THE BUSINESS INCUBATOR DEVELOPMENT (BID) PROGRAM IN UKRAINE
FINAL REPORT
1997-2003[1]
On the 29th of August, 1997 Loyola College of Maryland entered into a cooperative agreement from the United States Agency of International Development (USAID)[2] to assist Ukrainians to develop small businesses in the technology sector. This program entitled, The Business Incubator Development (BID) Program, sought to create sustainable small business incubators to help Ukrainians adapt to a free market economy.
Loyola College is one of over 50 Jesuit institutions of higher learning located throughout the world, some dating to the Sixteenth Century. Loyola has extensive experience in business education and services, in donor activities and volunteerism, and in international activities. It’s Sellinger School of Business and Management is fully accredited by AACSB – The International Association for Management Education. It operates undergraduate and graduate degree programs and is well known for its executive MBA program for senior executives. The Sellinger School also includes several centers for business assistance, including the Lattanze Center for applications of information technology in business and the Center for Closely Held Businesses (CCHB), which focuses on small business services. The CCHB also receives funding from the U.S. Small Business Administration (SBA) to conduct business training for minority entrepreneurs.
Loyola College promotes volunteerism in assisting those who need a helping hand to take their rightful place in the prosperity of today. Its students, faculty, and the institution as a whole are active in seeking opportunities to help, and particularly abroad. Project Mexico is a student-led program that helps poor folk in a U.S. neighbor to improve their housing. The Sellinger School operates the ILADES business training program in Chile and manages a new MBA program in Beijing on behalf of a consortium of U.S. Jesuit colleges.
The BID Program in Ukraine grew out of work that one of the principal’s, Dr. George Gamota (Gamota, 1993), has been doing in Ukraine since its independence in 1991. Additionally, it coincided with the mission of Loyola's International Technology Research Institute (ITRI), which sends U.S. delegations abroad to assess research and to seek opportunities for international cooperation. (Shelton, 1998) ITRI is supported by most US Government research agencies: the National Science Foundation (NSF), the Office of Naval Research (ONR), the Defense Advanced Research Projects Agency (DARPA), the National Aeronautics and Space Administration (NASA), and others. It has sent 40 delegations abroad since 1989, including several to the Soviet Union as soon as glasnost made it possible. It was soon clear to Gamota and others that the numerous scientists there were going to have difficulty adapting to a free market economy, and help was needed to accelerate small business creation based on utilization of existing technologies. At the same time, with support of other US Government agencies, ITRI has been helping foreign scientists by making contacts with Western firms to assess commercialization their ideas in many technologies including power plant controls (Hansen, 1991), displays (Doane, 1994), communications satellites (Pelton and Edelson, 1993), (Pelton and MacRae, 1998), nanotechnology (Siegel, 1999), wide band gap electronics (Dmitriev, 1999) and marine technologies (Seymour, 1994) (Mooney, 1996). ITRI along with the MITRE Corporation under the sponsorship of ONR, contributed to production of a five-volume report on Ukrainian technologies (Gamota, 1993). A survey of international practices in small business development had revealed that the business incubation approach could be effective (Lalkaka and Bishop, 1996).and identified a virtual incubator as a viable model for situations such as existing in Ukraine.
To prepare for the development of the program and possibly identify Ukrainian staff, Gamota obtained funding from the US National Academy of Sciences’ National Research Institute to hold a one week seminar. To organize the seminar, Gamota invited Alistair Brett and four other American business development specialists to Kyiv. The seminar was held at the International Management Institute (IMI-Kyiv) in Kyiv in May 1997. The seminar brought together Ukrainians from several cities that had expressed an interest in participating in a technology oriented business incubator program. The BID program was designed based on the output of this seminar and lessons learned from a similar program supported by USAID a year earlier in Moscow and managed by Alistair Brett. Soon after the start of the program, a training program was held at Loyola College in June 1998 for the senior Ukrainian staff. Its content covered best practices in the U.S. and included site visits to incubators in Maryland. In examining a number of incubators in the U.S., a number of best practices emerged.
While the following is not an exhaustive list, it presents the ones that had direct applicability to Ukraine.
Identify a Champion. Successful incubator operations often come from a vision of groups of forward thinking business people who have a commitment to supporting small business in their community. Often the champion and implementers are the economic development officers of states, counties, or cities. Financial and managerial support from the economic development offices provides the initial investment for physical facilities. Then the managing director, who is the visible champion, creates the environment to attract small businesses to the incubator and sets the tone for its successful operation.
Establish a Network of Partners. Developing a network of alliances with successful small businesses, government agencies, foundations, and educational institutions provides a wealth of varied skills to support the needs of the incubator and its clients. From these partners and sponsors, advisory boards may be created to provide guidance to the managing director and to the incubator clients. Further, their financial support will assist in the sustainability of the incubator.
Determine a Focus. For incubators to be most successful, an economic sector focus should be adopted based on an objective analysis of the needs of their community. In the U.S. common choices include: high technology, bio-technical, services, light manufacturing, agricultural products, consumer products, to name a few. This sector specialization helps to meet the local demand for assistance by entrepreneurs and small businesses, to know the extent of financing and other resources, to understand the markets available, and to be sure of the availability of technical advice.
Provide Physical Space and Business Services. A physical structure for the incubator establishes an environment conducive to developing entrepreneurs and their enterprises. The incubator needs to establish an image and “look and feel” of a business location and offer quality, affordable space to attract start-ups and businesses with growth potential. Within the incubator a full range of business services is needed that can be provided at low cost through sharing. While in some cases, an incubator without walls can be appropriate, a physical location for provision of quality, low cost business services is a must – some forum for exchange of ideas among clients is also necessary.
Include Formalized Business Education, Training, and Business Plan Development. Providing formalized business training is not standard among the U.S. incubators reviewed. In many instances, it is informal, relying on individual entrepreneurs to seek assistance from the incubator or on the managing director detecting a need and suggesting the appropriate resources to the client firm. Still, the opportunity for success is enhanced where relationships with educational institutions or appropriate professional organizations, such as Service Corps of Retired Executives (SCORE), exist and regularly scheduled courses are offered. Integration of business plan development into training courses also seems to make a positive contribution.
Provide On-Going Business Counseling. One of the most valuable components of being associated with an incubator is the availability of on-going, in-depth business counseling. The opportunity for immediate feedback and assistance leaves the firm with more time for productive work and reduces the number of costly mistakes.
