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Close-Up On The Rubicon Incubator

Structured support for early-stage companies has taken off in recent years and some 27 accelerator and incubator programmes are currently operational in Ireland, assisting over 200 companies every year.

Enterprise Ireland is particularly keen on incubation centres and began a capital investment programme over a decade ago to establish them in third-level institutions. Most institutions now have some form of incubation centre, offering mentoring, workshops, funding and other supports, while privately funded accelerator programmes like Sean O'Sullivan's SELR8R in Cork have also become a mainstay in Ireland.

In practice, business accelerators and incubators have a lot in common, but the difference with the former is that programme institutors usually get some share of equity in return for their supportive efforts. Those efforts are also delivered in bursts via intensive short-term programmes, while the gestation period for incubators is more likely to be measured in years, rather than months.

Recent research conducted for an AIB Outlook report on the technology sector counted 400 startups currently housed in accelerators/incubators around Ireland. Outside of the capital, 42% of startups that apply for such support get accepted, while in Dublin, the rate drops to 21%.

Despite financial gains for accelerators/incubators still being relatively rare – only one quarter of them profited from the firms they have supported thus far – they certainly benefit the startups themselves. AIB's research shows that 79% of the firms that completed accelerator/incubation programmes in 2012 are still in operation.

Such a success rate is down to the honing nature of incubation centres and their ilk, which force entrepreneurs to whittle their startup ideas into shape. This is facilitated through financial support to varying levels, as well as mentoring, industry expertise and networking opportunities.

Relatively cheap and well kitted-out office space is another draw for young companies that wouldn't otherwise be able to afford commercial rents. NovaUCD, Cork Institute of Technology's (CIT) Rubicon Centre and NUIG Business Innovation Centre are among the most successful of the campus-located incubation centres, responsible for shaping the likes of OxyMem, Sensory Research and OnePageCRM into viable businesses.

The Rubicon Centre in CIT houses over 50 knowledge-based startups on 3,000 sq m and is one of the country's most successful innovation centres for high-potential startups. Set up in 2006, the centre has seen nearly 250 companies graduate from its programmes and go on to create more than 2,500 jobs.

Mirroring the national trend, 70% of the companies that availed of Rubicon and CIT's enterprise programmes through the years are still in business. Rubicon is jointly funded by CIT and EI, and facilitates several different business development programmes for its startup residents, including the PINC programme for female entrepreneurs and Enterprise Ireland's New Frontiers programme, a three-part course to test, plan and develop business ideas.

New Frontiers focuses on manufacturing or traded services startups with export potential from a variety of sectors, and is run by EI in 14 campus incubation centres nationwide. The first phase of the programme runs for six weeks, comprising evening workshops on business feasibility.

The second phase runs for six months and involves full-time participation in workshops, mentoring and reviews, as well as office space and a €15,000 scholarship. The final phase involves a run-through of the government support available to startups, as well as further incubation facilities and support for a few months.

Some 150 companies are supported annually through New Frontiers, 12 of which complete the course in Cork's Rubicon Centre. Last year's crop of graduates included Robert Cosgrave (40), who co-founded LearnLode the same year. The firm supplies SaaS enterprise and customer service knowledge management systems to clients and is based in the Rubicon.

Cosgrave completed the New Frontiers programme in March last and says that the most unexpected benefit gleaned from it was the mentoring. “I didn't expect it to be as transformational as it was. When you apply to courses like this, you sometimes tend to see the funding only and think that it'll give you a few months of runway, but there's much more to be gained than that.”

Like most early-stage startups, Cosgrave found that ploughing a lone furrow was not the ideal route to take when forming his firm. He says that the incubation route brought him into contact with other entrepreneurs who were undergoing similar challenges, while also helping to develop his startup idea into a viable business.

“Starting a business in isolation can be a lonely process, but incubation centres and the programmes they run put you in a group dynamic, where you are part of other people's successes and failures.”

Another New Frontiers graduate from Rubicon is Niamh O'Dwyer, (pictured),  who set up an organic baby food business called Organic Little One. She finished the course proper in December 2013 and participated in the mentoring support options till March.

O'Dwyer (39) also highlights the peer-to-peer aspect of New Frontiers and incubation centres in general as a highlight in the education process. “Even though the other startups on the course were diverse in what they were doing, the issues they faced were fundamentally the same.”

O'Dwyer opted to remain in the Rubicon Centre, renting office space on the campus. “A big advantage is the atmosphere that's here – I could knock on a neighbouring door and get help easily if I needed it. There's a network of support in here and it alleviates the sense of isolation when starting up a company. The mentoring and reviews are also important – getting someone else's perspective is great.”

O'Dwyer adds that Organic Little One is benefitting as a result and the firm recently launched its products into over 70 SuperValu stores.

Platform Avenue is a third graduate from New Frontiers' 2013 class and winner of the award for 'best overall business opportunity' among the participating firms. Headed up by Patrick Dineen (37), Platform Avenue, which provides talent management software for companies in a variety of sectors, helping them with hiring, student placements, casting and application processing.

Dineen (pictured) feels that the continuous support structure offered by Rubicon was an unexpected but rewarding aspect to the course. “From spontaneous phone calls relaying a potential lead to recommendations on potential customers, or sometimes just a call to see if everything is going OK, it was a real confidence booster.”

General demand for places in accelerators and incubators is growing, both from indigenous and overseas applicants. According to the AIB-commissioned research, the average number of applications for these programmes increased from 114 in 2012 to 136 last year.

The main criterion for participants' acceptance to a programme, according to AIB's research, is high market potential (90%). Three quarters of the accelerator or incubator managers cited innovation as another important factor in choosing participants.

That startup supports like incubators/accelerators are still in such plentiful supply might seem odd, given their generally low rate of financial return for investors. Other metrics like job creation are also problematic assessors, while only an estimated 10% of 'graduates' in recent years have been acquired.

However, follow-on investment for startups who go this route was secured by over half (56%) of graduates in recent years, though how much of that was actually VC-related is unclear. (September 2014)

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