Feasibility study for a

regional flagship incubator in

Cambridge for Co - operative

and Social Enterprises.

March 2003

CONTENTS 1

Foreword by Anne Campbell MP

2

Executive Summary

4 Introduction

5 Methodology

6 What is a Social Enterprise?

7 What is a Business Incubator? • St John’s Innovation Centre, Cambridge • Self-Start Workshop, Godalming • Wandsworth Youth Enterprise Centre, Tooting • Community Action Network Centre, London • The Genesis Centre, Alfreton

12 How will an Incubator help Social Enterprise in

Cambridge and East Anglia?

14 Results of Questionnaire

18 Why Cambridge?

21 Support and Possible Link Ups

23 Sites

26 Funding

27 Management of Incubator

30 Critical Factors for Success • Development of physical Incubator • For CSEs within the Incubator

32 Conclusion

34 Summary Table of Proposed Incubator Types

35 Acknowledgements

36 Appendices

1

FOREWORD by Anne Campbell MP One of the key objectives of this Labour government has been to foster the spirit of enterprise in a way that opens up opportunities and prosperity for all people and enriches community life. Social businesses are central to this. They have the ability to generate jobs and training for those outside the mainstream employment. They can also stimulate enterprise in areas of social disadvantage, which many businesses regard as uneconomic. I have seen many Co-operative and Social Enterprise start-ups in Cambridge that have shown how the synthesis of economic and social concerns is not only possible – it has the potential to form a dynamic and innovative part of the economy. Many have demonstrated that a business with social objectives can be impressively successful. I think that this is attributable in no small part to the tremendous enthusiasm and dedication of practitioners in the social enterprise sector. But enthusiasm and commitment only go so far and I know from when I founded Opportunity Links in 1994 that business support, financial advice and the practical support of managed premises make an enormous difference to the success of a new cooperative or social business. That is why I welcome this feasibility study for a Social Enterprise incubator in our region and wish this project every success. Anne Campbell MP

2

EXECUTIVE SUMMARY Introduction Currently, there is no existing provision for Co-operative and Social Enterprise (CSE) start-ups, in Cambridge, in the way that there is for high-tech or graduate enterprises such as St John's Innovation Centre. In the dti’s recent Social Enterprise Unit (SEU) report called “Social Enterprise: A strategy for success”, Prime Minister Tony Blair stated that the government wants to ‘create an environment in which more people feel they are able to start and grow such businesses [social enterprises].’ The RT Hon Patricia Hewitt MP adds, ‘I want to ensure that we do more to encourage, grow and sustain social enterprises – to ensure that social enterprise is not seen as a ‘side show’ to the ‘real’ economy but rather an integral and dynamic part of it’. There therefore needs to be incubation support resources developed for these social enterprises that reflect those available to mainstream businesses. This report details the findings of a feasibility study to determine what a business incubator is, how it would benefit Cambridge CSEs and if there is a need for such an initiative in Cambridge. The research for this report also looked at; the availability of land and property; the funding for such a venture and the commitment of any support agency, local authority or other organisation to ensure the success of the initiative. Objectives of the study To establish what business incubation means by looking at various types and

evaluating best practice. To establish whether or not a need for a Cambridge based CSE incubator exists

and what services it should provide. To look at possible sites and funding opportunities.

Results of Study All CSEs in Cambridge and its outskirts would like to see an incubator for start-up and diversifying social enterprises. They all also thought that a CSE incubator based in Cambridge would draw attention to examples of best practice used by CSEs in the area and lead to better understanding of the sector by mainstream businesses, networks and support organisations. The incubator would also provide an effective model for replication. It would offer a central core of expertise supporting and encouraging those vulnerable CSEs in other parts of the region to develop into robust clusters. There were many other agencies interested in the concept as they were looking to set up similar developments for their client group. Currently it was estimated that an incubator for CSEs exclusively would need to have 10–15 workspace units (including light industrial and office space) and would need to provide shared administration services, business and funding support, training and conference facilities. If linked to other organisations the requirement would obviously be larger and more expensive but would offer the chance of working with and alongside diverse cultures creating ‘synergy’, spin-offs and a greater understanding of the needs and solutions within the

3

social economy. The development of relationships, networking, inter-trading of ideas and goods, mixing of cultures could only be of benefit to participants within an incubator dedicated to community regeneration and economic development. At the time of going to press no sites were positively identified for redevelopment although there were a few possibilities to follow up if the development was to proceed. The costings for two potential models indicate that capital costs could be between £1.5M - £3M. Potential funding streams were identified if the project was to be developed. Critical factors of the project would be the need for, funding of and a site for an incubator. If this initiative were to develop, finding an appropriate site could be an issue. Further research into the possibility of setting up a flagship in the region is to be commissioned by Business Link, this will add further insight into the needs regionally and perhaps the best place to position a CSE incubator within the County.

4

INTRODUCTION The benefits of business incubation are well recognised by mainstream business judging from the sheer number of such units in existence throughout the UK. In Cambridge, in particular, this is even more evident through the world-class incubator, St John’s Innovation Centre. The Small Business Services (SBS) acknowledge this through a government white paper published in 2001 ‘Opportunity for All in a World of Change’ that ‘the lack of access to suitable premises, business advice and other help, such as finance, can hinder the chances of survival for start-up and early growth stage companies … 75% of businesses that start in such incubation projects are still in business after 5 years compared with only 33% which do not have such support’. The paper goes on to add that the development of such business incubators ‘… is an important part of the SBS start-up policy’. In the dti’s recent Social Enterprise Unit (SEU) report called “Social Enterprise: A strategy for success”, Prime Minister Tony Blair stated that the government wants to ‘create an environment in which more people feel they are able to start and grow such businesses [social enterprises].’ The RT Hon Patricia Hewitt MP added, ‘I want to ensure that we do more to encourage, grow and sustain social enterprises – to ensure that social enterprise is not seen as a ‘side show’ to the ‘real’ economy but rather an integral and dynamic part of it’. Yet despite all this, there are no such incubation support facilities for Co-operatives and Social Enterprises (CSE’s) in Cambridge. It is therefore felt that Cambridge needs more business support resources, developed for CSE’s, to reflect those tailored to mainstream businesses. The East of England Development Agency (EEDA) funded Cambridge Co-operative Development Agency (CCDA) to research the feasibility of an incubator for CSE’s in Cambridge and the CCDA appointed Sue Roberts to ‘head up’ this research. It was considered important to ascertain the level of demand for an incubator among existing and recent start-up CSEs in Cambridge. CCDA was identified as the organisation best able to accomplish this effectively as many of the CSE’s are already in contact with CCDA and have a working relationship with them.

5

METHODOLOGY There were five phases of the research: Research on various mainstream and other incubators, for comparisons. Information was taken from various sources including the Internet, Anglia Polytechnic University’s WISE programme and publications from various relevant organisations including United Kingdom Business Incubator Ltd (UKBI) and the Department of Trade and Industry (dti). Requests were posted on relevant chat sites for information including Co-operative and SSEER websites. Visits were made to different types of incubators and other similar start-up business centres. Established level of interest in a Cambridge incubator with local CSE’s. Contact was made with existing CSEs to ascertain their particular needs at start-up. A questionnaire (Appendix A) was sent to known CSEs in Cambridge and on the outskirts of the city. Staff visited specific organisations identified as either emerging or diversifying for in-depth research of their current needs. Identified potential support from a variety of business support agencies and other organisations currently supporting, or involved with, CSEs. Telephone calls and meetings were made with appropriate agencies to discuss concept and ascertain, in principle, support for the incubator. Sites, or premises, which could be suitable for a CSE incubator were researched. Implications for trade, logistics and funding were looked at. Contact was made with local estate agents and developers, local authority planning offices, economic and development officers and possible funding bodies. Research on various possible management structures required for long-term success. Evaluation of existing incubators and other relevant research.

6

WHAT IS A SOCIAL ENTERPRISE? Social Enterprise is a broad concept with no easily identifiable design. The Sector addresses a wide range of social and environmental issues and operates in all parts of the economy. The breadth of objectives and activity within the social economy leads to a misunderstanding of it from mainstream business and organisations within the sector itself. Misunderstandings also arise due to the Sector’s relative ‘newness’, its lack of self-identification and lack of promotion in the general public domain.

“We see social enterprise as providing innovative solutions to some of the challenges faced by many communities across the nation”

Douglas Alexander MP The defining characteristic of a social enterprise is that it aims to benefit a community, either geographical or in kind, through trading. As charities should not trade they do not qualify as social enterprises. In many cases social enterprises aim to provide training and employment opportunities for disadvantaged or disabled people. They often find it more effective to achieve their aims through being managed by the workers or community that are intended to benefit from the business activities. They should also state, in business plans and so forth that their objectives are primarily social. As a matter of principle all surpluses or profits (and assets if the business were to be dissolved) should be reinvested back into supporting these objectives. There are many forms of social enterprise: Employee-owned businesses Community business Credit Unions Co-operatives Development Trusts Social Businesses Intermediate Labour Market Companies

There is no single legal or financial structure for a social enterprise. As noted by David Nicholls of Business Links Cambridgeshire at a recent seminar on social enterprise “one size doesn’t fit all”. A social enterprise may be a company limited by guarantee or it may be unincorporated. Many are co-operatives or mutual societies. A social enterprise may be self-sustainable or have some grant dependence. Each will have its own social mission, individuality, aims and objectives. Cambridge has a wealth of assorted Co-operatives and Social Enterprises (CSEs) profiled and supported by Cambridge Co-operative Development Agency (CCDA), including a number of recent ‘start-ups’.

