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Glossary of terms on Entrepreneurship and Business Incubation 2013
- 1. Glossary of Terms on Entrepreneurship and Business Incubation (v.1)
GLOSSARY OF TERMS ON ENTREPRENEURSHIP AND BUSINESS
INCUBATION
PREFACE
Topics of innovation, entrepreneurship, business incubation require necessary level of
language and terms we use. The need of common vocabulary on topics mentioned above is
evident. However, we found that there are no glossaries available online that combines business
incubation and entrepreneurship areas of knowledge. This Glossary intends to fill that gap and
help others to find their way in an entrepreneurship journey. We do not claim to define all
business terms and it’s assumed that reader can understand basics of business and management.
SOURCES
Sources of the above definitions include:
Molnar et al. (1997)
Meeder (1993)
DiGiovanna and Lewis (1998)
Allen and McClusky (1990)
Wolfe et al. (2000)
National Business Incubation Association, NBIA (http://www.nbia.org)
Texas Angel Investors (http://www.thecapitalnetwork.com/Txangels/TAICoApp.html)
SBA report on ACE-Net: The Process and Analysis Behind ACE-Net (Access to Capital
Electronic Network) (http://www.ace-net.sr.unn.edu/pub/wet/rpt-es.htm)
Virtual Business Incubation Services (2011)
Entrepreneur’s Advisor (http://blog.theentrepreneursadvisor.com/coachs-
corner/glossary-for-entrepreneurs-and-micro-enterprises/)
The Smart Guide to Innovation-Based Incubators (IBI) (2010)
http://entrepreneurs.about.com/cs/generalresources/a/glossaryindex_2.htm
The Institute for Social Entrepreneurs (2003)
U.S. Department of State publication, Principles of Entrepreneurship (2007)
KTH, Entrepreneurhip Course by Gregg Vanourek (2012)
Wikipedia (2013)
Copyright © 2012 Vasily Ryzhonkov. All rights reserved.
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GLOSSARY
Term Definition
Academics Credentialed persons who perform research; are versed in
scholarly publishing criteria, processes, and standards; and
provide advice and guidance based on interpretations of findings
in current research.
Accelerator / The business incubation industry has inspired the development of
Business Accelerator the “business accelerator.” Business accelerators will generally
offer all of the services offered by a business incubator. The key
difference is the level of hands-on involvement by accelerator
management which should increase the chances of success. While
no definitive definition of business accelerator exists in the
literature, it may be broadly
defined either as: (1) a late-stage incubation program, assisting
entrepreneurial firms that are more mature and ready for external
financing; or (2) a facility that houses a modified business
incubation program designed for incubator graduates as they ease
into the market.
Business accelerators are more likely to be financed by venture
capitalist looking for an opportunity to finance growth potential
through defined action plans.
Accounts Payable An accounting entry that represents an entity’s obligation to
pay off a short-term debt to its creditors
Accounts Receivable Money owed by customers to another entity in exchange for goods
or services that have been delivered or used but not yet paid for
Acquisition Taking ownership of another business. Frequently used in
conjunction with the word merger, as in mergers and acquisitions
or M&As.
Administrative Offices Space in the incubator facility dedicated to offices and other
amenities for the incubation program manager or professional
staff. This space is not leasable to incubator clients.
Advisory/Governing A dedicated group of business leaders, professionals, stakeholders,
/Management Board and/or specialists that provides competent advice and guidance
for the incubation program management team on a regular basis.
This group may also advise clients. If the board is a governing
board, it has additional fiduciary responsibilities for the business
incubation program. Some incubator programs have both a
management board that directs the “business activities” of the
incubator program—such as budgeting, personnel matters, etc.—
and an advisory board that is responsible for providing value-
added business services to client firms and assisting the manager
in her/his duties. In most cases these functions are combined in
one board, which may have either title. An advisory board usually
has representatives from the finance community, legal profession,
and host institution as well as economic development
professionals, the manager, members of the entrepreneurial
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Term Definition
community, and, in the case of technology incubators, technology
commercialization specialists, among others. When constructing
the board, it is desirable to ensure that it can assist in providing
value-added service to client firms and help to embed the
incubator program in the local community. The networks
established by the board should benefit client firms and increase
the potential of capturing the firms in the local economy after they
graduate.