Provide Access to Capital. Incubators need to attract sufficient financial resources to ensure their sustainability. This can be a three to five year process. For sustainability of incubators, there are several models that have been implemented: (1) an up-front grant that covers the capital investment and operational expenses of the incubator for the start-up period; (2) an up-front grant the covers the capital investment with operating expenses being covered through delivery of services; and (3) sponsors make investments of 10 to 15 years in return for equity positions in the businesses with high growth potential and are willing to cover the expenses of the incubator until the positions are cashed.
Incubator managing directors also need to attract financing for their clients. They do this through developing relationships with banking institutions, venture capitalists, foundations, and micro-enterprise loan institutions.
Camaraderie: Incubator clients share their experiences in dealing with business problems. These relationships provide new entrepreneurs the opportunity of benefiting from the experienced business owners. It is helpful to provide a forum for a mix of clients, such as: (1) start-ups that show signs of success, (2) successful fast-growing firms near graduation from the incubator, (3) established businesses that may provide business services to other clients in the incubator, and (4) businesses that are candidates for the incubator, but are developing and the outlook for them is uncertain. Indeed one of the most useful services an incubator can provide is though its selection process, which can counsel prospective entrepreneurs that they should not precede until they have a better business concept.
As a result of intensive research and experience of working in Ukraine, The BID program was created in response to a U.S. Agency for International Development Request for Applications, ITRI at Loyola College in Baltimore, Maryland. The BID Program has supporting letters from over 45 Ukrainian organizations, including: National Academy of Sciences of Ukraine, and other organizations, such as banks, small business associations, and government ministries as well as the vice Prime Minister A. Kinakh.
The purpose of the program was to establish technology oriented small business incubators in several Ukrainian cities, starting with Kyiv and Kharkiv, and to contribute to the development of small business activity throughout Ukraine. The technology and manufacturing sector were selected because of the exceptionally strong cadre of well-training engineers and scientists in Ukraine and its almost universal success of rapidly providing good jobs and high success ratio worldwide.
The BID Program incubators were designed to select entrepreneurs who have passed a technical and business review. The incubators, called SBI’s then provide resources to enhance their prospects, including an extensive business training program (practical marketing, finance, management, etc.), and connections to external sources of capital, sometimes as direct loans or loan guarantees. The KharkivSBI and SlavutychSBI[3] provide a space to house some entrepreneurs, while the KyivSBI is an "incubator without walls” (sometimes also referred to as a “virtual or incubator”). This last incubator form is appropriate for Ukraine since most of the entrepreneurial scientists and engineers have facilities and staff at their home institutions that have many open laboratories and ample free space.
The BID Program staff included American and Ukrainian professionals experienced in technology oriented small business creation and development. Professor Shelton was the program director, while Dr. Gamota was the in-country manager, in charge of hiring all Ukrainian staff, organizing the incubators, and responsible for Ukrainian and US Government relations, as well as rising matching funds to sustain and expand the incubators. The methodology is based on a USAID-supported incubator project in Russia developed by Dr. Brett, who was the director for Training. Mr. Bailey, who also helped establish an incubator in Russia, was the Communications Director. Once the incubators were established and functioning, although Dr.Gamota remained the In-Country Management, he was helped by Dr. Margenthaler who was brought into the program in 1999, thus relieving Dr.Gamota from day-to-day management and provided him time to focus on government relations and rising additional funds. Ukrainian senior staff included Dr. Andreyev , Dr. Katerniak, and Dr. Gagauz. Andreyev and Gagauz were directors of the incubators in Kyiv and Kharkiv, respectively, while Katernyak was Gamota’s deputy for Ukrainian Government relations. The USAID mission staff in Kyiv were extremely helpful in adapting U.S. techniques to Ukraine, particularly Greg Huger, Steve Hadley, Steve Silcox, and Ivan Shvets, who served as the program officer at the initial stage of the BID program development. Timothy Dubel, Donna Nails, and John Pennell also provided assistance throughout the fours years of the program.
The following pages offer more details on the programs developed as a result of the grant.
The BID Program had an Advisory Board composed of senior American and Ukrainian executives. The Board chairman, Mr. Frank Lindsay is a retired senior executive of the ITEK Corporation who has spent a number of years in Ukraine working under the Alliance program. The Board Vice-chairman was Dr. Bo Denysyk, president of Global USA, a Ukrainian-American who has international experience in the Orient as well as Eastern Europe. Other members of the Board were: Mr. Eugene Iwanciw, a Washington businessman, Dr. Ivan Vasyunyk the director of the Lviv Management Institute. The Board met twice a year and provided critical recommendations and ideas for executing the program and developing new methods for sustaining the incubators.
BID Program Ukrainian Coordination Office (UCO) was created in 1998:
· To coordinate the operations of the BID program units;
· To prepare the consolidated reports to the USAID and Ukrainian Government from Ukrainian BID Program;
· To develop the networking and informational exchange with state and local Ukrainian authorities, ngos, smes and international organizations;
· To support the Conferences, Seminars and Workshop for all the Party.
Dr. Volodymyr Andreyev and Dr. Eugenia Severianina were appointed as UCO Director and UCO Deputy Director, respectively. Dr. Ihor Katerniak was appointed as Director for Development for the BID Program
During 1998-1999 years UCO staff was working closely with National Committee for Regulation Policy and Entrepreneurship Support, Ukrainian Association of Business Incubators and Innovation Centers, Poland Association of Business Incubators and Innovation Centers, National Academy of Sciences of Ukraine, National Space Agency of Ukraine, the Ukrainian Science Technology Center (STCU), Ukrainian Representation of Civilian Research and Development Foundation (CRDF), etc. Since 1998 UCO represented BID Program in the American Chamber of Commerce in Ukraine.
After establishing the BID Program American Representative Office (ARO) in Virginia,US, Ukrainian Coordination Office was in charge from Ukrainian party of BID Program of supporting and organizing visits of Ukrainian companies representatives to US.
UCO has initiated the cooperation of BID Program with Slavutych City Administration and Ukrainian Technoparks.
In 2000 UCO was transformed into “Loyola College Representative Office in Ukraine” managed by the CID.
The list of events arranged by UCO is attached.