7

WHAT IS A BUSINESS INCUBATOR? Incubation is a process to help ‘start-up’ businesses survive and grow. They are usually managed premises comprising of small office or light industry work units with meeting rooms, parking and reception. New start-up businesses are provided with an informative and supportive environment. Peer group networking; business advice; business mentoring; technology support services and assistance in obtaining finance for growth are often found to help the new start-up businesses. Each incubator has different aims pertaining to the economic development of its local area. They can enable diversification of rural economies or, in urban areas, provide employment and build local wealth. Incubators are sometimes used as a vehicle to transfer technology from universities and major commercial businesses. Incubators can focus on a particular market (technology based businesses are nurtured in St John’s Innovation Centre in Cambridge) or have a mixed use that targets a specific group of entrepreneurs, like the Wandsworth Youth Enterprise Centre in Tooting (client group 18 – 30 year olds). Currently 82%, of business incubators in UK, operate a selection policy for entry to their incubators and 48% of those select business of a type (UKBI). The role of an incubator is to produce successful businesses that are financially viable and self-supporting when they leave the premises. The National Business Incubation Association (NBIA) states that

‘Critical to the definition of an incubator is on-site management, which develops and orchestrates business, marketing

and management resources tailored to a company’s needs’ The facilities on offer in an incubator usually include: Appropriate rental space and flexible leases Shared basic office services and equipment Business advice and support Assistance in obtaining appropriate finance for growth Other shared facilities including meeting rooms, parking, reception

Start-up business development covers a wide range of processes. Incubators help: Tackle specific problems of economic development in urban and rural areas Increase the success rate of early stage businesses Identify funding opportunities Speed growth of companies Create jobs

The NBIA states that two core principles characterise effective business incubation: Incubator gets recognised as a dynamic model of sustainable efficient business Local economy becomes improved due to successes of emerging companies

CCDA staff visited a variety of incubators seen as innovative and successful within their own field. The management structure, funding strategy, success and issues to bear in mind to help develop a new centre were studied. Though 52% of incubators operate as social enterprises (UKBI), no incubator or enterprise centre catered for CSEs exclusively. Most incubators had provided managed workspace for social firms (a CSE with at least 30% employees with special needs) but not deliberately as part of their policy.

8

CASE STUDIES St John’s Innovation Centre, Cambridge.

St John’s Innovation Centre is a mainstream business park providing market rate premises for small and medium sized businesses. In addition it provides a supportive environment with quality, cost effective services in

which technology transfer and innovation are promoted at local, national and international level. Tenants include start-up companies, second stage technology based companies, whose experience and maturity enable the creation of spin-off companies and service companies that provide support specific to the business genre including training, marketing and public relations. Funding The land is owned by St John’s College, which established the Innovation Centre

in 1987. The rental income is returned to the College in order to meet their aims. Funding comes from the service charge and contracts carried out either privately

or for the Small Business Services (SBS) or other agencies. Entry and Exit Strategy Businesses have a three-year secured tenure but in reality they may stay up to

five years. This helps keep the premises occupied maximising the return on the investment by St John’s College.

Tenants can exit with one month’s notice. Facilities included in rent Facilities available to tenants include a restaurant, conference rooms, reception, phone switchboard, heating, lighting, car parking, maintenance, cleaning of all areas, interview rooms, meeting rooms, library and security. Business support is also provided on site. Services provided for an additional charge include reprographic, telecommunications and postal services. Other Information The premises are based on the Science Park in Cambridge near to the A14 with parking and a Park and Ride facility. It is a prestigious building, which encompasses 80,000 sq ft of space. Eighteen employees manage the Innovation Centre. Results “There are 50 companies on site, 100 graduated and the failure rate is about 15% compared to 50% that may have been expected” (General Information, SJIC Jan 2002) Self-Start Workshop, Godalming, Surrey The workshop was set up by Surrey County Council in the mid 1980s in a redundant Fire Station owned by the Council. The objective was to tackle the problems of unemployment and lack of opportunities for young people in the area offering low cost managed workshop starter units to 16 – 30 yr olds, looking at self-employment as an alternative to unemployment. The Old Fire Station houses 5 workshops, some licensed to partnerships. Self-Start provides free business support, information and

9

training tailored to their client group who rent the premises but also to all 16 –30 year olds in the county. Rita Kelly who manages the Old Fire Station also runs ‘Live Wire’ which encourages young people to look at self-employment and a Business Club for under 30 year olds. Funding Rental income used to maintain the building Surrey CC employ a Project Manager who also manages on site services

Entry and Exit Policy The voluntary steering group, consisting of business professionals in the area,

interview prospective tenants. On their agreement 6-month licences are given. The steering group shares its expertise with the fledgling businesses including free legal and business advice. This provides good value for the centre.

There is no exit policy as businesses have naturally grown and found bigger premises in the area. Generally businesses stay in the incubator for 2-3 years.

Tenants have to give one months notice to vacate the premises. Results About 65% of businesses (both those contained within the Fire Station and those outside of the premises) nurtured by the incubator have been trading for three years or more. There is a higher success rate for those actually resident in the incubator. Community Action Network (CAN) Centre (The Mezzanine), Elizabeth House, London. The CAN Centre is based on one floor in a major office building in Central London. Mezzanine Services Ltd (MSL), a company limited by guarantee, runs the centre and is administered by CAN. It is a network based social enterprise and has licensees renting space within the open plan area maximising opportunities for like-minded social enterprises to interact and work in partnership. Glass partitioning for conference and meeting rooms further enhance the feeling of space and vibrancy. Organisations are charged full commercial rates plus a service charge and management fee. Funding Rent charged on individual occupancy of the Mezzanine is used to fund the centre’s on-site management and lease. As MSL is a mutual society corporation tax is largely avoided. MSL is a profitable, sustainable social enterprise completely unsubsidised with 100% earned income. There are currently 25 organisations in the centre, which is reliant on 100% occupancy to break even. Entry and Exit Strategy There is no formal policy, as full funding of the space is needed for sustainability Occupants are members of MSL and sign a deed of adherence rather than lease

Facilities included in the rent The licensees have access to a conference room with full catering, a central resource base, office services and telecommunications. There is a consultancy available for community development projects and social marketing initiatives. Elizabeth House, in which the centre is based, provides the reception service. CAN calculate that an organisation in the centre can save over £13,000 per annum due to shared facilities.

10

Future This is a very busy, pulsating environment and many spin offs have been created within the development. This centre offers professional facilities in the centre of London with good access from within and outside the city. The Mezzanine recently took over another 6,000 sq ft, which breaks even at 85% occupancy. Wandsworth Youth Enterprise Centre, Tooting, London.

Wandsworth Youth Enterprise Centre (WYEC) was set up in 1998 to tackle the growing areas of unemployment, social exclusion and lack of opportunities for young people. The low cost premises (including offices, workshops and studios) encouraged young people to start and develop their own businesses. It has 30 units, 25 of which are work units in various sizes (100 – 500 sq ft) providing support and business counselling for 17 –

30 year olds in and around the Wandsworth area. There are 6 staff running the complex and it is generally 90 – 95% full. Funding Initially from the local government, Training and Enterprise Councils, charitable

trusts, company sponsorship and the European Union. The development of the Trident Centre, a £2.7M commercial business centre

complex which provides managed workspace for 90 small businesses, is the commercial arm of the WYEC and generates an income to underpin the funding of the WYEC’s core activity. It is also a progression path for those under the WYEC scheme – aiding move on after two years in the ‘incubator’.

Entry and Exit Strategy Two years tenure. Stepped licence fees prepare start-ups for commercial rates. One month’s notice by tenants to vacate premises.

Facilities included in the rent Young entrepreneurs also have onsite-shared facilities including a conference hall, reception and administration office. Free Services In addition to this free specialised business counselling services are tailored to the individual requirements of young people at both the pre-start up and post start-up stages. Interlinked with this are free business skills workshops and training courses. All counselling, workshops and training is provided by WYEC staff on site. Future 85 - 90% of WYEC’s businesses continue to trade after 2 years. WYEC is currently working with a number of agencies nationally and in mainland Europe looking to replicate the model taking into account the needs appropriate to the region. For example in the rural areas of Eger in Hungary and the Highlands and Islands of Scotland ‘hub and spoke’ support models are being developed. The hub provides the central core of expertise and activity, which in turn supports satellite incubator activities enabling clusters of start-up enterprises situated in other localities to be assisted.