Affiliate Client A client that is not an occupant of an incubator facility but receives
many or most incubation services for a fee. See also “virtual
clients,” as these terms are sometimes used interchangeably.
Affiliate Firm A client firm that does not lease space at an incubator facility but
does participate broadly in the incubator program’s
entrepreneurial training programs and receives business services
from the incubator.
Anchor Tenant A business or organization that leases space from an incubator but
does not receive incubation services. Space is usually provided at
market rate. Usually anchor tenants are long-term and lease space
at market rates. The cash flow provided by an anchor tenant’s rent
helps the incubator meet its financial obligation. Anchor tenants
may or may not play another role in the incubation process. For
example, an anchor tenant may be a professional service provider
and be available for client firms.
Angel Investors/ A private investors who invest in earlier stage companies sums
Angel Capital Investor typically ranging from $250,000 to $1.5 million (from $50,000 to
$2 million, according to another definition). Angel investors tend
to be individuals or small groups of investors that accept high risk
and help entrepreneurs bridge the capital gap between the
entrepreneurs’ resources and traditional financial markets,
including venture capital markets. Angel investors obtain a return
on their investments when the companies in which they’ve
invested experience a liquidity event; are acquired, merged, or
have a successful IPO (see IPO); or are bought out by later-stage
investors.
Angel Networks Connected groups of high-net-worth individuals who are
accredited angel investors. Sometimes these individuals join
together to collectively invest in high-potential start-up
businesses. Angel investments are generally smaller and earlier-
stage than professional venture capital investments.
Assets Items of value owned by a company and shown on the balance
sheet, including cash, equipment, inventory, etc.
Balance sheet Summary statement of a company's financial position at a given
point in time, listing assets as well as liabilities.
Barriers to Entry Conditions that create disincentives for other firms to enter a
market.
Board of Directors A panel of individuals elected by a corporation’s shareholders to
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Term Definition
oversee the management of the firm
Bootstrapping Using creative means to obtain resources other than borrowing
money or raising capital from traditional sources.
Brand The set of attributes—positive or negative—that people associate
with an organization.
Breakeven point Dollar value of sales that will cover, but not exceed, all of the
company's costs, both fixed and variable.
Burn Rate The Burn Rate for a company is the speed per month at which
your start-up capital (cash) is being used up before you are able to
have positive cash flow. The BURN RATE includes everything that
you will outlay money for (wages, marketing, utilities, supplies,
licensing, professional fees, computers etc…).
Business A business plan is defined for entrepreneurs and micro-
enterprises as a method for thinking through your idea. A business
plan will answer and identify the Who, What, Why, How, When
and Where, enabling you to create a road map for your success.
Business plans come in three major forms:
Simple – Detailed road map – not normally used to raise capital
and should be done by entrepreneur.
Complex – may include detailed financials, competitive and market
analysis, intellectual property evaluation, identification of the need
being addressed, summary and road show components – used to
help raise capital – normally requires professional assistance.
True – a dynamic and flexible planning tool that includes all of the
components listed above but is constantly updated, maintained
and used for making action plans and annual or 5 year plans.
Business Incubation A dynamic process of business enterprise development that seeks
to fill the gaps in entrepreneurial development by providing a
supportive environment where new entrepreneurs receive
training in business management skills and marketing, buffered
from stiff market forces with below-market rent, reduced fees for
services, and improved access to necessary seed capital (NBIA
2001).
Business Incubation Programs designed to accelerate the successful development of
Programs entrepreneurial companies through an array of business support
resources and services, developed or orchestrated by incubation
program management, and offered both in the incubator and
through its network of contacts. A business incubation program’s
main goal is to produce successful firms that will leave the
program financially viable and freestanding. Critical to the
definition of an incubation program is the provision of
management guidance, technical assistance, and consulting
tailored to young growing companies. Incubators usually also
provide clients access to appropriate rental space and flexible
leases, shared basic business services and equipment, technology
support services, and assistance in obtaining the financing
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Term Definition
necessary for company growth.
Business Incubators (1) Facilities designed to nurture young firms, helping them
survive and grow during the startup period, when they are most
vulnerable. Incubators provide hands-on management assistance,
access to financing, and orchestrated exposure to critical business
or technical support services. They also offer entrepreneurial
firms shared office services, access to equipment, flexible leases,
and expandable space—all under one roof. An incubation
program’s main goal is to produce successful graduates—
businesses that are financially viable and freestanding when they
leave the incubator, usually after two to three years (NBIA 2001).