Upon receiving the award, the American BID Team arrives in Kyiv and meets International Management Institute (IMI-Kyiv) Rector Dr. Bohdan Budzan to discuss and agree to cooperate in creating the Kyiv Small Business Incubator at IMI-Kyiv.
In late 1997 Loyola College partnered with the International Management Institute (IMI-Kyiv), a private business school in Kyiv, to open the KyivSBI under the direction of Dr. Volodymyr Andreyev and Dr. Eugenia Severianina. IMI was chosen after a successful discussion and agreement to cooperate between the new IMI Rector, Bohdan Budzan and George Gamota.
The initial physical location of the BID Program was established in IMI-Kyiv according to the set of Agreements between Loyola College and IMI-Kyiv.: KyivSBI, which started as internal IMI-Kyiv Program “Small Business Incubator”. Additionally, Loyola College created the “BID Program Ukrainian Coordination Office (UCO) whose function was to coordinate activities between the two incubators and Loyola College.
So in the beginning Kyiv SBI, as IMI-Kyiv program, was focused on Educational Courses and Consulting services to develop and evaluate Business Plans for Client Companies. Building on the extensive experience of the IMI faculty in training students, the KyivSBI provided an intensive program of business education and consultation.
The idea of not providing space in the Kyiv region was due to the reality that there were many Academic Institutes and laboratories that had excess space and it was freely available to their staff to use and establish small businesses. Thus, just like in Russia, a distributed incubator was optimal. This incubator without walls is also appropriate for entrepreneurs who have special equipment or when a move of a company would be disruptive.
From March 1998, to the present over 974 students from 267 companies (63 percent paying, 45 percent women) were trained through the KyivSBI. 91 Business plans were developed. (See also additional info on the CID Training activities)
In addition to the extensive business training program provided by the KyivSBI, in Kyiv the BID Program also supported Junior Achievement's first training program for Ukrainian high school teachers to reach out to the next generation. Nancy Keel, a Peace Corps volunteer, served as the JA Executive Director for Ukraine at the time. She credited the BID Program for her ability to compete and obtain a separate grant from USAID to start a Ukrainian JA program.
Because the BID Program previewed wider activities than education and consulting, following the MOU between Loyola College and IMI-Kyiv of June 19, 1999, in August of 1999 the internal IMI-Kyiv Program “Small Business Incubator” has been transformed in the a self-standing legal entity “Center for Innovative Development” (CID), a subsidiary venture of IMI-Kyiv, and made it a sustainable center on its own right.
According to the MOU, the goal of the CID creation was “To facilitate the continuation of the BID Program in Ukraine”. This included the next lines of activities:
· Developing SME supporting infrastructure by creating effective and sustainable Business Incubators and supporting Technoparks progress in Ukraine;
· Facilitating the access of SME to the fund sources (both by the BID Loan Guarantee Project and by the other possibilities);
· Facilitating the SME access to the most important services, such as:
- Informational Services;
- Consulting Services;
- Educational Services (Training Courses);
- Partnership & Networking Development.
To facilitate these activities Loyola College and the CID developed several Projects and signed relevant Agreements:
|
№ |
Project Title |
Ground |
Amount |
Finish Time |
Results |
|
1 |
Loan Guarantees for Small Business |
Agreement between the CID and Loyola College №1 of 03.03.2000 |
230000USD* |
End of the 2003** |
Appended |
|
2 |
Development of the E.O.Paton Electric Welding Institute infrastructure |
Agreement between the CID and Loyola College №2 of 03.03.2000 |
70000USD |
15.06.2002*** |
Appended |
|
3 |
Creation of the Small Business Incubator in Slavutych City |
Agreement between the CID and Loyola College №3 of 12.09.2000 |
57000USD |
June, 2002**** |
Appended |
*) Planned sum was 250000USD.
**) The end of the current Loan Guarantee Projects.
***) The date of the PEWI-CID Protocol on this Agreement.
****) The date of the Transfer Agreement between the CID and Slavutych.
The CID was launched just at the end of the BID Program, the dates of the closing of the CID-Loyola Agreements has not been fixed (it was supposed that the CID will continue the work to finalize the BID Projects after the finish of the BID Program, planned initially on the August 29, 2000 and extended in July 2000 until August 31, 2001). Thus the “Finish dates” of the Projects reflect the actual status.
Following these Agreements after the end of BID Program, the CID has continued the implementation/finalizing of the BID Program Projects, such as Creation of the Small Business Incubator in Slavutych City, Loan Guarantees for Small Business and Development of the E.O.Paton Electric Welding Institute infrastructure.
To keep the wide links with International Organizations, the CID continued its membership in the American Chamber of Commerce in Ukraine and in the Ukrainian Business Incubators and Innovation Centers Association, and developed a Ukrainian NGO “Business Club of the Center for Innovation Development” which provided a forum for exchange of practical experience among its clients and links with other Ukrainian NGO and Governmental Organizations.
As a result of negotiations between Dr. George Gamota and Academician V. Semynozhenko, Director of the Institute for Single Crystals (ISC) of the NAS of Ukraine, Kharkiv, was to become the second of the two incubators under the BID Program. In early 1998 Loyola College signed an Agreement with ISC to create the Kharkiv SBI under the direction of Dr. Inna Gagauz. The ISC subsequently, in 1998 spun off a subsidiary, Small Business Development Center “Kharkiv Technologies” (KT), to operate the KharkivSBI and to help sustain it.
Many lines of activities of the KharkivSBI were the same as the CID’s, except that it was decided that KT host a limited number of “tenant companies” requiring special Internet connectivity. KT provided 208 square meters, which were used by 16 companies (taking into account the rotation). These and other KT’s premises were renovated by the cost of the BID program and equipped with computers and other office technique. The high-speed Internet connection was provided by the US Department of Energy following an agreement with George Gamota. The tenants were competitively selected from applicants, who could use the Internet facilities effectively for their business development.