11

Genesis Centre for Social Enterprise, Alfreton The Genesis Centre for Social Enterprise is owned by His Upper Room Trust (HURT). Its businesses and Family Entertainment Centre area are operated by its subsidiary company Genesis Social Enterprise. It provides workspace (office and workshop units) for up to 30 start-up firms with business support and advice. The Family Entertainment Centre, catering business and conferencing facilities are on site. The Centre aims to initiate and facilitate CSEs either as subsidiaries or to be independent. Funding Initial funding was received from East Midlands Development Agency and grant

trusts (£678K for capital costs). A further £400K of loan funds including HSBC, CDFI initiative and EMCLF.

The income is from the family entertainment centre, environmental and catering contracts. Rental income is also received from managed office space and workshops.

Entry and Exit policy The initial tenure is for 3 years. Tenants have to give between 1 and 3 months notice to vacate the premises.

Future The Enterprise Centre is in its infancy and there are tensions between commercial reality (the need for rental income) and the ideal of incubating CSEs at the Centre. Issues regarding graduation policy and the lifecycle of the centre will be researched as the centre develops. Development of another site could be a solution. Conclusion The incubators are very different and the difficulty appears to be sustaining the incubation facility just for start-ups. This was successfully overcome by WYEC in the development of their mainstream business that both underpins the funding of WYEC and provides a successful graduation path for those coming out of the incubator. The reality of unoccupied workspace is the loss of income needed to sustain the programmes. Entry criteria and management of the incubator will need to be tailored to the requirements of the CSEs. CAN’s research found that good relationships are their key to success. Careful selection of potential clients and ensuring shared values were maintained was found to be important. The open plan environment may not be the Mezzanine’s defining character but it does seem to attract organisations that are willing to share and be open with each other. The CAN Centre also develops good relationships between the organisations, acting quickly and sensitively to diffuse potential problems within the Mezzanine. The research indicates that to be successful an incubator needs to: Be seen as a dynamic, effective and sustainable business itself Must have on-site management Ensure that activities and values complement and integrate within the community Ensure relevant agencies make it part of the local economic development policy Tailor its resources, advice and support to the specific development needs of

those using the facility Develop an effective management system that also collects information to

evaluate its effectiveness and ensure that the needs of the clients are being met.

12

HOW WILL AN INCUBATOR HELP SOCIAL ENTERPRISE IN CAMBRIDGE AND EAST ANGLIA? The Government’s Strategic Vision

‘is to create a dynamic and sustainable social enterprise sector, as part of an inclusive and growing economy’

(Social Enterprise … a Strategy for Success, dti July 2002) Many social enterprises encounter the same difficulties as mainstream business although to date social firms and co-operatives have a higher survival rate. One in five Co-operatives fail within five years as opposed to three in five mainstream businesses failing within the same period (ICOM video). The two main problems encountered by those in social enterprise are funding issues and the misunderstanding of the sector. An incubator or development centre for social enterprise and co-operatives will play an important role in the region in helping to deliver on many of the Government’s key issues raised in the Social Enterprise Unit’s report.

‘many social enterprises are undercapitalised and struggle to access external finance, particularly when starting up’

(Social Enterprise … a Strategy for Success, dti July 2002) An incubator will be an opportunity to offer a supportive environment in which to establish new social enterprises. The inclusion of favourable rent and lease levels will generate more support and security, creating wealth that will ensure greater sustainability for CSEs and a broader provision for their client groups. Through being able to access more support through managed premises, CSEs will benefit through not having to deal directly with commercial landlords who will likely not understand their specific needs – being in an incubator will free up CSEs time to focus on the needs of the business and the groups they are seeking to support as they won’t be haggling with landlords over rent levels or service contracts. Provision of appropriate business support and financial advice would facilitate CSEs to move away from grant dependency, encourage them to look at other methods of sustainability or to work with other members on site in joint funding bids. The report also identifies the need to develop CSE networks

‘Networks of social enterprises and social entrepreneurs, ensure that the social enterprise voice is heard and can play

an important role in the sharing of best practice’. An incubator where CSEs converge will automatically generate such networks and facilitate a continuous exchange of best practice. This will drive up the competitiveness of social enterprise within mainstream business, creating spin offs and further productivity and employment.

‘Lack of visibility and misunderstanding of the sector also needs to be addressed – we need to engage in active promotion, to give a higher profile to

the sector and help spread understanding’ (Social Enterprise … a Strategy for Success, dti July 2002)

13

EEDA stated through their 2010 strategy that they want to pursue the themes of ‘creativity, innovation and enterprise, leading-edge infrastructure’. An incubator for CSEs would develop infrastructure and encourage entrepreneurship by providing a tangible base and resource centre to build upon their skills helping to ‘attract new businesses and help existing businesses grow’. It will promote the experience of new ways of working throughout the region leading by example providing a central core of expertise supporting and encouraging those most vulnerable to develop into more robust social enterprise clusters and through replication. In practical terms, the real economic impact of an incubator for social enterprise will be the same as for mainstream business. Co-operatives and Social Enterprises will benefit from: A stable peer-group network Affordable premises The shared benefits of greater economies of scale Opportunities to inter-trade Partnership working within its own sector and with mainstream business Funding advice and the opportunity to make joint funding bids Joint bids for public procurement contracts Explore ways of moving from grant dependency Ability to take risks in a secure environment Provision of administration support with shared office equipment Provision of business advice tailored to individual organisations needs Access to shared technology

The strength and success of a development centre will rely on the management of the site, the seen professionalism and effectiveness of the development and the provision of specific facilities required by those who use it. Not all social enterprises will be able to take up residence in one particular location however, the facilities could be made available to all in the social sector to enable growth, provide relevant support and encourage new social entrepreneurs to expand their ideas in a relatively secure environment.

14

RESULTS OF QUESTIONNAIRE A questionnaire was sent to 28 known Co-operative and Social Enterprises (CSEs) in Cambridge and its outlying areas. These were identified through the Guild’s recent mapping and Cambridge CDA’s ongoing mapping of this sector, in the area it serves. Ten CSEs were targeted for an in-depth study on the basis that they were diversifying their operations, start-up businesses or needed new premises. The remaining CSEs were sent an accompanying letter explaining the incubator vision and asked to complete the questionnaire (see Appendix A). For a full list of CSEs questioned please see Appendix B. Housing Co-ops were not included as the original funding bid specified that office and light industry were the managed workspaces to consider. Agricultural based CSEs were not targeted, as their business would need to be based near to or on a farm. 71% of targeted CSEs completed the questionnaire. 25% of those were classed as emerging social enterprises whilst the remaining 75% have been in operation for two years or more. The trading activities of these CSEs were diverse and ranged from office-based firms to manufacture, retail and art based activities. Main issues faced at Start-up 85% of CSEs who completed the questionnaire stated funding as a major problem at start up. Many used their own capital to set up the business, whilst others used loans from Industrial Common Ownership Finance (ICOF) as they provide loans exclusively for CSEs. Many organisations felt that mainstream funders did not really understand their needs and the fact that they were operating a non-profit making business. Fundraising or looking for grants was thought time consuming and most of the time quite ineffectual. This led to despondency within the sector and reluctance to keep applying to potential funders. Many CSEs were successful in creating surpluses. However, there are many that depend heavily on day-to-day finance and grant funding. 60% of the CSEs stated that access to affordable, appropriate premises had been a major problem in setting up their businesses. The spiralling costs of premises in Cambridge had proved a major problem with the new start-up CSEs. This trend may also be a major concern for mainstream Small and Medium-sized Enterprises (SMEs) in the present economic climate. 30% of the CSEs said they would have welcomed business advice relevant to their businesses structure. Available advice had not always been specific to their needs. Other issues raised were legal advice on the issues of renting and agreeing the use of premises. Lack of access to shared marketing tools also caused problems. The Need for a low cost start-up property development for CSEs CSEs agreed unanimously that there was a need for an incubator-type development, for many reasons. Provision of low cost premises and access to funding advice were the most important feature however those questioned were keen to see the profile of the sector raised giving it equanimity with its profit making counterparts and also to show how useful and successful the sector is. Although CSEs targeted in this research had totally differing trading activities and many were serving specific communities, such as Barnwell Community Café, 70% agreed that Cambridge would

