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INSIGHT

How to Develop Effective Entrepreneurship Programs for the Youth

Mentors can address the technical and business development needs of aspiring entrepreneurs. Photo credit: ADB.
Mentors can address the technical and business development needs of aspiring entrepreneurs. Photo credit: ADB.

Published: 26 April 2022

Lessons from Indonesia show young entrepreneurs need mentorship and training, business services and facilities, and post-incubation assistance. 

Introduction

In recent years, entrepreneurship education has become increasingly important in Indonesia. It is seen as a strategic way to harness the untapped potential of the country’s “demographic bonus” and to address persistent high youth unemployment.

A 2019 survey by the World Economic Forum showed that more than a third of Indonesian youth wanted to be entrepreneurs, the highest ratio in Southeast Asia. However, turning entrepreneurial ideas into sustainable business enterprises is no easy task—it requires knowledge, skills, and training.

Indonesia has offered comprehensive entrepreneurship development programs for the youth for several years. The Ministry of Education, Culture, Research, and Technology has also prepared a medium-term investment plan for higher education to stimulate entrepreneurship at top universities and accelerate innovation in new technology as part of the government’s National Medium-Term Development Plan for 2020–2024.

To support this effort, the Asian Development Bank took a closer look at incubation centers in Indonesia’s three public higher education institutions and a Swiss–Indonesian start-up accelerator program. In the study, ADB recommends measures that focus on management and resources, financial sustainability, mentorship and training, business services and facilities, graduation and post-incubation, and documentation and evaluation.

Entrepreneurship Development Programs

Three kinds of entrepreneurship development programs currently operating in Indonesia aim to bridge the wide gap between entrepreneurial aspiration and entrepreneurial success:

  • incubators run under the support of the government through the Ministry of Education, Culture, Research, and Technology;[1]
  • incubators with support from bilateral donors; and
  • incubation centers run by private sector companies through their corporate social responsibility programs.

Incubators and accelerators offer a wider range of services to help mitigate the risks that cause many budding entrepreneurs to fail. These programs provide in-house entrepreneurs with physical space, mentorship by academics and industry professionals, training, access to information, exhibitions, and networking and funding opportunities. This support can begin even before the actual incubation starts and can extend to years after they exit.

An ADB study on the Evaluation of Entrepreneurship Development Programs[2] looked at how entrepreneurship development programs nurture startups and how they help young entrepreneurs gain access to financing and technology. It also studied the quality of training and mentorship provided, as well as the facilities and business services offered to help reduce start-up difficulties. It studied four entrepreneurship development programs:

Founded in 1994, IncuBie is one of the pioneer incubation centers in Indonesia. It was established with the initial aim of commercializing the innovations developed within the state-run Institut Pertanian Bogor (formerly Bogor Agricultural Institute). Today, the agriculture-dedicated start-up incubation facility provides a 3-year incubation program with access to training, mentorship, networking, and finances. Since 1995, it has incubated 265 tenants, 83% of which successfully completed the program and graduated.

It offers a 1-year incubation program for University of Indonesia students or alumni seeking entrepreneurial careers. With a 100% success rate in terms of tenants graduating from the program, it is considered one of the most successful incubation centers in the country.[3] About a third of the 91 tenants it has incubated since 2015 have won prestigious local and international awards for their innovations. The institution has received recognition as well, including the Presidential Award from the International Council for Small Business Indonesia in 2019.

PENS Sky Venture was initially established to cater to its students and commercialize research-based innovations under a 3-year incubation program. Now, it also hosts tenants selected and sponsored by the Ministry of Education, Culture, Research, and Technology. Those supported by the ministry are offered a 1-year incubation process that can be extended for 2 years. It has had fewer tenants than the other incubators assessed by the study, but many of its graduates have posted impressive rates of return that range from 30% to 72%.

The start-up accelerator program launched in March 2019 accepts Indonesian and Swiss start-ups that want to explore international opportunities. It is supported by the Swiss government under the mandate of Leading House Asia of ETH Zurich in collaboration with the ZHAW School of Management and Law. The free program offers a 5-day training course delivered over 9 months, mentorship, and visits to Switzerland and Indonesia to meet prospective investors.

Recommendations

Qualitative and quantitative assessments and comprehensive case studies developed on the four entrepreneurship development programs yielded the following recommendations:

Institutional Capacity

  • Management and Human Resources – Establish a strong supervisory or advisory board with diverse expertise, leveraging the university’s resources. Cultivate a dedicated and experienced management team and roster of mentors with a sufficient staff-to-client ratio.
  • Financial Sustainability – Diversify funding sources to reduce dependency on funding from parent institution or the government and ensure self-sustainability by increasingly including revenue from rent and service fees.