(2) The definition of a Business Incubator can be described as a set
of programs set up by a government, business alliance or academic
group though a variety of services/training. The intent is to help
small companies in the incubator have a better chance of survival
through the start-up phase. Services may include but not limited
to:
Office space: Usually at a reduced rate.
Office services: Receptionist, conference rooms,
computers, office equipment etc.
Entrepreneurial advice and mentoring: Entrepreneur
advisor services can range from establishing a web
presence to identifying IP licensing opportunities to
raising capital.
Business planning and market adjustment consulting:
Business plans are dynamic and constantly need to be
adjusted to fit the market.
Contacts and Networking: The biggest advantage of a
business incubator is its access to experienced
entrepreneurs, innovators and professionals who can
answer questions, provide guidance and resources.
Business Incubator Facility The space or building devoted to housing the business incubation
program of services, incubator management, and resident and
anchor client companies. “Business incubation program” and
“business incubator” often are used synonymously. However, the
research team for this project defined a business incubator as a
multitenant facility with on-site management that directs a
business incubation program, as defined above.
Business plan A written document detailing a proposed venture, covering
current status, expected needs, and projected results for the
enterprise. It contains a thorough analysis of the product or
service being offered, the market and competition, the marketing
strategy, the operating plan, and the management as well as profit,
balance sheet, and cash flow projections.
Business Service Providers Professional business assistance consultants who augment the
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Term Definition
skills of incubation program staff. These individuals – with
expertise in specific subject areas such as marketing, finance,
business planning, procurement, and patent law – often provide
their services on a no- or low-cost basis. Along with incubator
staff, these individuals provide the value-added service that is the
core of effective business incubation. These individuals may also
be referred to as “outside service providers,” denoting that they
are professionals resourced by the incubation program but they
are not paid staff.
Capital Cash or goods used to generate income. For entrepreneurs, capital
often refers to the funds and other assets invested in the business
venture.
Cash flow The difference between the company's cash receipts and its cash
payments in a given period. It refers to the amount of money
actually available to make purchases and pay current bills and
obligations.
Client Firm (1) Any firm that utilizes the incubator program as tenant, affiliate,
or graduate.
(2) Participants in incubation programs that receive incubation
services from program staff and the program’s network of service
providers. There are resident clients and affiliate (non-resident)
clients.
Client Retention Client retention is defined as practices that businesses engage in to
retain their customer base after the sale has been made. “Poor
customer service is the number one reason customers do not
return to make additional purchases. Implementing client
retention programs will not only lower your loss client ratio but
also increase your long term revenues.”
Complementary Benefits Any benefits that accrue to an incubator sponsor or supporter
including reuse of an abandoned facility, creation of student
internships, access to SBA guaranteed loan programs, joint
research opportunities, etc.
Copyright A business form that is an entity legally separate from its owners.
Its important features include limited liability, easy transfer of
ownership, and unlimited life.
Customer Segmentation A method for grouping customers based upon similarities they
share (e.g., needs, interest in features, etc.)
Creativity The ability to bring something new into existence
Development A group of community members that are interested in establishing
Team/Community Advisory an incubator program. There should be broad representation that
Team increases as the development progresses. Often there is an
informal leader(s) who champions the cause. The goal of the board
is to gauge the level of community interest and support, identify
potential partners, and determine if a feasibility study should be
conducted. It is also common that members of this team become
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Term Definition
advisory board members.
Due Diligence The inquiry process of obtaining sufficient and accurate disclosure
of all material documents and other information which may
influence the outcome of the transaction.
Elevator Pitch A pitch that companies use to tell about their products or business
quickly and succinctly. It gets its name from the idea that the pitch
should be able to be made in the span of an elevator ride (30
seconds to two minutes).
Empowerment Incubator An incubator focused on fostering the growth of business located
in areas that face economic challenges, such as high
unemployment or distressed neighborhoods. They may focus on
welfare-to-work clients, women-owned businesses, or minority-
owned enterprises.
