Incubation hubs: The launch pad your business needs?

Tired of meeting in coffee houses and each other’s’ houses, a handful of developers and entrepreneurs came up with a plan. They decided to create a space where they and other like-minded individuals could get together and work.

The idea was to provide the necessary business infrastructure, like working space and Internet access, on a shared model, reducing the overall costs of renting office space for the average entrepreneur.

This gave birth to iHub, East Africa’s premier incubation hub and co-working space, in 2010. It remains one of the enduring tales of Nairobi’s start-up scene. iHub has since moved out of Bishop Magua Building, along Nairobi’s Ngong Road, where it occupied a wing, to take up two floors at Sanetu Plaza – more than six times the space it occupied previously.

According to the World Bank, Kenya and Nigeria both had 11 co-working spaces as at 2016, and are second in the continent to South Africa, with 24 hubs.

Josephine Mwangi, the head of communication and marketing at Nailab, one of the oldest co-working spaces in the city, says demand for business incubation has been on the rise as more and more people view entrepreneurship as a viable option.

“When we started five years ago, co-working spaces and business incubation hubs did not interest many people and we were not even charging. But as employment has become elusive for many in recent years, we have seen an upsurge in requests for space,” she says.

The costs

Most co-working spaces double as business incubation centres – enterprise boutiques where start-ups get mentorship and business training in addition to the shared space.

In many co-working spaces, entrepreneurs register as members and get access to basic shared amenities, including a front office assistant, wireless Internet, phone lines and common meeting areas. Additional privileges, like private offices, are charged extra.

The average cost of rent and membership in co-working spaces depends on the hub providing it, the location and the time signed up for.

For instance, Nailab, which operates out of Ngong Road, will charge you Sh700 per day per person if you just need a desk to work from.

A longer-term arrangement costs Sh10,000 per person per month, and gives an entrepreneur access to meeting spaces, daily morning tea and all-day access to the premises.

Pawa 254, a co-working space on State House Road dedicated to artists, charges Sh500 for access to a communal working space for the day, or Sh15,000 per month for premium members.

The Hub East Africa, a five-bedroomed bungalow-turned-office along Waiyaki Way is one of the newest spaces in the city. Walk-in entrepreneurs can rent desk space for Sh800 for the day or Sh500 for half a day. Tenants are also offered a home-made lunch option for an additional Sh150.

Lynn Sellanga, the head of operations at Nailab, says working from co-working spaces allows entrepreneurs to benefit from the network of other businesses in the hub.

“The environment and spirit in a co-working space is not the same as when you are working at home by yourself,” she says.

“People connect and have access to networks so you may be developing a good website and you often find someone within the same space who has expertise in the kind of help you need.”

Elusive benefits

In this way, a co-working space can be the first pool of resources for young start-ups looking to staff the businesses or outsource some services, as well as a testing ground for their products.

A recent study in the Harvard Business Review found that people who work from co-working spaces tend to thrive more than employees in traditional office environments.

Researchers who spoke to hundreds of entrepreneurs working from dozens of co-working spaces in the US found that co-working spaces are more collaborative, more stress-free and provide entrepreneurs with a much-needed support structures.

Employees in co-working spaces were found to have more control over their workflow and were relatively happier and found meaning in their work.

Joshua Mutua, the CEO of Kejamove, a business that traces its roots to incubation at Nailab back in 2014, adds that working from a co-working space helps entrepreneurs get through the difficult period of self-doubt. This is the phase where many entrepreneurs on a lone journey tend to throw in the towel.

Unfortunately, many of these benefits remain elusive for many entrepreneurs in the country.

According to the Institute of Economic Affairs, Nairobi contributes about 60 per cent of the value of goods and services produced in the country.

This has seen most co-working spaces set up in the city, since they need a critical mass to be viable. The downside of this is that access is difficult for entrepreneurs in other counties, or even those outside urban areas.

Government role

“We tried testing the waters in Mombasa and in Kisumu, but there are capacity constraints that need to be addressed,” Josephine says.

“This is where the Government needs to come in and use its muscle and networks to help take this model to the counties and make it successful.”

Further, for some entrepreneurs, the costs and rules of working from a co-working space can be a turn off, as can the lack of privacy. While most incubated business owners are respectful of the work environment, it can get noisy when calls need to be made, or discussions have to be had.

Additionally, co-working spaces, particularly those with a focus on business incubation, have the challenge of sustaining profitable operating models, with many drawing funding from donor partners.

Funding hurdles arise because the majority of start-ups are unable to turn a profit fast enough, and eventually end up leaving incubation hubs when the founders give up. Those that become profitable opt to leave for larger premises as they scale their businesses.

Incubation hubs have largely operated without the help of the Government, with a recent initiative to set up Enterprise KE, a business incubation centre that would be jointly run by the Government and private sector, stalling.

However, the Kenya Industrial Research and Development Institute (Kirdi) runs training programmes for young entrepreneurs and offers businesses incubation.

Some of those it helps out are entrepreneurs looking to get into juice and jam making, dairy production, meat processing or bakeries, with training costing Sh10,000. It also supports leather processing and chemical processing, where entrepreneurs learn how to make detergents, beauty products and so on.

Devolution has also fuelled a few initiatives that have taken incubation services to some counties.

The Rift Valley Innovation Centre (RVIC) in Baringo County is arguably the first incubation hub set up in Rift Valley. It opened its doors earlier this year and is spearheaded by John Tanui, the CEO of Konza Technopolis Development Authority.

“Together with professionals from my locality, we initiated the centre with the desire to contribute to the development of the community, and address the national challenges of unemployment and poverty,” the Konza boss said at its launch.

RVIC is hoping to emulate the success of Lake Hub, a Kisumu-based incubation hub that was the first to stray from Nairobi’s Silicon Savannah when it launched in 2015.

Ultimately, while having a cost-effective and convenient location to launch your business might go a long way towards ensuring its growth, the traditional components that determine success in business remain vital, wherever you work from.

“Incubation hubs can at times make businesses complacent because you have everything provided for you, and this can shelter an entrepreneur and create a comfort zone of sorts,” says Josephine.