Besides the Agreement with ISC, which created the base of the KharkivSBI, Loyola College established several other Projects, carried out by the KT:
|
№ |
Project Title |
Ground |
Amount |
Finish Time |
Results |
|
1 |
Support for sustainability of the Center of Small Business Development "Kharkiv Technologies", as a physical incubator of small business in Kharkiv. |
Contract № 1between the KT and Loyola College of 10.09.1998. |
91300 USD |
March 1, 2000 |
Appended |
|
2 |
Educational activities within the Kharkiv Marketing Assistance Program (MAP) |
Agreement №1 between the KT and Loyola College of 20.06.1999, with Addition of March 1, 2000. |
153870USD |
August 29,2000 |
Appended |
|
3 |
Development of the ISC Technopark infrastructure |
Agreement between the KT and Loyola College № 2 of March 1, 2000 |
20000USD |
August 31, 2001* |
Appended |
|
4 |
Loan Guarantees for Small Business |
Agreement between the KT and Loyola College №3 of March 1, 2000 |
200000USD |
December, 2003* |
Appended |
* Because the finish dates of some of these Agreements were not fixed, the proposed dates reflect the actual situation.
Within these Projects, the KharkivSBI, in cooperation with Kharkiv Polytechnic University and other local organizations, offered an extensive business training program to clients. (See “KT Training Courses”).
KharkivSBI played an essential role in the Kharkiv Marketing Assistance Program – a forerunner to the Kharkiv Initiative - and in the ISC Technopark development. During the years 1998-2002, 1880 students (41 percent women) took courses through the KharkivSBI.
Loyola College offered to reprogram $300,000 of grant funds to help USAID support the start of the Kharkiv Initiative. This initiative of the U. S. Government attempted to make up for lost business Kharkiv suffered after canceling a contract to help build an Iranian nuclear power plant. In return, the US promised to provide extensive instruction on innovative marketing techniques and business opportunities to offset the lost income.
KharkivSBI become a Loyola Agent on the implementation of the MAP Program. During the course of this initiative 512 students representing 225 companies took part in MAP-KharkivSBI training program. To make the program successful, Loyola partnered with two other USAID programs in Ukraine, DAI’s NewBizNet program and Alliance’s Partnership program.
Although the MAP program officially ended after just 9 months, BID chose to continue the training part of the program with its 256-hour senior Business Development program. The program included senior managers of Kharkiv’s large organizations.
The closing of the Chornobyl Nuclear Power Plant was a high priority for both the US and Ukrainian governments, but one of the main stumbling blocks was the issue of what to do with the large number of highly skilled scientists and engineers who work at Chornobyl and now would be unemployed. Most reside in a special science city “Slavutych” created after the accident in 1986. Working with the NIS Coordinator, William Taylor George Gamota proposed to create a technology incubator in Slavutych, using the BID Program as the model. The idea was quickly accepted by the Slavutych Mayor, Volodymyr P. Udovychenko, and publicly announced in connection with President Clinton’s trip to Ukraine in June 2000.
In early 2001 Loyola College and CID partnered with Slavutych city government to create the Slavutych small business incubator (SSBI). This physical incubator, which can be considered to be a branch of the KyivSBI, helped provide resources that made the closure of the Chornobyl nuclear power plant more acceptable.
Development provided technical assistance and helped to create the Slavutych Small Business Incubator (SSBI).
The CID cooperated closely in the SSBI development with the Business Development Agency of Slavutych (SBDA), but as it was pointed by Slavutych Mayor on the UBICA[4] Conference, 2001, Lviv, “The CID was a “brain”, which designed and created the SSBI.
Because of the limited funds for SSBI Project, the cooperation with Local and International Organizations was extremely important. Kyiv USAID (John Panel) and the CID (V.Andreyev, E.Severyanina) were key to help establish this cooperation and thus enlarge the cost sharing. The result was: for $1 of the BID investment - $1.4 of additional investments were procured, as indicated below:
Slavutych City Administration provided BDA with premises for the SSBI in 3 buildings as well as land for use, where 2 of these buildings are placed, for creating functional SSBI modules. Moreover, Slavutych Administration provided funds for partial renovation of the buildings.
Because of these actions the SSBI’s space was increased sufficiently and came practically to 1572 sq. m. One half of this space was developed within the USAID-Loyola College Pilot Project framework.
Now SSBI is located partially in the BDA building, partially in the former “Daugava” supermarket building, and the training class and computer laboratory are placed in the Slavutych city Lyceum and now SSBI is the only incubator in Ukraine that received into its possession immovable property and land where that property is located. This situation is very important and is a base for sustainability of the SSBI activity and further development.
Statistics on the SSBI and its current status:
- As for April of 2002, 46 companies have become clients of the SSBI.
- 86% of companies-clients have been established during the period of International projects supporting SSBI creation activity. An international project input for creation of single company is as big as USD 2100.
- SSBI company-clients are planning to create 365 job places, which around 10% of the job places needed to Slavutych in nearest future.
- 51% of client companies cooperates with SSBI according to the classical business incubation model (lease of the premises + services), 35% are “virtual clients” (without lease of premises); 11% are target group (companies which use informational technologies).
- Companies created by former ChNPP workers: 32%.
- Companies created by unemployed or use former unemployed: 11%
- Women business: 32% of companies-SSBI clients are created by women.
- Youth business: 51% of companies are created by entrepreneurs under 40 years (24% - under 30 years, 27 % - from 30 to 40 years).
- Modern Informational Technologies: 22%.
More information about SSBI Project realization and results is quoted in amendments.
In January of 2000, after the Ukrainian government established the first three technoparks, the BID Program used reserve funds to help develop these technoparks as natural allies in the business incubation effort in Ukraine. This effort started with developing and delivering a special one-week course in the U.S. on technopark management to help ensure the success of this new initiative.
The course was modeled after our successful incubator management course of June 1998, with modules on general management (including financial control and marketing), experience from technoparks in the U.S. and Eastern Europe, and site visits to successful technoparks in Maryland and Pennsylvania. The technoparks primarily provide for prospective companies space and some protection against corruption by local government structures and security, while the incubators provide other resources, such as: training and consulting, access to capital and markets, information technology infrastructure, camaraderie, etc.
The implementation of the Technopark supporting Projects was included into the CID and KT schedules (See CID-PEWI Technopark Cooperation, and KT SCI Technopark Cooperation)
Due to rapidly fluctuating economic conditions and the lack of due diligence procedures in Ukraine it took several years to establish the procedures necessary to award small business loans. To ensure that loans were provided to worthy companies, a Process was put in place to review all proposals. A Technical Review Committee (called “Expert Rada) headed by Academician Baryakhtar with Dr. Oleksandr Slobodyanyuk as Executive Director performed that task. The associated banks: Joint Stock Bank “AGIO in Kyiv and Joint Stock “RealBank” in Kharkiv, provided financial review. They also provided the loans.