Entrance Criteria Depending in part on the sponsor of the incubator, entrance
criteria for a client’s admission into an incubator range from the
ability to pay the rent to other benchmarks such as local
ownership, potential for job creation, type of industry, and having
a written business plan. Other criteria may include an evaluation
of entrepreneurs’ commitment to the new enterprise as well as an
evaluation of their entrepreneurial skills.
Entrepreneur (1) An entrepreneur is a person who recognizes opportunity, sets
forth a plan of action and then acts upon the plan taking
responsibility for its outcome. Being an entrepreneur is a mindset
or a personality as it describes a person who is willing to create
value or take a new direction. Although being an entrepreneur is
most commonly associated with people who start a new venture,
the term also refers to anyone who recognizes and pursues an
opportunity within an ongoing business either on a small or
corporate scale.
(2) Someone who recognizes a social problem and uses
entrepreneurial principles to organize, create, and manage a
business venture, and assumes risk.
Entrepreneur Advisor A person or organization with the experience base and educational
knowledge necessary to guide an entrepreneur from concept
through business fruition. The more technical the venture, the
more important education becomes especially with regards to
intellectual property.
Exit Policies See Graduation Policies
Experienced Entrepreneur An individual who has experience growing his or her own
company or others’ companies, including a person who may
be a serial entrepreneur.
Equity The value of an incubator’s client company that may be
shared by owners and investors.
Feasibility Analysis A detailed process to determine the viability of a business idea.
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Term Definition
Feasibility Study An objective, systematic analysis to determine whether an
incubator program should be established in the host community.
Financial Ratios Ratios used to determine whether a firm is meeting its financial
objectives and how it compares against peers
Financially Sustainable Having a diversity of dependable income sources, such that
if one source of funding fails, the incubation program still
will be fully functional.
First-Mover Advantage (Potential) advantage gained by the initial occupant of a market
segment.
Founder The entrepreneur(s) who started a venture.
Graduate Firm (1) A client (tenant or affiliate) firm that has exited an incubator
program having completed a set of benchmarked goals. Though
exit criteria may also apply to affiliate forms, most often these
goals are part of the lease agreement for tenant firms in an
incubator.
Graduation/Exit Policies Graduation policies have a rational hierarchy of both real estate
and business-development criteria. Firms may exit the incubator
as a result of not meeting the realestate criteria (such as
noncompliance with the lease agreement or having reached the
predesigned maximum length of tenancy), although in these cases
the former client probably did not meet the other benchmarked
business-development criteria and would not be considered a
graduate. One business-development criterion is escalating rent
over time to cushion the firm’s early-stage cash flow while
preparing it to pay market-rate rent over time and inducing
relocation as rent approaches or surpasses the market rate.
Having a flexible and explicit time limit on the length of tenancy is
another best practice. One of the most important goals is firm
growth. In the case of technology incubation benchmarked criteria
may include prototyping, scale production,
and full-scale production. The explicit length of tenancy is usually
longer for technology incubators as a result of the length of time it
takes to develop and commercialize new technology products and
services.
“Hand-holders” Incubators offering mainly business development services (VBIS
2011).
Hybrid Incubator Hybrid In terms of sponsorship, a hybrid incubator is one that has
multiple sponsors that share financial and/or governance
commitments, with no single controlling entity.
Incubation Program The executive who directs an incubation program’s operations.
Manager Most managers report to either the chief executive officer of the
program’s sponsoring organization, a university president or dean,
or a board of directors that governs the program. Some incubation
program managers have alternative titles, such as president, CEO,
or executive director.
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Term Definition
Incubator with Walls An incubator with walls is a business incubation program with a
multitenant business incubator facility and on-site management.
Although an incubator with walls offers entrepreneurs space in
which to operate their businesses, the focus of the program
remains on the business assistance services provided to the start-
ups, not on the building itself.
Incubator without Walls An incubator program that provides some or all of the
complementary business services and entrepreneurial training
programs but has no physical facility to house tenant firms. Often
these services are delivered via the Internet.
Initial Public Offering (IPO) When a company issues shares to the public for the first time
Innovation (1) Successful introduction of something new and useful to the
market; applied creativity.
(2)Innovation is a change that creates and/or adds value, and prov
ides a competitive advantage HERE and NOW.
Intellectual Capital Sum of all knowledge in an enterprise. Intellectual Capital is the
sum of Intellectual Assets and Intellectual Property.
Intellectual Assets The knowledge, experience and skills that have been obtained,
preserved, catalogued and made available for sharing.