15

be a good place to set up a ‘flagship incubator’ for the sector. Reasons included strong support for CSEs in the area and that Cambridge is very visible to other parts of UK with the success of the Cambridge Phenomenon. Even though many did not want to take up residence in the development they were interested in the advice and support network of a ‘virtual’ incubator and felt that this could only be of benefit to all in the sector. Issues to take on board in the location of the incubator included: accessibility, many thought the outskirts of Cambridge would be easier to get to for their customers, trainees and employees. Some suggested near to Cambridge Regional College as many of their client group were supported and trained with CRC. Some CSEs thought that the incubator would work within the city but not in rural areas, although it could provide support to clusters of CSEs in these areas. One CSE felt that Ely should be the city as it was central to the region and accommodation cheaper. Benefits of a start-up firm property development Most CSEs felt that a specific property development for the sector would be cost effective, especially with the provision of low cost premises, shared admin facilities and with the benefit of a shared conference and training rooms. It was felt that working in close proximity with other like-minded businesses would provide peer group support and make the sector robust, not scattered and vulnerable, offering encouragement to other social enterprises and providing further employment and training opportunities. Training, funding and business advice appropriate to the sector would also be beneficial. Collectively this would enhance the sector and make it more visible and competitive with mainstream businesses. It was felt that the development should be managed on-site and that the provision of payroll facilities would be a practical and invaluable service. Shared transport facilities, for example a shared minibus, were thought to be a necessary service especially for those CSEs whose trainees and employees are financially, medically or physically disadvantaged. Possible problems that could be encountered Some CSEs felt that their autonomy could be threatened unless the development was independently managed. It was also felt that ineffective management could lead to reduction in efficiency if too much time was spent on sorting out ‘sharing’ problems. These were perceived as being territorial issues such as parking and waste disposal. Accessibility to individual CSEs client groups was also seen as a possible problem depending on where the development was situated. Some questioned thought that there should be a selection criteria for such a diverse sector as an unstructured mixture could cause problems, such as duplication of services or problems applying for planning permission. Facilitating units for businesses such as hairdresser or catering organisations was seen as not cost-effective especially if there was a ‘graduation’ policy. This would have to be pointed out to prospective tenants. It was felt that some of these areas could be overcome if there was an effective selection criteria and the visibility of different groups of the sector were kept separate. Perhaps separate office and industrial unit areas. Many expressed the need to present a collective, dynamic image and that the management and presentation of the development should reflect this. Many were in agreement that the building/s should look prestigious and well managed to present to the ‘real’ world the effectiveness of the social sector. Some were concerned that a complex exclusively for CSEs could promote exclusiveness and the reluctance to work with mainstream business.

16

Agencies already used by CSEs It has already been stressed that CSEs feel that their main start-up and second stage issues revolve around premises, business advice and funding issues. Many do use agencies in the area. CCDA is seen as one of the most effective providers of information and signposting to appropriate advice and help with 65% of CSEs using the CCDA on a regular basis. Other agencies used were CCVS, CEA and Business Link (20% use each). It was felt that mainstream business advice given was not always appropriate to individual organisations and that it could be presented in a more understandable and relevant way to CSEs. CSEs understood that the diversity of their sector does lead to misunderstanding and felt that an incubator would highlight their specific needs and also give them a better understanding of their own sector. Many expressed the desire to operate an efficient, effective and sustainable business even though their primary objectives were in the main different to mainstream businesses. The research highlighted the number of agencies used by CSEs in the area – 24 agencies were mentioned (Appendix C). Many partnerships have been formed and this relates to the individual CSEs training objectives, care provision and trade. Type of property An overwhelming response was that the development should be prestigious and to be shown to be an effective and professional business. 25% of CSEs felt an incubator with mixed premises (office and light industry) would be the best solution to cater with the diversity of the sector and to fulfil their particular needs. 25% indicated that light industrial would satisfy their requirements and 20% indicated that they would prefer retail outlets (however these were not looking to move into such a centre in the near future). Wish List Many of the benefits highlighted in the questionnaire so far were seen as encompassing most of this sectors visions. Other requirements included, a marketing team, payroll, financial advice (profit and loss), community café, aesthetics (views over Cambridge that mainstream businesses would die for), quality business advice, ecological aspect taken into consideration in the design of the development, sprung floor and rigging (for art based organisations), shop fronts to display services or products, easy access and communal transport. Good transport infrastructure enabling disadvantaged and disabled trainees and employees easy access to the city and workplace Three factors for operating a successful enterprise CSEs were asked to reflect on what they though were the three successful factors to sustain growth of a successful social enterprise. 55% pinpointed persistence and commitment as the top factor, 35% a sustainable funding stream, 20% sound Business Plan and 20% understanding the market and having a solid client base. CSEs interested in renting space if a development was made available now Based on the enterprises polled during this research, seven organisations would be interested in renting premises if this initiative was developed in Cambridge, two possibly in the future, three would be interested in the future if in another part of the region. Summary There appears to be an overwhelming need for some type of development from the CSEs perspective. This could be an incubator or managed workspace with the

17

provision of shared facilities, business, legal and funding advice. More established or diversifying CSEs still had the problem of finding suitable premises to take their businesses forward. Start-ups also had this initial cost and with funding issues felt that they would benefit from a secure centre offering the facilities mentioned. All CSEs who replied felt that such a development could only benefit the sector. As to the role of the incubator, many felt that there were many issues to take into account in deciding if the development was made available exclusively for start-up firms. It was felt that the experience of second stage social enterprises would encourage peer group support, provide welcome experience and present opportunities for spin-off businesses, which would be unlikely to develop with only start-up enterprises. Also consideration had to be given to the commercial reality of rental income sustaining the incubator. Interaction with like-minded enterprises would encourage networking and add to the wealth of support. The provision of business, legal and funding advice tailored to the sector was felt to be essential with perhaps the CCDA managing the centre, working with other agencies such as Business Link and educational establishments in the area. The recent research on training and development opportunities undertaken by CCDA has identified that CSEs are prevented from engaging more fully with training because of the lack of knowledge as to the provision available. This appears to run concurrent with the sector’s knowledge of outside agencies available for business, funding and legal support – although it is agreed that the CCDA has at different levels over the years been the main organisation that has supported and offered most of the appropriate advice. This is not to say that other agencies have not been willing to offer support, but there does appear to be disparity in the levels of support due to a lack of understanding of the sector. An incubator would encourage communication of needs, understanding and practicalities of this sector in order to better support and help them engage with networks to remain better aware of support and advice opportunities. Conclusion Co-operatives and Social Enterprises agree unanimously that an incubator type of development would be beneficial and that a ‘flagship’ would probably be best situated in Cambridge. If a potential site and costs were identified there will be a need to acquire concrete evidence from social enterprises as to their intent to take up space in an incubator and how much they would be willing to pay.

18

WHY CAMBRIDGE? Cambridge has become a world centre for generating and growing successful businesses mainly in the scientific/hi-tech fields but is now a deeply polarised city. Congestion and spiralling property prices have excluded local communities to the effect that two wards within this perceived economically successful city, Abby and King’s Hedges, are eligible for special help, as they are amongst the 2000 worst wards in England. Concern about the implications of the divide was raised at the Greater Cambridge Partnership annual conference in 2002. With the Government’s current resolve to encourage, grow and sustain social enterprises nationally, an incubator or development centre within Cambridge provides an ideal opportunity to widen the benefits of enterprise to all the city’s citizens irrespective of background. There are many successful social enterprise clusters in the city and this would give an ideal foundation for a successful flagship that can be replicated in the region. Building on existing relationships with educational establishments, commercial, statutory, health, voluntary, community and social economy and a commitment to working together would further strengthen and help to ensure success of such a venture. The support of Cambridge Co-operative Development Agency, a pro-active unit that encourages and supports new social enterprises and the active and strong base of the Cambridge Council of Voluntary Services ensures that a physical and cultural supporting infrastructure is already set in place within the City. The recent report by CCDA into training needs of the social enterprise sector highlighted the differences between the priorities at a regional and local level. Namely, at regional level, the training needs are identified as being business management and understanding the culture of social enterprise (The Guild) whereby in local areas they were seen to be in-line with those of mainstream businesses: business finance, management and health and safety issues. The report concluded that the research found that “wherever Co-operative Support Organisations (CSOs) exist, clusters of co-operatives, social firms and social enterprises will develop around them and begin to organically network with each other, sharing experience and culture’ (Training issues facing social enterprises in Cambridgeshire, LSC) Regionally the disparity in the support given to social enterprise means there is a greater demand to understand the culture and values of this sector. A CSE incubator in Cambridge would act as a flagship for the region and draw attention leading to better understanding by other mainstream businesses, networks and support organisations. It would also provide an effective model for replication regionally or provide a central core of expertise supporting and encouraging those most vulnerable to develop into more robust social enterprise clusters. Cambridge also has a wealth of educational establishments that are leading the way in encouraging understanding of the social economy. Judge Institute of Management University of Cambridge is currently piloting a Master of Studies in Community Enterprise degree course, which includes the study of clusters and business incubation, for social entrepreneurs who manage enterprises throughout the United Kingdom. Anglia Polytechnic University is also currently piloting the ESF funded WISE accredited course on Understanding Social Enterprise. This will undoubtedly create a further wealth of social entrepreneurs in the area that have a better

19

understanding of and can convey the achievement and advantages of the social economy. Many of the Colleges have experience and involvement in the development and economic success of Cambridge such as Trinity College and St John’s playing a key role in the development of the Science Park and St John’s Innovation Centre. Added to the support and mentoring of established organisations, Business Link has recently provided a new post in support of Social Enterprise in the county. The Social Enterprise Adviser, will map and support social enterprises delivering advice, business support and training. It will also look at business incubation regionally for this sector. Although a higher percentage of CSEs in the region operate outside of Cambridge City and its outskirts, those that do operate within the City have created a robust and solid foundation within the area and are supported by local authorities and colleges. Although other areas in the region would also benefit from an incubator, the high profile of Cambridge would give high visibility to this initiative providing the central core of expertise and activity which in turn would support satellite incubator activities in the region enabling clusters of start-up enterprises situated in other localities to be assisted. This would be even more effective if set up in the disadvantaged wards of Cambridge. Other initiatives in the Region There are a number of similar activities taking place in Cambridge and across the region and a few have been identified below as examples of good practice. They are at different stages of development and it is important to learn from the experience in the county and regionally to prevent overlap and to improve the sustainability of the initiatives instead of competing with them. Examples of other initiatives in Cambridge and in the region include: Zion Baptist Church Suffolk Connect FACET

Zion Baptist Church, Cambridge Zion Baptist Church is situated in the centre of Cambridge. The refurbishment of the crypt 6 years ago enabled the set up of Jimmy’s Night Shelter, a social enterprise with charitable status providing 31 beds, food and resting place for Cambridge’s homeless people. Through Rev A Barker’s entrepreneurship, motivated by his faith and the need to finance other projects, Zion Baptist Church currently houses five other community enterprises including Aspire, a social enterprise that provides work for homeless and ex-homeless people, the Bike Project and a Resource Centre for Home Educated children. Dial-A-Ride, another successful enterprise, has recently moved due to the expansion of its operation. All projects have evolved from clients needs, many clients are part of projects within Zion. There is one administrator to oversee the lettings. Funding The building belongs to Zion Baptist Church. Income received from statutory grants, trust funding, donations and rent is needed to maintain and develop the services. Individual projects are funded by their own means.