On March 28, 2001 KyivSBI gave out its first loan and KharkivSBI followed suit the following month.
The majority of the equipment purchased under the cooperative agreement was donated by Loyola College to the incubators to assist in their sustainability efforts.
At his moment the Donation of the Equipment “imported to Ukraine” is documented by the Kyiv USAID Mission – Loyola – CID Transfer Agreement for $18.502,60, but the transfer of equipment “purchased by Loyola in Ukraine still needs to be closed out[5].
The BID Program achieved its objectives in Ukraine. Its KyivSBI, KharkivSBI and SlavutychSBI have provided business development services to more than 2600 students and are operational long after USAID sponsored funding has ended. The SBIs are generating an income stream that gives them a reasonable chance of sustained operations, and have shown growth.
The program office in Kyiv was established within 30 days as specified by the award. The project performance monitoring plan and the plan for the first year's operation are delivered within 45 days as required. Plans for training and for client project selection are drafted.
Staffing was completed with recruitment of one professional and one clerical person for the Baltimore headquarters and two professionals and two clerical staff for Kyiv. Two Peace Corps volunteers were engaged to maintain a Kharkiv office.
A contract was signed with the International Management Institute (IMI) to provide space and human resources for the Ukrainian Coordination Office. A flat was leased in Kyiv to serve as both housing in lieu of hotels and for additional office space for American and Ukrainian staff from outside Kyiv. In effect this made it possible for the UCO to operate on both the Ukrainian and US time zones. Memoranda of agreement were signed with IMI-Kyiv and the ISC in Kharkiv to serve as the basis for subcontracts for operation of the two small business incubators.
A contract is signed with the International Management Institute (IMI-Kyiv) to operate a small business incubator (KyivSBI). Dr. Volodymyr Andreyev, who formerly worked for Loyola College directly, became an employee of IMI and served as their project director. This incubator was the distributed type, with client entrepreneurs remaining at their existing locations but coming to the SBI for training and consulting.
Subsequent to the signing of agreements with IMI-Kyiv, a contract was signed between Loyola and the Institute for Single Crystals (ISC), with ISC serving as the subcontractor for the KharkivSBI. In a competitive process, Dr. Inna Gagauz was named as director. In addition to being a provider of training and consulting, the Kharkiv incubator provided space for selected clients in need of high-speed Internet service. This service was provided by a brokered deal between the US Department of Energy and George Gamota. The incubator space was provided to companies participating in a competitive process. Companies who showed the greatest promise and need of a high-speed Internet received the housing.
As a measure to provide evidence of sustainability commitments, both organizations signed agreements to provide substantial cost sharing. Both also signed agreements pledging to follow the USAID standard provisions that our parent cooperative agreement requires of subcontractors.
In a competitive process, four proposals are received from Ukrainian banks to handle the loan guarantee program. Of that number two were chosen to handle the loans, one in Kharkiv and one in Kyiv.
The first cycle of educational modules for the KyivSBI and KharkivSBI, and associated consulting begins.
Each SBI began with a seminar open to all who were interested in signing up. At the close of each seminar a call was made for submission of business plans by those interested in participant in business development training. An Executive Committee was formed to review first set of business plans from Kyiv (two sets) and Kharkiv.
An intensive (75-hour) course for BID Program incubator managers is conducted in Baltimore under the direction of Bob Margenthaler, the former Loyola Business School Dean. The course includes site visits to American incubators in Maryland and Pennsylvania.
The Expert Rada analyzes 10 business plans from the first class at the KyivSBI and recommends four of them for funding by means of loan guarantees.
A memorandum of understanding is negotiated with the Western Ukrainian Bank in Kharkiv to serve as the basis of the loan guarantee program there. It is identical with the one previously signed with the AGIO Bank in Kyiv to simplify operations.
At a suggestion by George Gamota to USAID, BID agrees to reprogram $200K to $300K of the existing award to expand operations in Kharkiv, and fund the cash poor pilot of the Kharkiv Initiative Program – the Marketing Assistance Program or MAP. The BID Program provide leadership in coordinating their effort with that of the DAI’s NewBizNet, and Alliance programs. BID’s contribution to MAP provided a broad range of training for small and medium sized companies designed to augment the introductory marketing courses proposed by.
Recommendations for BID Program measurement indices are prepared for USAID. These include measures of overall impact, as well as impact of BID education and consulting programs on participating companies, and the impact on the recipient companies of the direct financing (loan guarantees), and access to other sources of Ukrainian and foreign financing and investors, provided by the BID Program.
At the request of the BID management and with support of USAID/Kyiv, BID received Authorization from USAID/Washington to open the incubators to start-up companies. Preparation of course modules for start-up companies began. Courses based as much as possible on educational materials already available from the KharkivSBI and the Kharkiv Polytechnic University was used plus new material was developed by Ukrainian and American staff.
In preparation for granting loans to qualified borrowers the "Bank Deposit Agreement" and the "Property Rights Collateral Agreement" are completed and coordinated between the AGIO Bank and the law firm, Frishberg & Partners, acting on behalf of Loyola College. Further, a draft Power of Attorney to duly authorize the signatories for Loyola College is prepared.
The BID Program continues to prepare a substantial amount of electronic media on the Web and CD for its clients among the Ukrainian small and medium sized enterprises (SME's). This will provide supplemental information and training for SME's while offering a reference source and serve as an organizational guide to creating a business. BID views the development of this material as an important extension of its business services infrastructure, which will contribute to the development, growth, and durability of technology-oriented SME's in Ukraine (See Events: Conferences, Seminars, Workshops And Presentations).
Final arrangements are made between Dr. Andreyev and Leo Owsiatckij of the Science and Technology Center in Ukraine (STCU) to put on the course “Commercialization of Innovations” for STCU clients. This course, which was held in Kyiv in April and Kharkiv in June, brought an income of $17,000 to the two SBIs, with options for an additional set of 4 courses to be provided later, boosting their prospects for sustainability significantly.
Dr. Gamota meet with USAID and proposed to help coordinate and develop the Marketing Assistance Program (MAP) in coordination with NewBizNet and Alliance, and subsequently, as part of a USAID-led delegation, meet with Kharkiv city and Oblast officials to get approval for the program. The MAP program schedule and list of courses is identified and agreed to by all parties. A press release was submitted to the Kharkiv newspapers. BID and its Kharkiv partner, Kharkiv Technologies participated in this joint activity and developed the more advanced marketing program for Kharkiv's high-tech companies.