Intellectual Property Intellectual assets that have been legally protected. Intellectual
Property is often referred to as IP. Types of Intellectual Property
include:
Patents
Trade Secrets
Know-how
Trademarks
Copyrights
International Incubator Recently, a new form of business incubation program has
emerged, which focuses on helping foreign firms enter the U.S.
market. These international business incubators provide the same
set of entrepreneurial services as a typical incubator, but they
concentrate on providing a “soft landing” for international firms
that want to access U.S. markets, partner with U.S. firms, or access
other resources. Some specialized services offered by
international incubators that are above and beyond typical
business incubation services include translation services, language
training, help obtaining business and driver’s licenses, cultural
training, immigration and visa assistance, and housing assistance.
Immigration services are often extended to trailing spouses and
children, making it easier for foreign entrepreneurs to settle into
their new location.
Internet/E-Commerce An incubator that fosters the development of new enterprises
Incubator engaged in establishing e-commerce businesses
Intrapreneur An intra-organizational (inside) entrepreneur; “a person within a
large corporation who takes direct responsibility for turning an
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Term Definition
idea into a profitable finished product through assertive risk-
taking and innovation” (Gifford and Pinchot).
Invention The creation of new forms, compositions of matter, or processes;
an idea made manifest.
Leasable Space The total amount of space in the incubator facility that is
dedicated for rental by both anchor tenants and resident
clients (excludes administrative offices and shared common
space, for example). This term is used interchangeably with
“net leasable space.”
Key Performance Indicators Key Performance Indicators are quantifiable measurements, agree
d beforehand, that reflect the critical success factors of an organiza
tion. They must be quantifiable and reflect the goals of the
organization.
Management Board See Advisory Board.
Manager The executive who directs the operation of an incubator program.
A manager develops and coordinates business assistance
programs and usually provides one-on-one counseling and
referral services to incubator clients. Other tasks include
marketing the incubatorprogram, fund raising, client screening,
collection of rents and fees for service, and managing other
incubator personnel.
Manufacturing Incubator A manufacturing incubation program is designed to assist new
enterprises primarily engaged in the manufacturing sector.
Because clients typically require manufacturing space in addition
to office space, manufacturing incubators tend to occupy more
square footage than do other types of incubators. Generally, to be
considered a manufacturing incubator, at least 50% of the client
firms should be manufacturing-oriented.
Market A group of people who want or need a particular product and have
the ability and willingness to pay for it
Mentors (1) Industry experts and business service providers who offer
ongoing counseling to incubator clients. A mentor provides a voice
of experience on a long-term basis, perhaps through one or more
stages of a company’s development. Groups of mentors having
different areas of expertise may be assigned to individual
companies.
(2) Is defined as a person who is; willing to be a sounding board
for your ideas and issues, provide guidance, teach or direct you to
the needed resources and is willing to tell you what you need to
hear and not what you want to hear. Mentors are often found or
placed on a Board of Advisors or Board of Directors.
Microentrepreneurs Entrepreneurs who run businesses that have five or fewer
employees, require $35,000 or less in start-up capital, and do not
have access to traditional (bank) financing.
Micro-enterprise Is a term used to describe very small businesses that have less
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Term Definition
than 5 employees and annual revenues under $250,000. This term
is frequently used to describe home and farm based businesses or
businesses with no employees other than the owner. In some
Countries, States and Provinces micro-enterprises make up the
vast majority of the workforce. The term can also be used to
describe a new venture in its early formation such as a new
technology company that is just forming or only in a research and
development stage.
MIS Management information systems are technologies, processes, and
protocols used to manage people, payments, receivables,
documents, business or manufacturing processes, and other
financial information and resources.
Mixed-Use Incubator A mixed-use incubator (also called general purpose incubator) is a
business incubation program that fosters the growth of all kinds of
companies; the businesses in a mixed-use incubator are not
required to fit into any specialized niche. Companies in mixed-use
incubators may include service, manufacturing, technology, and
other types of firms.
“Network boosters” Networking focused business incubators (according to the VBIS
classification)
Outsourcing Outsourcing is the assigning of non-core functions of your
business to an outside party in order for you to have more time to
concentrate on your main (core) business functions. Typical
outsourced functions for a small business include, payroll, legal,
sales, marketing, computer services and human resources.