20

Exit and Entrance Strategy There is no strategy for exit. If the space is available and the organisation has a social theme then organisations can rent the space. They tend to be spin offs from those already housed in the church or developed to clients needs. Zion is not formally set up and has grown organically. This implies that although infrastructure and a built environment may provide the basis of a sustainable and vibrant incubator, long term success relies on solid partnerships and perhaps in the social sector there is more awareness that community, client group and worker groups needs are as important as the business needs. Facilities included in the rent Subsidised rent, heating and lighting, kitchen facilities and meeting rooms. Help is given with funding issues including filling in application form. Rent varies according to the organisations income. Outcomes Spin off organisations – Aspire social enterprise Partnerships – Cambridge Foodbank, on separate site, with Emmaus Cambridge Suffolk Connect A feasibility study commissioned by EEDA is currently researching the redevelopment of Bury St Edmunds Railway Buildings. Suffolk Connect is the lead partner. The vision is to redevelop the site providing a cluster of social enterprise initiatives with an emphasis on ideas, innovation and business start ups, in particular waste and recycling initiatives. The centre intends to provide an Internet café, serviced office spaces, serviced starter units, training and conference facilities. Fenland Area Community Enterprise Trust (FACET) FACET is based in March, Cambs and was set up to create new social enterprises for its local geographic community needs. Although this study focuses on a city development, FACET is situated and supports rural enterprise and it is important to note that rural models of incubator ‘type’ developments are also seeking to meet the needs of their communities. A central incubator situated in Cambridge although facilitating a different market could extend research, support and advice to satellite developments such as FACET gaining knowledge of the specific needs of rural areas.

21

SUPPORT AND POSSIBLE LINK UPS Views were sought from various local agencies with regard support for an incubator type development for social enterprises and co-operatives. In principle most local bodies were very interested in the idea and would like copies of the completed report. The research also found support from like-minded organisations that expressed an interest to link up ideas if the concept was developed further. LOCAL AUTHORITIES Economic and Development Department – Cambridge City Council Martin Clark, Citylife Ltd (see below) met with Brian Human Head of Community and Economic Development who indicated in respect of their vision of a Community Enterprise Park that they would offer unqualified support in principle and liked the possible link up with a CCDA social enterprise incubator. Small grants may be available for development of the idea, capital or operation costs. They would be able to help in the planning process. Andrew Poulton, Senior Economic Policy Officer commented that the City Council are reviewing their Economic Policy Statement in particular to business support in the City so this initiative could very well fit in with their targeted areas. South Cambridgeshire District Council Cameron Adams, Strategic Development Officer would welcome in principle an opportunity to help endorse the venture. This type of development complements the council's vision to promote employment and training opportunities for all sections of the community across the district. A modest community fund has now been established by the council to help “kick start” new social enterprise schemes. For further information about the community fund and how to apply please contact Cameron Adams on 01223 443135. Cambridgeshire County Council, Simon Smith (Head of Economic Development) In partnership with other authorities the County Council are developing a series of workspace units in the fenland area. At this stage they had not considered any CSE specific incubator development for Cambridge and anticipate that the fenland development will adequately cater for the needs of start-up social enterprises in that area. DEVELOPMENT AGENCIES East of England Development Agency (EEDA) EEDA have expressed an interest in seeing incubator initiatives developed throughout the region as shown in their regional development and corporate plans. Cambridge Co-operative Development Agency CCDA, who is administering this Feasibility Study, is keen to continue to take an active role with such a high profile and prestigious initiative.

22

BUSINESS SUPPORT AGENCIES Business Link David Nicholls, Business Development Manager, commented that in view of the new emphasis of Business Link with social enterprise that they would be keen to support a ‘flagship-incubator’ wherever it was located in the county. They would consider placing a Business Link Officer in situ probably the newly appointed Social Enterprise Adviser and would recommend that advice and support be made available within the incubator from enterprise agency advisors such as the CCDA. Business Link are currently looking to further this research, looking at developments in other parts of the region. EDUCATION AND TRAINING Anglia Polytechnic University Anglia Polytechnic University is currently piloting the ESF funded WISE accredited course on Understanding Social Enterprise that provides practical business advice for and promotes the understanding of Social Enterprise. Lewis Herbert, Manager of the Wastewise part of this course, commented that a link up may be possible as he is currently looking to set up Re-use centres in the region, encouraging social enterprises to look at waste and recycling initiatives. OTHER ORGANISATIONS Eastern Touring Agency ETA has recently received funding from the Arts Council to look at the demand for an Arts based incubator in the region. They have recently visited San Jose to look at models in America. Interest was shown by John Wroe, Managing Director and Pauline Catlin-Reid, Diversity Programme Manager in this current study. The possibility of link up was discussed and the ETA position is that if a development of a social enterprise incubator takes place, ETA would very much like to be part of and be involved in the shaping of it. They welcomed the potential to work in a social enterprise cluster as in their experience working with and alongside diverse cultures has been one of the key successes of work in their area creating ‘synergy’, spin-offs and a greater understanding of the needs and solutions within their market. The development of relationships, networking, inter-trading of ideas and goods, mixing of cultures could only be of benefit to participants within an incubator dedicated to community regeneration and economic development. Citylife Ltd Martin Clark of Citylife Ltd, a charitable industrial and provident society based in Cambridge, has been studying the possibility of a Community Enterprise or Innovation Park. This has involved looking at a provision of high quality but affordable business start-up accommodation with on-site support services for a more disadvantaged client group than is currently served by workspace in the city, such as Prince’s Trust clients, (disadvantaged young people aged 18-30 years) and older groups. Citylife has expressed an interest in linking up of ideas and would welcome discussions and input if the incubator idea is moved forward. Conclusion There is a great deal of interest in the idea of a community/social enterprise incubator within the City. Incubator type developments providing support for community enterprise, arts based firms, etc are being looked at as a way to encourage growth and regeneration within disadvantaged communities creating a ‘dynamic and sustainable social enterprise sector, as part of an inclusive and growing economy’ (Social Enterprise … a Strategy for Success dti July 2002).

23

SITES Land and property prices in the area are currently at an all time high although the market is becoming unsettled at the moment (Januarys Estate Agents, 2003). Renting premises is a major issue for all new (and established) small businesses due to rising costs and many small firms are having problems sustaining their businesses. Research has looked into the current availability, future development and possible costs of sites within Cambridge and its’ outskirts. Issues raised by the questionnaire have been taken into consideration when looking for a possible site for an incubator development. These include: Low cost land or premises, free hold or long lease Suitable site to house 10 – 15 units, office and light industrial. This was based

on current needs (7 properties needed with provision for meeting and admin office support) with a few extra spaces for new or other types of businesses

Good transport infrastructure. Access to site by client group and consumers Near to learning establishments used by client group Near to Science Park for credibility and visibility

Contact was made by telephone, email and letter with; local estate agents; developers; local authority planning offices; economic and development officers; college property managers and other connected agencies to look at current (and future) development planned in the environs of Cambridge to see what possible sites are available now, that may be suitable for a CSE ‘incubator’. Results At this present time Cambridge City Council only has individual units for leasehold available. Listing of their property can be found on their website, details see Bibliography and these are available at market rates. The current market rates for leaseholds in the centre of the city are; £5 - £8 per sq ft for light industrial warehouse and £17 - £25 for office space. On the outskirts it’s about £5 - £6.50 for industrial warehouse space and £9 - £20 for office space, dependent on facilities and the state of the building (DJ Wisbey, Januarys, 2003). Research and Development Centres range from £20 – £22.50 per sq ft (Slough Estates Plc 2003). Stephen Conrad, Sales and Acquisition Manager (Property Estate, County Council), explained that all local government properties needed to be sold at market rates for best value and that sites with properties in declining use currently available have a market value of £1.5M per acre. The two models below look at the possible costs of new build or refurbishment of existing buildings. These estimations are based on current market price and information gathered from Bidwells Property Consultants in Cambridge. A model incubator, based on the requirements of CSEs, would be 10 light industrial units (approx 1000 sq ft each), 4 office space (350 sq ft each), 1 conference room (350 sq ft). This gives an estimate for the land needed as being up to ¾ acre, working on the premise that the whole site will include car parking and space to move around (actuals 40% of whole area needed). Industrial land available for development is scarce in Cambridge however these models are overviews to give an idea of potential cost. Figures calculated are ‘ball park’ figures of whole cost.