The BID Program “American Representative Office” is conceived. Its purpose is matching US and Ukrainian companies to facilitate joint ventures, alliances, partnerships, licensing, outsourcing deals, and other business-to-business marketing. BID staff in Ukraine will locate, review, evaluate Ukrainian companies and train their representatives in developing their portfolios and in making presentations to US firms. US staff will work with the Ukrainian representatives in the US to improve the Ukrainian image, reduce barriers to US firms, and capitalize on US outsourcing needs.
Formal modification to our coop agreement is approved and allows reprogramming of $300,000 from the loan program to the Marketing Assistance Program in Kharkiv. A review of MAP program progress in Kharkiv is held before the city and oblast administration. Dr. Gamota and Ms.Gagauz make presentations on the BID Program's participation in the Marketing Assistance Program. In total it is expected that BID will teach marketing and other business development skills to 500 persons from about 240 technology-based companies in the Kharkiv region.
The BID Program receives approval from the National Science Foundation and the Office of Innovative Technology in Reston, Virginia to provide exhibit space for our Ukrainian client companies at a Small Business Innovation Research (SBIR) Conference. Representatives from four BID client companies attend with travel support from Loyola. The BID Program also conducts a session at the conference for the clients to present their products and services, "International Collaborative Ventures: Business Opportunities through S&T Partnerships".
An American Representative Office (ARO), for Ukrainian companies, continues to develop. Its purpose is matching US and Ukrainian companies to facilitate joint ventures, alliances, partnerships, licensing, outsourcing deals, and other business to business marketing. Ukrainian side.
The BID Program finalizes copyright and content acquisition for its new CD-ROM targeted at Ukrainian small and medium sized enterprises (SME's). The CD-ROM contains basic, fundamental business management information and is applicable to SME's and microenterprises in any region or country. This CD product will provide supplemental information and training for SME's while offering a continuously available reference source and serve as a self paced organizational guide to creating a business.
A delegation consisting of 12 Ukrainians participates in “Ukraine Technopark Managers Course” at Loyola College in Baltimore.
The BID Program American Representative Office (ARO) is established in Arlington, Virginia at an office/apartment rented by Loyola College with overhead funds. Four participants spend an average of three weeks there every quarter, learning how to make contacts with American sales prospects in person, on the Web, and through traditional media.
USAID approves a six-month no-cost extension to permit establishment of the loan program and to ensure that the incubators are integrated with the new technoparks.
The BID Program received word that our proposal to Ambassador Taylor for $100,000 in additional funds to establish a branch incubator in Slavutych has been accepted by the State Department, and funds are transmitted to USAID to help administer them.
The Government of Ukraine approves a tax-exempt status for CID and Kharkiv Technologies, which will ensure non-taxation of money received through the BID Program, and the final stage negotiations with banks on loan money transfers are completed. The approval by USAID of our loan guarantee process permits us to move ahead with this program, and the first loans will be awarded next quarter.
The White House announces during President Clinton’s state visit to Kyiv that we would be creating a SBI to help the effort to close Chornobyl. The BID program signs a second MOU with the mayor of Slavutych, which calls for their side to contribute space for the new SBI office and a dozen small business startups.
Ongoing cooperation with USAID controller and program officer result in approval to begin transferring loan funds to CID and Kharkiv Technologies and a process to promptly reimburse Loyola College for the outlay of funds. The first trial loan transfers were made in September 2000.
The Slavutych Small Business Incubator (SSBI) project is initiated as part of a one-year extension to the USAID/Loyola College Cooperative Agreement. The CID will provide the managerial and administrative guidance to establish the SSBI and will oversee its in-country budget. As part of the SSBI initiative, significant support is provided to the Slavutych Business Development Agency in preparing a promotional brochure for the BDA and the SSBI.
Both CID and KT select firms to be considered for the first loans and begin preparing documentation for their respective banks for evaluation, and recommendation for loans to these firms. This provision of capital for small business development is the final phase of the original BID Program.
Loyola receives approval from the Ukrainian Government for Loyola College’s Representative Office. This approval comes with the help of Frishberg & Partners law firm after years of effort. The Loyola Representative Office is located in the Paton Electric Welding Institute (PEWI) near the Center for Innovations Development (CID). Agreements are completed between Loyola College and the PEWI for leasing space and fees for services.
The second increment of the loan guarantee funds are transferred to the bank accounts of CID and KT and Loyola receives reimbursement from USAID. This incremental action is taken to prove the process with some initial funding, and correct any deficiencies before major commitments are made. The process works efficiently. The next increment of loan funds was transferred after CID and KT have successfully implemented the loan guarantee process and a loan to a firm from each has been finalized.
The Slavutych SBI offices in the bank annex were completed and opened for operation.
The first two loans of the program are awarded.
CID’s first loan is awarded to MX Motors in the amount of $21,712.52 to purchase a Japan manufactured milling machine. The loan is approved and made on March 28, 2001 for duration of 18 months at an interest rate of 14 percent. MX Motors puts up $3,000 collateral on deposit in AGIO Bank and CID, and MX Motors enters into a Property Rights Collateral Agreement. MX Motors orders the equipment, prepaying 70 percent of the cost from the loan.
KT’s first loan is awarded to Kryos Ltd. in the amount of $10,000 for technological modernization of their production processes.
Preparations began to transfer property purchased under coop Agreement to KyivSBI and KharkivSBI. Remaining loan funds are transferred to Ukrainian banks.
Kharkiv Technologies awards 3 additional loans.
Kharkiv Technologies awards 12 additional loans.
Kyiv “Center for Innovations Development” awards 6 additional loans.
December 2001, NGO “Business Club of the Center for Innovations Development” registered.
March 2002 – The Assets purchased by Loyola abroad transferred to the CID.
March 2002, BID part of the SSBI is opened. Protocol “On Results of the Project "Creation of Small Business Incubator in Slavutych City" 1999-2001 years between Slavutych City State Administration, Ukraine, Business Development Agency, Slavutych, Ukraine, Center for Innovations Development, Kyiv, Ukraine, International Technology Research Institute of Loyola College in Maryland, USA is signed.
