining such vital resources can push initial capital outlays over budget.The role of Frontia's incubator is to reduce uncertainty, reduce initial capital outlays and slow the rate of cash burn. This provides the new venture with greater stability in costs so as to improve the management of cash flow in the critical development phase, so that products and services do not need to be rushed into the market before supporting infrastructure is in place.
Nuts and Bolts:
Frontia's incubator in Okazaki is ideally placed to help new ventures with the above. Office space is usually provided in 28 square meter (approximately 300 square feet) rooms (some smaller rooms are available), all of which have sound insulation, air-conditioning/heating, ample power supply, high speed internet access, and good telecoms. At this stage there is no laboratory space available. Laboratory space and storage/distribution facilities are planned to be added by the end of 2004.To further reduce start up costs, the incubator provides office automation shared between the different ventures, server colocation in a dedicated server room (including climate control, 24x7 security, high speed connectivity), as well as essential ancillary services and support such as accounting & banking services, legal assistance (for example with patent registration), e-commerce and technical support, security, cleaning etc. The incubator is also able to provide assistance with recruitment and training, sharing expertise and office personnel.
In addition to the above, the incubator has facilities including meeting rooms, and access to a 60 seat theater with full IT support and conferencing capability, plus a large amount of car-parking space (including ample turning space for light trucks).
Flexibility:
The incubator is focussed on IT services - within this range projects to date have included a Call Center, community radio station, multimedia studio, software developer, web developer, datacasting service provider, iMarketing teams and an e-commerce systems facilitator. It is important to note that it is not essential for a venture to be physically based in the incubator. An entrepreneur working from home can co-locate their database and mail servers at Frontia and receive full technology support, similarly a large joint venture may prefer to operate their offices outside the incubator, but use the facilities on a contract basis.A project is usually able to be accommodated in the incubator until it reaches 2 of the standard sized rooms. When additional space is required, Frontia Corporation can assist in the search for appropriate leases. As a general rule, the longest period a project can remain in the incubator is planned to be 5 years.
Equity Financing:
To help new ventures further reduce their initial capital outlay and first year cash burn, Frontia usually seeks to provide equity financing in exchange for reduction in or removal of rent and other services. In most cases, Frontia will not be prepared to take up more than a minority stake in the business. Frontia is also in a position to introduce venture businesses to investors and/or securities firms.For more detailed information please contact us.
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