24

Model 1: Purchase of Land and New build Purchase of land ¾ acre @ £1.5M per acre £1,125,000New office bespoke approx £100 per sq ft £175,000Light Industrial Unit approx £50 per sq ft £500,000Car Park TOTAL £1,790,000 Model 2: Leasehold and refurbishment of existing building – based on current building in Cambridge 20 year lease 17, 081 sq ft x £5.50 £2,254,920Refurbishment approx £50 - 100 per sq ft £1,000,000Car Park TOTAL £3,254,920 These figures are maximum costings. Industrial land is scarce so the ‘real’ cost of land is based on the ‘incubator’ being set up within a residential development. Refurbishment on existing buildings is also estimated at maximum cost however actuals will be dependent upon the building and the specifications of refurbishment and therefore could be considerably less than the above estimate. Although the cost of the leasehold is based on 20 years at current market price, a more favourable tenure could be negotiated and in the present unsettled clime there could be opportunities to obtain buildings at a more affordable price. Obviously issues to take into consideration include planning and integrating businesses into existing premises. There are other cost considerations to be taken into account including rates, although the organisation leading the development may be entitled to 80% rate relief depending on status. Planning Permission Another point to bear in mind is planning application for new build or change of use of existing premises. The contact with City Council indicated that the presumption is that most land waiting to be developed will be used for residential build. General planning policy is to restrict office development and to protect industrial land as there is too much of the former and not enough of the latter, resulting in an imbalance in the labour market. Consequently, because the plan for a social enterprise ‘incubator’ involves office developments, a special case will have to be made if it is to be allowed. New Developments New developments may be a possibility but will still hold the market value. Gallagher Estates has recently distributed plans for the Arbury Camp development site in Kings Hedges. There is provision for mixed commercial development areas. One intention is to encourage local young entrepreneurs to remain in the area. Contact has been established with Gallagher Estates who commented that the planning application is with South Cambs District Council at present. This site could offer many benefits: Close to A14 Extension of Kings Hedges and Arbury districts that already house stable,

successful CSEs including Daily Bread and Kings Hedges Community Centre Near to Cambridge Regional College Plans to be serviced by the Rapid Transport System, a single integrated public

transport scheme linking up St Ives, Huntingdon and Cambridge.

25

Local Estate Agents regularly send information of available sites. Many have included warehouse structures outside of Cambridge including Ely and Fordham. Prices are not so high in these areas but further research would be needed to look at setting up a ‘flagship’ incubator further out of Cambridge. Conclusion Various possibilities have been researched including buildings, brown sites and developed land in Cambridge. Unfortunately no suitable site has been found at this time although there are possibilities that will need to be followed up. If an incubator development is to be taken to the next stage the requirements will need to be more specific. Space in Cambridge is hard to find and beyond the scope of this overview. Further research will need to look at: Buildings in declining use that are owned by a sympathetic owner or local

authority who would like to sell it at a reduced rate. Possible candidates could be churches, redundant schools and community centres. An important issue to understand is that although the ‘incubator’ could bring employment to the area, provide community driven commodities and sustainable regeneration, the community must be the focus of the development. Although an area or building use may be perceived to be in decline, it still may provide a vital use for a small part of the community that may not see how a new development could benefit them if it replaces a function central to their current needs.

Future developments in the area include Arbury Camp and Newmarket Road. Use of brown field sites Identifying a benevolent landowner or a charitable trust Negotiating favourable long-term leaseholds on existing buildings Look at possible sites further outside the City Planning implications for identified sites

The cost of a new build on freehold land is estimated in excess of £1.5M and for a 20-year lease hold with a complete refurbishment of premises, the cost could be in excess of £3M.

26

FUNDING One of the critical factors for success in respect of the incubator development is the affordability and sustainability of the project. At this initial stage of research actual figures are not required. However, working on the assumption that the incubator would be a new build and that the cost of the scheme would reflect market price in Cambridge at this time, a cost of £1.5M would be a realistic estimate of capital needed to pay for the land, building and equipment. This would of course decrease if benevolent landowners were found or the economic climate changed and so on. Possible Sources of Funding SBS Business Incubation Fund – available for loans up to 50% of capital costs of

incubator. This fund can be used for new incubation projects, workspace refurbishment into incubators and infrastructure initiatives such as broadband and other technical services. This loan fund is only available for non-profit making and charitable organisations, local authorities and Higher Education Institutions.

European Union Social Fund grants – administered through GO-EAST. Adventure Capital - bursaries administered through the DTA for start-up SEs Regional Development Agencies providing access to Regional Innovation Funds

of £50M, nationally, to support business clusters and incubators. Phoenix Development Fund – promoting innovative ways of supporting

enterprise in deprived areas SSEER – Supporting the Social Economy in the East of England Region –

supported by EEDA led by Business Link Herts. Industrial Common Ownership Finance (ICOF) – ICOF are very interested in the

incubator concept and in principle could pull in a £300,000 loan for the project. Citylife Ltd raises capital and revenue to achieve social goals through the sale of

bonds. They could feasibly raise upwards of £2M which would mean £1.5-1.6M loan for capital (purchase and new build of housing and workspace) and £400-500K for revenue to ensure the development achieves its goals.

Banks Local Authority and Trust grants Rental income Other initiatives within complex, training, community café, hiring of rooms etc

Conclusion There are a many options for raising capital and applying to grant funding bodies. Once further research ascertains actual costs then potential funders could be approached with clearer objectives and plans.

27

MANAGEMENT OF INCUBATOR Research has shown that local CSEs have not expressed any preference for the management structure of the incubator. Profiled case studies have shown that in this research there are no standard models for management that are universally used. There are, however, some common themes explored later in this section. At this stage, taking into consideration the results of the questionnaire, it would seem that the most appropriate model for an incubator for CSEs is a mixed development site. Office space would be interspersed with light industrial units, varying from 350 – 1,000 sq ft. The incubator could offer services to pre-start-up, start-up and more mature businesses. As stated by NBIA a critical factor of a successful incubator is on-site management, although recent research by UKBI Ltd showed that only 69% of incubators in UK actually have on-site management. Taking into consideration the experience of incubators in the case studies, on-site management provides effective operation of the incubator and if this is to be a ‘flagship’ for the region the incubator will have to be seen as an effective and efficient business itself. The incubator could be managed by: An appointed agency or paid staff The occupants Or a mix of both. Day to day operations staff responsible to the tenants’ board,

which would set the long-term strategy and aims Cambridge CDA recommend the third option as this would be most familiar with the CSEs, as most of them have a similar structure. Possible key players in the management of the incubator On-site Manager to; encourage 100% capacity of incubator; maintain building;

employ staff; oversee operation of the incubator; monitor entry and exit policy Receptionist and administrative staff to deal with; visitors, direct enquiries and

manage conference rooms for meetings, training events and bookings. They would also manage any communal office equipment and operate a ‘back office’ facility for licensees

Cleaner employed by site for office and communal spaces Facilities Facilities on offer need to be tailored to occupants. The physical or learning

difficulties of the employees and trainees needs to be catered for. Structural design would have to take the current and future possible needs into account.

Good transport infrastructure will be needed to ensure accessibility for those with special needs. Many organisations suggest the incubator could provide a communal vehicle for use by occupants perhaps to hire out at agreed times to cover costs.

A Community Café could provide an informal place for occupants and visitors to interact, sharing ideas on good practice. It could be a focal point to encourage networking especially for those in the light industrial units.

28

Services Provision of business services – this could be provided by on-site managers of

the operation if suitably experienced i.e. CCDA, or provided by service providers renting space such as Business Link. The important aspect is that the information, advice and training are relevant to the occupants.

Financial advice is also seen by the sector as a very important facility as conventional funders see social enterprise as high-risk clients. Again this could be administered from suitably experienced managers of the incubator or information sessions arranged on site with relevant funders participating when needed. Again it may be that a Development Agency would be the prime contender to run the site, as it would already have these skills within its infrastructure.

Policy Entry criteria - The CAN Centre research has shown that relationships are a key

factor in the success of their model. Consideration must be given to the type of social enterprise accepted into the incubator to avoid duplication of trades and to look at the mix of organisations, how they will complement each other and do they share the same values.

Exit policy - A business incubator in its truest form would have a graduation policy. The role of the incubator would have to be decided from the outset although it may have to be flexible in its approach to the operation taking into consideration loss of income from unoccupied space. It would appear that many business incubators operate a graduation policy with 49% based on length of tenure (UKBI 2002). In the consideration of a graduation policy, the infrastructure must be set up to ensure successful graduation into commercial workspace such as stepping rent to prepare for market prices, business development support, etc. If there is no graduation policy, how will the incubator cope with businesses that do not want to leave the centre even if they have become successful? Current research indicates that true forms of incubators have organically grown and client needs have provided solutions such as WYEC’s acquisition of the Trident Centre. The CAN Centre has just invested in more space. The Genesis Centre development will research and consider the ‘bottle neck’ of enterprises within the Centre as the 3 year tenures come up for approval.

