another article published on the Star by me back on Thurday,April 26, 2006
Based in Amman, (iPark) Jordan Technology Incubator is a business incubator specialized in Information Technology and telecommunication (ICT). It was established in 2003 by the Higher Council of Science and Technology (HCST) as a non-profit organization.
“The incubator aims at helping entrepreneurs to establish their own companies, in the most critical stage: The first two years,” said Omar Hamarneh, director of iPark, adding, “start-ups fail in their early stages not because their ideas are not innovative but because the founders fail to think and act as businessmen instead of thinking as engineers.”
Incubator firms in the West, provide qualifying new start-up businesses with a set of facilities—physical space, shared services, business, marketing and legal advice, and financial inputs—to facilitate their creation and assist them until “graduation”, when they have the capacity to “survive” in the outside competitive environment.
On the other hand Venture Capital (VC) firms raise funds to finance ICT companies in early, mid and/or late stages, in exchange for convertible preferred stock. That type of funding is interest free, which makes it consistent with Shar’ia (Islamic law). Usually VCs’ main focus is on investing in emerging and promising young companies.
iPark dose not acquire a share in the startup; it provides all its services from office space to furniture and IT infrastructure to managerial and marketing advise for only JD160 monthly.
“Unlike western-based incubators, iPark does not provide funding but tries to arrange funding from different sources: National Fund For Enterprise Support (NAFES) to help small- and medium-sized businesses of HCST; individual or corporate investors,” Hamarneh said.
According to Hamarneh start-ups in Jordan struggle to get funding. “We do not have enough seed funding in Jordan; for example if you have an established company that needs funding of JD2 million, VCs would oblige. but if the company was a startup which need seed funding for JD 30,000 it will not find”. He said. Adding that “startups that need seed funding are small, so the probability of their failure is higher, that means higher risk for the VC”.
To get qualified to iPark an entrepreneur needs a business plan that is evaluated by iPark; if it was not available, then iPark will provide free consulting to prepare it. iPark has contracted a lawyer and an accountant, who offer their services to the incubatees for a minimal charge.
“We examine the founders and their drive, iPark interviews them from 4 to 5 times, before accepting or refusing them”. Hamraneh said, to accept applicants, iPark looks at the business opportunity, the competitive advantage, financial maters, and the size of the market, “the size of Jordan’s market is small, so we also look at the ability of the founder at least to enter neighboring markets”. Hamarna said.
There are 18 companies working today in the incubator, and two more companies will be entering soon. “No company has failed all of them are successful” said Hamarna.
Four companies has graduated from the incubator: Dimensions Consulting Inc (DCI) specialized in chip design, Electric Pharmaceutical Services (EPS) a business to business pharmaceutical procurement company, Jeeran.com the first Arab web hosting community and RAZORView Advisors strategic consultants.
DCI has graduated after 8 months because it expanded and it needed more office space, “the incubator is a brilliant idea, but they need to expand and host 100 companies instead of its current capacity of 22, in order to provide a scale for extra services,” said Muhannad Al-Saman, technical manager at DCI.
Saman had high expectations prior to enrolling in iPark as his business was lacking support. “The benefits derived from being part of iPark are the ability to launch right away the business with the availability of equipment and office space, and being in one place with other IT startups who share the same motivation and ambition,” Saman said.
Lu’ai Tawfeeq, general manager of EPS who graduated in October 2005, named the benefits in terms of affordable rental of office space which is equipped with high speed Internet, telephone, fax, copiers, printers, PC and office furniture.”
He added, “we benefited also from iPark database of customers contacts, legal offices and VCs. iPark referred us to Jordan-US Business Partnership (JUSBP) which covered 80 percent of the cost of documenting our software, plus paying a new employee’s monthly salary of JD100; iPark also referred us to NAFES fund which covered 80 percent of the cost of developing our business plan.” EPS was the first company to join iPark; it started with 3 employees and now employs five.
“The availability of the IT infrastructure at iPark enabled us to focus on our core business—community web hosting,” said Omar Qoudsi, president and co-founder of Jeeran.com, adding, “while we were part of the incubator, iPark launched a finance and accounting workshop, for free, which was very beneficial for us.” Like Saman, Qoudis, complained about the limitation of fiscal space, and demanded the incubator to offer more consulting services in accounting and finance, and to carry out checks on its member companies and how they are progressing.
Jeeran started with 2 personnel and now it has a staff of nine, according to Qoudis who declared that jeeran.com is profitable, with 550,000 registered users from all over the Arab world and 400,000 web sites.
“The incubation offers a good environment that hosts many companies under one roof; it gives you an insight into the market, and enables you to exchange expertise with other companies,” said Majed Qasem, managing director and founder of RAZORview, which joined the incubation in 2003, and graduated in 2005. It grew from an initial staff of one to the present seven employees.