Participating Clients Incubation program clients who rent and/or use the incubator
facilities, programs, or services on a regular basis and have
not graduated from the program.
Patents Conveys the right to the owner (not necessarily the inventor) the
right to prevent others from making, selling, using, offering for
sale or importing the patented invention. There there are four
types of patents, 1)Utility, 2)Design, 3)Plant, 4)Animal.
Pivot Chris Schultz called this the startup term du jour; it is used to
mean changing directions in your business strategy.
Post-Incubation Services offered to companies that have graduated from the
incubation program (i.e., access to specialized facilities as needed,
consulting services, CEO roundtables, and networking functions).
Pre-Incubation Services offered to companies or individuals who have not been
formally admitted to the incubation program (i.e., FastTrac or
NxLevel training and business plan reviews).
Primary Stakeholders The organizations or entities that have or should have an interest
in the incubation program’s success. In addition to sponsors, these
could include local government agencies, economic development
organizations, industry sector networks, Small Business
Development Centers, and others whose missions are such that
they should have an interest or “stake” in the incubation
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Term Definition
program’s success.
Primary Sponsor Entity that provides regular financial and other support for a
business incubation program. A sponsor may or may not have
developed the incubation program initially, but a current sponsor
maintains ongoing responsibility for managing or governing the
incubator and may provide subsidies to fund program operations.
In some cases, a sponsor may initiate the program, but if it ceases
its financial, governance, or management role, the incubator likely
would then operate independently with no sponsor. If two or more
sponsors provide financial or management support and there is no
single controlling or primary controlling entity, the incubation
program likely operates with hybrid sponsorship. (See “hybrid.”)
Professional Staff Staff Incubator staff who might include a chief operating officer,
information technology professionals, client business advisors,
professional facility managers, and/or other management
professionals who are normally paid staff of the incubator.
Resident Client A participant in the incubation program that rents physical space
in a facility-based incubator and receives incubation program
services that may be provided for additional fees.
Sales Metrics Sales metrics are the variables used to define how you will achieve
your sales projections. This includes; knowing how many sales
people or web site visits it will take to generate a qualified lead,
how many leads it takes to generate a sale or client, cost per sale
and the length of the sales cycle. Sales metrics are the cornerstone
of the sales and marketing functions for new ventures.
Seed capital providers Finance-focused business incubators (according to the VBIS
classification)
Seed financing / A relatively small amount of money provided to prove a concept; it
Seed Funding may involve product development and market research. Seed in
business terms refers to a company in its early stages; seed
funding is funding granted a company in its early stages, to get it
off the ground.
Series A, B, C Financing The first (A) / second (B) / third (C) round in a series of equity
financing in a new venture.
Service Incubator An incubation program that fosters the development of
entrepreneurial firms in the service industry. Firms may range
from landscapers, graphic designers, and consulting firms of many
types to Internet-based companies and Web development firms.
An incubation program may target a segment of this sector for its
services.
Social Entrepreneurs (1) Entrepreneurs who run companies whose business model
includes achieving a social good in addition to being successful in
business and generating profits. Such a company might devote a
percentage of its profits to a philanthropic cause, or it might
devote its services or products to ameliorating a social problem
such as hunger or to lack of access to clean water or
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Term Definition
pharmaceuticals, etc.
(2) Someone who recognizes a social problem and uses
entrepreneurial principles to organize, create, and manage a
venture to make social change. Social entrepreneurs often work
through non-profit organization and citizen groups, but they may
also work in the private or governmental sector. Many successful
entrepreneurs, such as Bill Gates of Microsoft, have become social
entrepreneurs.
Social entrepreneurship The art of simultaneously pursuing both a financial and a social
return on investment (the “double bottom line”).
Start Up A Start Up is defined as a new business that has yet to achieve a
sustainable positive cash flow or has been in operation for a
limited period of time.
Still in Business Businesses that have participated in the incubation program in the
past that are still successfully operating as businesses, generating
revenues, developing products, and/or hiring employees.
Stock Options A special form of incentive compensation providing employees the
option or right to buy a certain number of shares of their firm’s
stock at a stated price over a certain period of time
Targeted Incubator Incubators that focus on assisting startup companies from a
specific industry.