Health and Safety A collective health and safety policy for the whole complex Preparation for the real world If the incubator is to provide subsidised workspace and other complementary services how will this encourage and develop sustainable social firms offering real work enabling them to compete in the private and social sector, will subsidised workspace offer ‘real’ experience? Models have shown that where reduced rents are applicable, stepped rents and a good referral network outside of the incubator has ensured successful placement of graduated businesses. Funding of infrastructure of incubator essential Revenue funding will need to be researched thoroughly if the incubator is to be seen as professional and effective. Charges may need to be raised for business and financial advice. Business support plus other services could be charged directly to the tenants incorporated into their licence fees. If the incubator aims to promote sustainability then it needs to be seen as pro-active and innovative in this area. The Genesis Centre provides leisure and catering facilities, WYEC has rental income from the Trident Centre and SJIC contracts out consultative work

29

Services offered outside the incubator The diversity in the sector raised some concerns. Would an incubator be able to accommodate all? Obviously this would not be achievable. However an incubator would be able to offer its services to those not concurrently renting space in the complex. Conclusion Whatever the model, the incubator will not serve all in the community but ongoing monitoring of social enterprises’ will ensure that an incubator will be flexible and meet most of the needs of the community it serves.

30

CRITICAL FACTORS for development of physical Incubator FACTOR ISSUE COMMENT Demand

CSEs

Established need through research and

interviews with CSEs and interested groups

Government Strategy

Govt has identified needs for initiatives like this;

high visibility, mainstreaming and support

Land

Planning Permission

Difficult if land is earmarked for housing, as

most is at present Possibility of new developments that have

already applied for planning permission for mixed use i.e. Arbury Camp

Reuse of building will need planning, dependent on previous use

Cost Current land cost £1.5M per acre

Cost at market price, unless benefactor found

Availability Need to continually track development in market During research no ideal sites but possibilities,

see Sites section

Funding

Initial Purchase

CAPITAL Estimated cost of 10 – 15 unit incubator

including land, building and equipment £1.5M new build, £3M lease and refurbishment

REVENUE Management and maintenance of complex

including fulltime manager and associated costs £50,000 pa

Available funding Plenty of funding pots available in business incubation and promotion and growth of social enterprise sector, regionally and nationally. Funds available if good idea and proof of need.

Revenue Rental Income Innovative ideas to create income i.e. training

for other organisations, community café, hiring conference facilities

Other grants

31

CRITICAL FACTORS for CSEs within the Incubator

FACTOR

ISSUE

COMMENT

Partnerships

Client Referral

Development of incubator to attract top class entrepreneurs irrespective of field of experience

Research has shown this development crosses many different sectors, CSEs involved with many agencies

High level interest by other bodies i.e. voluntary sector CCVS and COVER

Economic Partnerships Statutory Authorities

Attract Funding Attract and Retention of CSEs

Type of Accommodation

Research has shown hybrid building containing warehouse and office facilities

Prestigious building for high visibility and to bring credibility to the sector

Good transport infrastructure Proximity to centres of learning

Range of

Services On site business and funding support i.e.

CCDA, Business Link Training and conferencing facilities Access to shared office equipment Administrative support

Positive Benefits

CSE success within development

Entry policy Type of enterprise Values of enterprise Direct competition?

CSE success on

graduation from incubator

Lease Policy Easy entrance and exit lease agreement Stepped rent for preparation for commercial

rates Exit Policy Build in flexibility. Will businesses outgrow

development? Prescriptive exit policy on maximum

tenure? Anticipate that need to ‘add on’ as unit

becomes managed workspace

32

CONCLUSION All social enterprises questioned agreed that some type of incubator development would be beneficial in order to promote and give visibility to the social enterprise sector. Most agreed that Cambridge would present an ideal site for a ‘flagship’ development in the region. Although the idea of an incubator in its truest sense was appealing many felt that primary need for their enterprise whether fledgling, diversifying or expanding was access to affordable suitable premises. Therefore further research is needed to establish what form the incubator should take and more importantly what role the development adopt. The present research indicates that the incubator needed now would be a development combining both office and small industrial units. If available today, seven fledgling and diversifying social enterprises would be interested in moving into a dedicated development in Cambridge (CCDA questionnaire, Jan 2003). It would be feasible to look at a development that could house 10 – 15 mixed units providing space for these interested CSEs, a conference room, administration and management office and training areas. Surplus space could be made available to other fledgling community enterprises. The role of the incubator needs to be specific, although flexible, either a centre to nurture existing enterprises through clustering and capacity building or to generate new social enterprise through a genuine incubation patch. Once again initial research indicates a hybrid development catering for businesses at all stages, with part managed workspace and part incubator provision would be the most suitable choice at this stage. As with other hybrids criteria will have to be set in place for the management of such a centre taking into consideration the requirements of the sector, the cost of running the centre and other issues such as the flexibility of the operation and entry criteria. This will include the availability of space to social enterprises and co-operatives exclusively or allowing access to entrepreneurs from disadvantaged communities. The decision may rest with the economics of operating the centre. This research has shown that successful incubator type developments automatically generate networks within their groupings, see case studies. A robust cluster of Co-operatives and Social Enterprises in a prestigious development based in Cambridge will ensure that their voice is heard outside the sector, whilst facilitating a continuous exchange of best practice within. Policy makers, financial bodies and the general public would become much more aware of the sector. This will enable support and replication of the model in other areas of the region adjusting the set-up and operation of such a development to meet localised needs. As NBIA stated, effective on-site management is essential to the success of an incubator. Cambridge is central in the region for supporting groups within social enterprise with CCDA playing a key role. CCDA provides effective all round support to the sector so it may be prudent for the local development agency to manage such a venture if set up in Cambridge as the incubator would provide centralised support and signposting to relevant organisations. The difficulty has been at this stage to find a suitable site. Ongoing research of what is on the market needs to continue if this idea is to be developed further.

33

Working on current market prices the capital funding needed to set up the incubator could range from £1.5M to £3M. A comprehensive study of actual costs and funding streams needs to be researched once a suitable site is located. Capital funding of the centre could be achieved through grants, loans and fundraising initiatives. This would help in the provision of subsidised and stepped rents to start-up tenants. The rental income could pay for day-to-day management, operation and business support and advice for occupants; again a comprehensive look at revenue costings is needed to assess viability of identified sites. There are a variety of funding routes and the role and type of incubator will have an impact on funding streams available. There is a great deal of interest in the idea of a community and social enterprise incubator within the City. The publication of the dti Strategy for Social Enterprise report has heightened the interest in the sector. Incubator type developments are seen as one way of encouraging growth in the sector, aiding visibility and understanding within the entire community. It is seen as a tool to enable new and established social enterprises to participate in the economy on equal footing with mainstream SMEs, encouraging many to look at new ways of increasing their output and sustainability. The development of this sector within an incubator will provide even more necessary services and aid regeneration of communities by offering real employment; training opportunities; effective services and competitively priced products. Access to relevant business support and financial advice would encourage competitiveness within their own sector and with mainstream business. Although this study has looked at an autonomous development exclusively for CSEs, the research has shown that there is potential to link-up with various other agencies to develop a larger centre for multiple beneficiary enterprises.

34

SUMMARY TABLE OF PROPOSED INCUBATOR TYPES (Refurbished or New Build) TYPE

INFRASTRUCTURE FUNDING*

BENEFICIARIES Possible Disadvantages

MANAGEMENT ISSUES**

Mixed 10 –15 units

Need sites near to A14 and bus routes

Near to learning establishments Needs to have scope for

expansion – as more enterprises take up space

CSEs Trainees and employees Mainstream business &

financiers (better understanding of CSEs)

May exclude itself from other incubation initiatives

Exit strategy – high profile development reluctance of CSEs to move on

Exclusively Office space

On bus route or any road link city centre, outlying villages such as Histon

As above except CSEs would be trading as non-manufacturing

Not suitable for all enterprises

CSEs may be perceived as cerebral

Possible entry strategy tensions with the wider social enterprise sector

Exclusively industrial units

Needs good transport infrastructure for deliveries, near to A14

As for mixed units except CSEs would be trading as manufacturing and light industry

Not suitable for all enterprises

Doesn’t give itself the opportunity to be reflective of the sector as a whole

Would need dedicated back office to deliver greater admin support

Less aesthetically pleasing Possible entry strategy tensions

with wider social enterprise sector

Hybrid (mixed tenancy)

Dependent upon type of units (see above)

May bring in specific funding streams not targeted exclusively at social enterprise

As above Disadvantaged would be

entrepreneurs (i.e. Princes Trust clients, ethnic minorities, etc)

Lack of clear identity for incubator

Possible conflicting values between objectives of different groups of enterprises

