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10/10/2000

IDC Says the Concept of Incubation Is Here to Stay

FRAMINGHAM, MA — OCTOBER 10, 2000 — Despite the recent negative publicity and criticism incubators have received, IDC demonstrates in a new report that the concept of incubation and business acceleration has merit. Firms incorporating certain best practices have an opportunity to excel, according to IDC's new report Incubators and Business Accelerators: IDC's Competitive Analysis of the Market.

"With so many companies jumping into this space, incubators and business accelerators are being viewed as just another fad. Many of them have failed at their original business, which begs the question as to why they would be successful guiding other start-ups. Unfortunately, the market has focused on these extreme examples and has ignored the value that business incubation and acceleration can bring to new companies," said Meredith Whalen, director of IDC's eIncubators and Accelerators research program.

Other critics have likened incubators to those who sold picks and shovels to the gold diggers; they often got wealthy at the expense of those who gave it all up to hunt for the gold. "This isn't the case with today's incubators," said Nicole Weber, senior analyst of IDC's eIncubators and Accelerators research program.

"Today's incubators provide rapid access to often hard-to-obtain resources. They also lend best practices from their experience and access to a network of contacts."

According to IDC, companies that succeed in providing incubation services will be those that develop repeatable business processes and manage their risk. "Just like any other people-intensive service business, incubators and accelerators need to focus on ways to capture the unique processes associated with each company's incubation and to repeat these processes across all portfolio companies in all incubator facilities," Weber advised.

When it comes to managing risk, IDC advises companies providing incubation services to diversify their revenue streams and their partnerships. "The risk of incubators is that many of them have tied their revenue streams directly to the stock market," Weber said. "As we have seen recently, a downturn in the stock market can erode incubators' future profits. Incubators that draw upon other revenue streams or those that charge for some of their incubation services will buffer themselves from these downturns."

Additionally, IDC notes how incubators can minimize their risk through partnerships with Fortune 500 organizations. Recent announcements involving Sprint and eCompanies, and Dow Chemicals and campsix are such examples.

IDC's new report, Incubators and Business Accelerators: IDC's Competitive Analysis of the Market (IDC #B22905), analyzes the business models of various types of incubators and accelerators and provides insight into what does and doesn't work in launching new companies. The report discusses the types of incubators, services offered, payment options, and marketing efforts. It presents best practices for incubators and makes recommendations for those competing in this space. The report also profiles the following companies:

Andersen Consulting, Cambridge Incubator, campsix, Cap Gemini Ernst & Young LLP, divine interVentures, eHatchery, Gazelle Lab, idealab, i-group Hotbank NE, Internet Venture Works, iStart Ventures, LaunchCenter 39, McKinsey & Company, NetCatalyst, PricewaterhouseCoopers, Scient, and WingSpring.

To purchase the report, contact Jim Nagle at 1-800-343-4952 at extension 4549 or at

jnagle@idc.com.

About IDC

IDC is the foremost global market intelligence and advisory firm helping clients gain insight into technology and ebusiness trends to develop sound business strategies. Using a combination of rigorous primary research, in-depth analysis, and client interaction, IDC forecasts worldwide markets and trends to deliver dependable service and client advice. More than 700 analysts in 43 countries provide global research with local content. IDC's customers comprise the world's leading IT suppliers, IT organizations, ebusiness companies, and the financial community. Additional information can be found at www.idc.com.

IDC is a division of IDG, the world's leading IT media, research and exposition company.

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