TACIS part of the SSBI is opened.
June, 2002 Agreement on the Transfer of the Assets between the CID and Slavutych administration is signed.
June 2002, NGO “Laboratory of Small Business” (LSB) created.
First courses on the SBI management in small towns delivered by the LSB.
Duane Robert Shelton is the Director of ITRI and the Director of BID Program. He has led foreign technology assessments since 1984, as a policy analyst at NSF, and now as ITRI Director. He summarized the findings and policy implications of these studies in Benchmark Technologies Abroad: Findings from 40 Assessments 1984-94, published as an ITRI Monograph in 1994. After years of focusing on Japanese technology assessments, Dr. Shelton organized an expansion worldwide by raising funds for studies of technologies in Western Europe and the Pacific Rim. To take advantage of the new glasnost policy of openness, he organized and led ITRI's first delegation to the Soviet Union - a study of nuclear power plant controls in 1991. Subsequently he has reviewed Ukrainian R&D in Kyiv, Kharkiv, and Odesa. Dr. Shelton has served as a professor at several universities, including chairing departments of engineering, computer science, and applied mathematics. In 1994 he was awarded an IEEE Congressional Fellowship and in 1995 served as a legislative assistant to Representative Lloyd Doggett from Austin, Texas.
Dr. George Gamota is Associate Director of ITRI, Chief Operations Officer and In-Country Manager of the BID Program. Dr. Gamota is an expert on U.S. and foreign technology. He has been a frequent visitor to the Ukraine since 1992 and is the author of the five-volume report: Science, Technology and Conversion in the Ukraine. For his work in the Ukraine, he was awarded an Honorary Membership in the Ukrainian Physical Society, the first foreign member to receive such a distinction. In 2000 he was elected a member of the prestigious National Academy of Sciences of Ukraine. He has experience in creating small business ventures and was the founder and Chairman of the Board of the Michigan Research Corporation, a venture capital company created to help spin-off businesses from research performed at the University of Michigan. Also, while Division President at Thermo Electron Corporation in Waltham, Massachusetts, he acquired and restructured a $17 million company, created a new laser company, and a new business line in thermoelectric coolers for the electronics and recreation industry. Dr. Gamota is also an educator, who has experience in adult training. During the early 90s, he was Director of the MITRE Institute, a training unit of the MITRE Corporation, a major engineering firm. He also taught at the University of Michigan, where he was Director of the Institute of Science and Technology, an interdisciplinary unit focusing on applied research and high-technology business development. Dr. Gamota is a Ukrainian-American and fluent in Ukrainian.
Dr. Margenthaler
Dr. Bob Margenthaler crm@loyola.edu is Director of the ITRI Business Development Division and Professor Emeritus in the Joseph A. Sellinger, S.J., School of Business and Management at Loyola College in Maryland and served six and one-half year tenure as Dean of the Sellinger School. While Dean, Dr. Margenthaler established, with the support of business executives, three Centers of Excellence to serve his vision for the Sellinger School, i.e., to build partnerships with the business community. He assumed the responsibilities of Executive Director for the Lattanze Center for Executive Studies in Information Systems in April 1997, a center focused on strategic issues of importance to information technology executives. He began service of the Business Development Division of ITRI on September 1, 1998. Dr. Margenthaler has worked extensively with small business incubators in the United States. For the field study activity in the MBA programs, he and his students concentrate on small businesses and the development of business plans for their future growth. He is a regular participant in the Small Business Administration's Program for Minority Business Executives. He has also conducted international seminars and courses, focusing on strategic management and total enterprise simulation, at Egyptian Ministry of Defense in Cairo, Renmin University in Beijing, City Government of Shanghai, XLRI in India, and ILADES in Santiago, Chile. Prior to joining Loyola College, Bob gained experience in a 24-year career in the United States Air Force. He held positions in research and development for space operations; chief scientist in the Logistics Directorate of the Joint Chiefs of Staff, Pentagon; and faculty member with the Industrial College of the Armed Forces and the National Defense University in Washington, D.C.
Alistair Brett a.brett@worldnet.att.net is the Head of the BID Program Special Projects Section and also directs training and evaluation. Dr. Alistair Brett is a principal in the Technology Education and Communications Institute Inc., a company specializing in training for technology development and transfer. He is also a Senior Associate at Oxford Innovation Ltd. (UK). Dr. Brett was formerly Director of Technology Management and Transfer for Virginia Polytechnic Institute. Dr. Brett served as a consultant for the Business and Technology Centers Division of Control Data Corporation, where he helped design and implement strategies for new business incubators. He has run national and international conferences on technology commercialization, and is co-editor of the book; University Spinoff Companies. He was also principal consultant for the formation of two seed capital funds. Dr. Brett served on the National Board of Advisors for the U.S. Federal Laboratory Consortium. He was Virginia Tech Project Manager for the USAID grant to develop the International Business and Technology Incubator in Moscow. In this position he was responsible for prime contractor project oversight, and was in charge of business training program development, American-Russian liaison, and funding support from European organizations. Dr. Brett is currently assisting in the development, in Central and Eastern Europe of the global Master of Science degree in Technology Management & Commercialization with the IC2 Institute at the University of Texas at Austin.
Mr. Bailey
David Bailey ebailey@idt.net is Director of Communications for the Ukrainian BID Program. He started Electronic Knowledge Corporation in 1993, which specializes in international science and technology information for business, industry, and government. Before starting Electronic Knowledge Corporation, Mr. Bailey worked on-site at the Defense Advanced Research Projects Agency (DARPA), as a contractor monitoring international technology developments for DARPA's technical program managers. Mr. Bailey is currently involved with international business development and marketing initiatives and was one of the principals in the development of the Russian incubator program. Mr. Bailey recently completed a jointly funded U.S. Department's of State and Commerce project which involved the research, composition, and editing of the publication, Compendium of Foreign Science and Technology Information Sources in the Federal Government and Select Private Sector Organizations.
Viktor Hryhorovych Baryakhtar was the Chairman of the Expert Rada for the BID Program. He is well known internationally for his pioneering work in magnetism, and has been a leading authority on problems related to nuclear power and safety, including Chornobyl; energy issues. He is the Vice-President of the Ukrainian National Academy of Sciences, and was the first President of the Ukrainian Physical Society. He is a Member of the Science & Technology Council of the Ministry of Chornobyl; Member of the Science & Technology Council of the Ukrainian Government Committee on Urgent Accidents; and Adviser to the President of Ukraine on Nuclear Industry Problems. He is the chair of the committee for science and technology of the Kuchma-Gore Commission. He is fluent in English.