A research study published in the United States in 2011 emphasized that management is one of the factors that matters most to an entrepreneurship development program’s success. Diverse expertise can help develop quality business assistance services, embed the program in the broader community, market the incubator, and provide effective program oversight.

International studies, meanwhile, show that most successful incubators are not-for-profit organizations but are self-sustaining. They generate income from fees charged to tenants and as equity participation in the start-ups or royalty payments. Incubators and tenants can develop a 5-year projection of revenue and expenses before graduation, which will later be used as the basis of royalty payments. This projection may subsequently be adjusted based on audited financial figures.

Start-Up Services

  • Pre-Incubation/Acceleration Phase – Study the target market to determine concerns and motivations in pursuing an entrepreneurial career. Improve marketing and communications to raise awareness, build trust, and attract the right applicants. Provide applicants with initial training and coaching for pitching concepts.
  • Access to Mentorship and Training – Expand roster of mentors to sufficiently address technical and business development needs of all tenants. Develop a network of experts from the public and private sectors. Ensure mentorship and training programs support offbeat ideas and include consumer behavior research and the creation of demand for new products and services.
  • Access to Business Services and Facilities – Provide office space and infrastructure to support product development, as well as assistance on business registration, permits and licenses, etc.
  • Access to Funding – Provide guidance on how to prepare winning investment proposals and how to use funding grants efficiently.
  • Graduation and Post-Incubation – Establish clear exit criteria for graduation, including readiness to implement growth plans. Provide post-incubation services such as access to specialized facilities and consulting services.

Incubators should provide mentorship, knowledge, and guidance on various aspects of business, including marketing, financial management, and product development.

A major challenge for all incubators, especially government-run entrepreneurship programs, is receiving the right mentoring to access financiers. As none of the government managers have been entrepreneurs themselves, they need to exert extra effort to reach mentors and investors.

Institutional Improvements

  • Documentation and Evaluation – Keep track of graduates, collect data on performance, and analyze collected data regularly to evaluate incubation services and programs.
  • Developing a Strong Network – Create a strong ecosystem by developing and leveraging a strong network within academic and business communities, government agencies, and state-owned enterprises.

Once tenants graduate, incubation centers must regularly keep track of them and note their progress to validate their services, showcase successes, and learn from failures. At least every year, data on revenues and employment, survival rates, and the outcome of specific activities, among others, can be collected. The information can then be analyzed every 3–5 years to serve as the basis for evaluating the incubator’s programs and processes.


[1] During the study, the Ministry of Research, Technology and Higher Education managed the incubation programs. In January 2020, the higher education portfolio was added to the Ministry of Education and Culture. In January 2021, the research and innovation component was also given to the Ministry of Education and Culture, and the name of the ministry was changed to Ministry of Education, Culture, Research, and Technology.

[2] The technical assistance (TA)—TA-9678 INO: Supporting the Advanced Knowledge and Skills for Sustainable Growth Project—is funded by a $1.15 million grant from the Japan Fund for Poverty Reduction. This TA is part of the Advanced Knowledge and Skills for Sustainable Growth Project.

[3] Success rate here refers to how many of an incubator’s accepted tenants complete its program and graduate from it. In some incubators, tenants may drop out from the program due to various reasons, such as inability to produce a viable product.

Resources

Asian Development Bank. 2021. Incubating Indonesia's Young Entrepreneurs: Recommendations for Improving Development Programs. Manila: ADB.

D.A. Lewis, E. Harper-Anderson, and L.A. Molnar. 2011. Incubating Success: Incubation Best Practices That Lead to Successful New Ventures. University of Michigan.

World Economic Forum. 2019. ASEAN Youth Technology, Skills and the Future of Work. Geneva.

Ask the Experts

  • Sutarum Wiryono
    Senior Project Officer (Education) Southeast Asia Department, Asian Development Bank

    Sutarum Wiryono is a senior project officer for education at the ADB Indonesia Resident Mission. He plays key roles in preparing and implementing various education projects in Indonesia covering basic education, vocational education, and higher education. Prior to joining ADB in 2010, he served as an education consultant in various projects funded by development partners.

  • Rudi Hendrikus Louis Van Dael
    Principal Portfolio Management Specialist, South Asia Department, Asian Development Bank

    Rudi Van Dael is currently a Principal Portfolio Management Specialist based in the ADB Nepal Resident Mission. From 2010 until 2019, he worked as a social sector specialist in ADB on various education projects in Indonesia, Bangladesh, and Nepal. Complementing the project work, he was involved in studies on using human-centered design, entrepreneurship programs, skills for the electricity sector, minimum service standards in education, and subsidized employment programs. He has a diploma in computing science, a master’s in public administration, and a PhD in sociology.

  • Asian Development Bank (ADB)

    The Asian Development Bank is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region. Its main instruments for helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, and technical assistance.

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