Integrated Housing and workspace

Location sympathetic to needs of housing tenants while still beneficial to the trading enterprise activity

Creates more housing in line with govt targets therefore money may be available from central govt and housing associations

As above Individuals

disadvantaged in the housing market ie homeless, low income

Larger ecological footprint needed

Possible conflict of values and interest and expectations demand for housing may outweigh

demand workspace; site may evolve into housing estate

Housing tenant participation – conflict of expectations

Incubation issue – application of entry and exit strategies in relation to housing tenants or tied housing

*All funders in Funding Section relevant to all models unless otherwise stated ** All issues in Management of Incubator Section relevant to all models unless otherwise stated Environmental Issues All structures have the capacity to incorporate positive environmental features. Research needed into similar eco friendly housing and workspace once model and site have been identified

35

ACKNOWLEDGEMENTS

• Cameron Adams, Strategic Development Officer, South Cambridgeshire District Council • Adrian Ashton, Development Officer, Cambridge CDA • Rev Tony Barker, Minister, Zion Baptist Church, Cambridge • Nigel Boldero, Eastern Regional Development Manager, DTA • Matthew Brundle, Technical Director, WSP Environmental • Pauline Caitlin- Reid, Diversity Programme Manager, Eastern Touring Agency • Anne Campbell MP • Martin Clark, Director of Employment Initiatives, Citylife Ltd • Andrew Cogan, Managing Director, COVER • Stephen Conrad, Sales and Acquisition Manager, Cambridge County Council • Chrissie Davies, Cambridge • Lorna Davies, Director, CCVS • Tom Davies, Accounts clerk and Admin support, Cambridge CDA • Craig Dearden, Speaking Up • Arnaud Drapier, Research and Project Manager, UKBI Ltd • Cllr John Durrant, Cambridge City Council • Peter Durrant, Humberstone, Cambridge • Donald Findley, Financial Director, CAN • Martin Garrett, Director, Greater Cambridge Partnership • Lewis Herbert, Wastewatch, Anglia Polytechnic University • Walter Herriot, Managing Director, St Johns Innovation Centre, Cambridge • Andrew Hibbett, ICOF • Darren Hill, East Cambs District Council • Steven Holmes, CX, The Genesis Enterprise Centre • Owen Jarvis, Manager, Aspire Social Firm, Cambridge • James Jolly, Development Consultant, Wandsworth Youth Enterprise • Rita Kelly, Manager, Start-up, Godalming, Surrey • Andy Lawson, Assistant Projects Director, Gallagher Estates Ltd • Neil Longhurst, Keystone Community Partnership, Thetford • Michael Manning-Prior, Managing Director, Wandsworth Youth Enterprise Centre • Jamie Merrick, EEDA • David Nicholls, Business Development Manager, Cambridge Business Link • J Blott, Cambridge City Council Planning Department • David Potter, Regional Director, RICS East of England • Andrew Poulton, Senior Economic Policy Officer, Cambridge City Council • Simon Smith, Head of Economic Development, Cambridge County Council • John Wilkinson, Social Policy Inclusion Adviser, EEDA • D J Wisbey, Januarys Chartered Surveyors, Cambridge • John Wroe, Managing Director, Eastern Touring Agency • Sara Gisby and Keith Fuller, Bidwells Chartered Surveyors, Cambridge

36

APPENDIX A

QUESTIONNAIRE – SOCIAL ENTERPRISES Name of Organisation

Contact

How long has your organisation been trading? Please circle?

0 – 1 yr 2 – 5yrs 1 – 2 yrs 5yrs +

At what stage of development is your organisation? Please circle

Start-up Expansion/Growth Diversifying New premises needed None of the above

Which best defines your trading activity? Please circle

Agriculture, Arts, Catering, Childcare, Other care, Environment, Finance, Gardening/Horticulture, Housing, Manufacture, Recycling, Retail, Training, Transport, Other (please state)

Start-up. What were the problems your organisation encountered at start up?

Finance/funding Suitable premises/location Business Advice/Support Legal Advice/Support Administration Marketing/Visibility Other:

Do you think that there is a need for a low cost start up property development set-up for Co-operative and Social Enterprises?

Yes / No Where do you think this ‘incubator’ should be set up, and why?

What benefits do you think such a development could offer to you and other enterprises in it?

Business Support Networking (with other social enterprises) Physical market to trade ideas/goods/services Sharing of facilities Cost effective Visibility in the market place Other:

37

What problems do you feel could be encountered?

What agencies do you currently use for advice and support?

What type of buildings would be most suitable for your organisation?

Office space Light Industrial Units (what access issues?) Mixture of office space and Light Industrial Units Other:

WISH LIST – If you have not already been able to list them, what things would you like to see made available to organisations being based in such a development?

What three factors do you believe are necessary to ensure success and longevity of your organisation?

1. 2. 3.

At this stage of initial research, would you be interested in being based in an appropriately located incubator?

Yes / No

Thank you for your help. Please return this form to:

Sue Roberts, Project Officer,

CCDA, Alex Wood Hall, Norfolk Street, Cambridge CB1 2LD

Any queries please contact me on 07974676504or 01223 360977

38

APPENDIX B Targeted Social Enterprises 3D Logistics, Sandy Arjuna Natural Health Centre Ltd, Cambridge Arjuna Wholefoods, Cambridge Aspire, Cambridge Biofuel, Cambridge Branching Out, Ely Burwell Community Print, Burwell Castle Project Print Finishers, Cambridge Daily Bread Co-operative (Cambridge) Ltd, Cambridge Darwin Nurseries, Cambridge Delta T Devices Ltd, Burwell East Barnwell Community Café, Cambridge FACET, March Farmgate Dairies Fledglings, Ickleton Funky Flamingo, Bourn Hyperion Auctions Ltd, Huntingdon Micro-Robotics Ltd, Cambridge Narinda Ltd, Cambridge Opportunities Without Limits, Sawston Papworth Trust, Papworth Radical Changes, Cambridge Regional Credit Union, Cambridge Rowan Foundation, Cambridge Silverfern Trust, Cambridge Spectrum Co-op Ltd, Huntingdon The Supply Teacher’s Co-operative, Cambridge Workbridge, Huntingdon

For a copy of the Directory of Co-operative and Social Enterprises in Cambridgeshire please contact Cambridge CDA, Tel No 01223 360977

39

APPENDIX C Organisations used by local CSEs Anglia Polytechnic University, APU Business Links Cambridge Action for Communities in Rural England, ACRE Cambridge Centre for Voluntary Services, CCVS Cambridge Co-operative Development Agency, CCDA Cambridge City Council Cambridgeshire County Council Cambridge Enterprise Agency, CEA Cambridge Housing Association Cambridge Independent Advisory Service, CIAC Cambridge Regional College, CRC Council of Volunteers Eastern Region, COVER East Cambridge District Council, ECDC East of England Development Agency, EEDA Get to Grips, GET Huntingdon Regional College, HRC Industrial Common Ownership Finances, ICOF, now part of Co-operatives UK Learning and Skills Council, LSC National Health Service, now Trust Papworth Trust School for Social Enterprise South Cambridgeshire District Council, SCDC Social Firms Eastern Region, SFER Social Training Enterprise Networking Group, STENG Speaking Up

40

BIBLIOGRAPHY EEDA Corporate Plan 2002 – 2004 EEDA Eastern Region Regional Development Plan EEDA 2010 “Prosperity and Opportunity for All” ICOM Video “The Co-operative Advantage” LSC “Training Issues facing social enterprises in Cambridgeshire” Dti Social Enterprise Unit “Social Enterprise: A Strategy for Success” 2002 APU WISE – Working in Social Enterprise Websites www.businesslink.org Business Link www.cambs.businesslink.co.uk Business Link Cambridgeshire www.cambridge.cvs.org.uk Cambridge Centre for Voluntary Services www.cambridge.gov.uk Cambridge City Council www.camcnty.gov.uk Cambridgeshire County Council www.citylifeltd.org Citylife Ltd www.can-online.org.uk Community Action Network www.co-op.co.uk Co-operative Movement www.cover-east.org Council of Volunteers Eastern Region www.dti.gov.uk Department of Trade and Industry www.e-t-a.org.uk Eastern Touring Agency www.gallagherestates.co.uk Gallagher Estates Ltd www.gcp.uk.net Greater Cambridge Partnership www.nbia.org National Business Incubation Association www.sbs.gov.uk Small Business Services www.social-enterpirises.org.uk Social Enterprise Unit www.ermis.co.uk Social Firms UK www.scambs.gov.uk South Cambridgeshire District Council www.socialenterprise-east.org.uk SSEER www.stjohns.co.uk St John’s Innovation Centre www.surreycc.gov.uk Surrey County Council www.ukbi.co.uk UK Business Incubation Ltd www.wyec.org.uk Wandsworth Youth Enterprise Centre www.wspgroup.com WSP Environmental

Cambridge CDA Alex Wood Hall, Norfolk Street, Cambridge CB1 2LD

T: 01223 360 977 F: 01223 50 90 40

E: CambridgeCDA@ConnectFree.co.uk

W: www.colc.co.uk/cambridge/ccda

Registered in England No. 1853517