Dr. Andreyev
Volodymyr Andreyev was the Head of Ukrainian Coordination Office (UCO) and KyivSBI Director. Subsequently he became the director of the Center of Innovation Development (CID) while continuing to be the Head of the UCO, and act as the principal senior person representing Loyola College. He has a Candidate degree in physics and mathematics and is an experienced researcher. In 1994-1996 he was a director of the small business company using computer technologies. In 1995, he was co-director of Advanced NATO Workshop for Network Administrators. He was a professor of physics at the Kyiv University, and was one of the founders of the Ukrainian Physical Society in 1990. Dr. Andreev is fluent in English, and has traveled extensively to the West. In 1995, he received a fellowship from the AAAS to spend three months in Washington, to learn the U.S. proposal process used by R&D funding agencies.
Inna Gagauz gagauz@isc.kharkov.com was the Director of KharkivSBI, and later became the director of Kharkiv Technologies. She has 23 years of experience in the science and engineering fields of spectrometric and optical characteristics of alkali halide and other crystals and also in plastic scintillates studies. In 1975, she graduated from the Radio Engineering Department of Kharkiv Aircraft Institute (Technical University). She is a scientist at the Institute for Single Crystals, Deputy Head of Alkali Halide Crystal Department of Scientific Technology Center "Institute for Single Crystals". She has a certificate of High State Courses of advanced training for engineers and research workers on the problems of the science of theory and practice of patenting and inventions. She was awarded by the medal "Honor Inventor of the USSR". She is a member of the Ukrainian Nuclear Society. Mrs. Gagauz is an author or co-author of over 30 scientific articles and 8 inventions. Mrs. Gagauz is now engaged in using her scientific expertise to assist Ukrainian small businesses in the development, evaluation, and commercialization of technologies.
Dr. Katerniak
Ihor Katerniak ik@uar.net is the Director for Development for the BID Program and Director for Technology Promotion Center at the Lviv Institute of Management. He has a Candidate degree in physics and Mathematics from Lviv University and an MBA from Lviv Institute of Management. He also took business courses and was an intern at Wayne State University in Detroit, MI, and University City Center, Philadelphia. He has extensive experience in technology transfer, and has worked on several USAID sponsored programs. Most currently, he has become a consultant to the Ukrainian State Committee for Development of Entrepreneurs and since 2000; he has been the Director of the Ukrainian Distance Learning System (http://www.udl.org.ua). He is fluent in English.
Oleksandr Slobodyanyuk slobod@slobod.kiev.ua is the Executive Secretary of the Expert Rada for the BID Program. He is also a vice president of the Ukrainian Physical Society (UPS) and head of the UPS Special Ventures. He is a professor at Kyiv University, where he is a scientist in the field of applied optics. He holds 15 patents and has experience in laser applications. He has experience working in industry and has made extensive trips to Germany and the U.S. over the last 15 years. He has management experience in leading a team of scientists and engineers and received his D.Sc. degree in 1995. Professor Slobodyanyuk was one of the founding members of the UPS. He was its first Chairman of the Coordinating Board responsible for the American Physical Society grant program in Ukraine --the first large scale international scientific funding program in Ukraine. As Chairman since 1990, he gained official recognition for the UPS as a nongovernment organization, helped it acquire legal status, set up legal system of fund transfers from the U.S., and was instrumental in gaining a favorable tax status for the UPS grants. In 1995 he was elected Vice President of the UPS. He is fluent in English, German and Russian.
Eugenia Severianina was the Office Manager for the Ukrainian Coordination Office, and since the creation of the Center of Innovation Development (CID) she has been the Deputy Director of CID. She also has had extensive experience working in the US for the George Soros’ International Science Foundation While working under the BID Program she has been responsible for accomplishment of the “Small Business Incubator in Slavutych” project and cooperation with PEWI Technopark .She has a Candidate degree in physics and mathematics from the Institute of Physics of Metals, National Academy of Sciences of Ukraine. E. Severianina was working 7 years as a Group Leader at a Design Office of the world known Kyiv “Arsenal” plant and more than 10 years as a Senior Staff Scientist at the Institute for Problem of Materials, National Academy of Sciences of Ukraine. Mrs. Severianina is an author or co-author of over 50 scientific articles and 5 inventions. Thus her strong experience in science and applied research is extremely helpful in carrying out projects connected with the evaluation, development, and commercialization of technologies. She is fluent in English, Russian and Ukrainian.
International Management Institute is an institute for post-graduate studies located in the capital city of Ukraine. Its mission is training Ukrainian business professionals using leading-edge management education methods. These methods are adapted to address the unique challenges of Ukrainian business practices. IMI-Kyiv was the first business school of its kind to be established in the former Soviet Union. It was launched in 1989 with the mission to educate professional managers as leaders of Ukraine's progression towards a prosperous globalized economy. Its founders are the Institute of Economy (Ukrainian Academy of Sciences) and the International Management Institute in Geneva.
In 1995, IMI-Kyiv began conducting a series of programs focusing on expanding and developing the business skills of professional community leaders. IMI-Kyiv fulfils management development needs at all levels, including:
Strategy seminars for senior management;
Broadly-based integrated management programs covering a range of disciplines;
Highly focused workshops and courses on specific subjects.
Such programs, lasting from three days to several weeks, are based on current international business practices and how they can be applied to the existing economic situation in the Ukraine. Program participants are managers and executives from multinational and Ukrainian companies, as well as community leaders.
Kharkiv State Polytechnic University (KPU) is the largest technical education institution in Eastern Ukraine, has a long history and extensive experience in providing education and training to industry and the military in the Kharkiv region. KPU has a long history of training for defense-industrial complexes in the region. In the 80's KPU enrollment was around 25,000, but is now down to around 12, 000 because of the loss of military-industrial training contracts. Many department specialists are however still involved with these enterprises and helping convert to other activities.
2. Shelton, R. D., The ITRI Web Site, http://itri.loyola.edu/itri/ September, 1998.
7. Siegel, Richard and Evelyn Hu, Russian Nanotechnology Research, ITRI, Baltimore, 1999.