Technology Generator An institution—such as a university, national laboratory, or
private research and development laboratory—that ensures a
sufficient concentration of human capital and engages in an
adequate amount of R&D to produce numerous opportunities for
new commercialization ventures.
Technology Incubator An incubator that fosters the growth of new technology ventures
by helping to close the gaps in the innovation process and correct
for market failures. Generally, if 50% of the client base are
“technology firms” then an incubator is considered a technology
incubator. Technologies could be software, biotechnology,
robotics, nanotechnology, or instrumentation. Technology
incubators may focus on commercializing early-stage technology,
developing new applications for existing technology, or both.
Tenant Firm A client firm that is housed at an incubator facility, receives the
menu of business services, and participates in the entrepreneurial
training provided by the incubator program.
Total Annual Revenue The sum of all incomes generated for an entire fiscal year
including: 1) sales; 2) Small Business Innovation Research
(SBIR)/Small Business Technology Transfer (STTR) or other
grants; 3) Venture Capitalist investments; 4) Angel investments;
and 5) technology licensing arrangements.
Total Cash Equity The sum of all the cash revenues received by a company for which
Investments it has offered stock, warrants, or other ownership instruments.
Cash equity does not include ownership that is dependent on
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Term Definition
sweat equity (working in or for the company in return for an
ownership interest).
Types of Incubators Overall industry specialization of an incubation program
indicating the program’s primary focus area. Typology of
incubators depends on the perspective.
Value-Added In the incubator industry, the concept of value-added refers to the
manner in which incubator programs enhance the ability of their
tenants to survive and grow in the market place. The value-added
components of an incubation program generally include business
management and marketing training, affordable rent, shared office
services, networking opportunities, financial assistance, and, in the
case of technology incubators, access to host institutions’ facilities
and experts. For example, a university-hosted technology
incubator will generally provide access to its library, laboratories,
and faculty at no or reduced cost.
Valuation The appraised or estimated worth of a firm
Value Proposition The quantifiable benefits that a business promises to deliver to
customers
Venture Capital (1) Source of funds for earlier stage enterprises that are on the
verge of product/service introduction and need an infusion of
capital to ramp up to full production. These funds may also be
used for research and development, testing, or prototyping. In
technology ventures, generally the firm has a developed proto
type. Typical funding ranges from $5 million to $15 million, the
average investment growing steadily from $2.3 million in 1987 to
$5.6 million in 1995 (ACE-Net). These institutional funds often
include union pensions as well as individual investors’ capital.
(2) A form of financing for a company in which the business gives
up partial ownership and control of the business in exchange for
capital over a limited time frame, usually 3-5 years. Investments
typically range from $500,000 to $5 million., although there are
occasionally VC investments for as low as $50,000 or as high as
$20 million.
Venture Capital Investors Persons or groups that give cash sums to high-potential start-up
businesses in exchange for shares in the company. Venture
capitalists always seek an exit strategy in which the company is
merged or acquired, or its stock is sold on the public stock
markets, permitting the investors to recoup many times their
initial investments. Professional venture capitalists generally
manage and invest large sums of other peoples’ money through a
professionally managed entity such as a limited liability
partnership.
Virtual incubation (1) Incubators without walls and virtual business incubators are
synonymous terms. Essentially, they are business incubators that
Copyright © 2012 Vasily Ryzhonkov. All rights reserved.
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Term Definition
do not offer on-site space for clients, although they may have a
central office to coordinate services, house the management staff,
meet with clients, and perhaps even provide conference rooms for
clients. Virtual incubators may or may not be located in the same
geographic area as their client companies, since a virtual presence
is what defines an incubator without walls.
(2) location-independent business incubation.
Virtual service Virtual service concept refers to a service that is offered to non-
resident incubatees.
Virtual tool Virtual tool is a way of delivering a service to a dispersed group
of users (using ICT-based or other means), where the service
provider and service recipient are not in the same physical
location.
Service Incubator A service incubation program fosters the development of
entrepreneurial firms in the service sector. Firms may range from
landscapers, graphic designers, and accountants to Internet-based
companies and Web development firms. An incubation program
may target a segment of the service industry or a range of service-
oriented firms. Again, at least 50% of the client companies should
be service firms to be categorized as a service incubator.
Window of Opportunity The time period in which one can realistically enter a new market
Copyright © 2012 Vasily Ryzhonkov. All rights reserved.
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