How to create innovation ecosystem in Armenia: case study of a technology park

How to create an innovation ecosystem in

Armenia: case study of a technology park

MTE Master Thesis Report

Year: 2014

Company: Enterprise Incubator Foundation

Student: Areg Gevorgyan

Company supervisor: Sona Kochkanyan

MTE supervisor: Lebret Hervé

2 Master Thesis Report: Areg Gevorgyan

Table of Contents 1. Executive summary ........................................................................................................................ 4

1.1. Overview of proposed approach .............................................................................................. 5 1.2 Highlights from selected model for the project .......................................................................... 6

2. Project Concept .............................................................................................................................. 8 2.1. Project background .................................................................................................................. 8 2.2. Mission, Objectives and Benefits ............................................................................................. 9

2.2.1. Mission .............................................................................................................................. 9 2.2.2. Objectives ....................................................................................................................... 10 2.2.3. Benefits of stakeholders .................................................................................................. 10

2.3. Technology Park Overview .................................................................................................... 11 2.3.1. Business incubator .......................................................................................................... 12 2.3.3. Co-working spaces ......................................................................................................... 14

3. Technical Design .......................................................................................................................... 15 4. Organizational structure ............................................................................................................... 16

4.1. Board of Trustees .................................................................................................................. 16 4.1.1 Board Duties .................................................................................................................... 17

4.2 Staffing .................................................................................................................................... 17 4.2.1 Executive Director ............................................................................................................ 18 4.2.2 Financial Manager/Accountant ........................................................................................ 18 4.2.3 Business Development Manager ..................................................................................... 18 4.3.4 Operations Manager ........................................................................................................ 19 4.3.5 Legal Consultant .............................................................................................................. 19 4.3.6 Support Staff ................................................................................................................. 19

5. Service Offerings .......................................................................................................................... 21 5.1 Standard Services: ................................................................................................................. 22 5.2 Additional Services ................................................................................................................. 23 5.3 Enterprise Counseling ............................................................................................................ 23 5.4 Training Services .................................................................................................................... 24 5.5 Financial and Commercialization Services ............................................................................. 25 5.6 Technology Counseling and R&D Support ............................................................................. 25

Master Thesis Report: Areg Gevorgyan 3

5.7 Networking .............................................................................................................................. 26 6. Tenant selection ........................................................................................................................... 27

6.1 Technology Park Tenant Selection ......................................................................................... 27 6.1.1 Application process .......................................................................................................... 27 6.1.2 Tenant Recruitment .......................................................................................................... 28

6.2 Business Incubator Tenant Selection ..................................................................................... 28 6.2.1 Application Process: ........................................................................................................ 28 6.2.3 Evaluation Criteria ............................................................................................................ 28 6.2.4 Graduation Policies .......................................................................................................... 29

7. Marketing ..................................................................................................................................... 31 8. Budget and Financial Plan ........................................................................................................... 32

8.1 Projected income statement: .................................................................................................. 33 8.2 Projected cash flow ................................................................................................................ 33 8.3 Scenario analysis ................................................................................................................... 33

9. Opportunities and risks ................................................................................................................ 35 9.1 Strengths: ............................................................................................................................... 35 9.2 Challenges: ............................................................................................................................. 36

APPENDIX I – JEC Business Incubator Tenant Services Innovation Continuum Process .............. 37 APPENDIX II -- Projected Income Statement .................................................................................. 38 APPENDIX III -- Projected Cash Flow .............................................................................................. 39 APPENDIX IV – Pessimistic Scenario Analysis ............................................................................... 40 APPENDIX V – Optimistic Scenario Analysis .................................................................................. 41 Bibliography ..................................................................................................................................... 42


1. Executive summary Enterprise Incubator Foundation (EIF) was established in 2002 within the framework of the

World Bank’s “Enterprise Incubator” project, the mission of the company is to support the

development of information and communication technology sector in Armenia through

creating a productive environment for innovation, technological advancement and company

growth. Nowadays EIF has become of the largest technology business incubators and consulting companies in the region, operating in Yerevan, Armenia.

The company has big experience in building linkages between business and research

communities in key technology markets. Examples of projects conducted by EIF are

Microsoft Innovation Center, Regional Mobile Applications Laboratories for ECA in

cooperation with Nokia, Armenian National Engineering Laboratories in cooperation with

National Instruments, Gyumri Technology Center, IBM Innovative Solutions and

Technology Center. Many of them include skill development component and implement

annual startup/team contests. Moreover EIF is conducting startup/team competitions such

as Science and Technology Entrepreneurship Program (STEP) and Innovation Matching

Grants Competition, as well as has established first Venture Fund in the region. We can

conclude that the company has created environment for support of ICT enterprises in all stages of development.

During the 12 years of operation in the ICT sector EIF has shown positive impact to sector,

contributing to the annual 20% growth1. The management team has prioritized

diversification of the operating sectors in the global strategy of the company for coming decade.

In 2014 in the framework of Trade Promotion and Quality Infrastructure program of

International Bank for Reconstruction and Development supported by Ministry of Economy

of Armenia, EIF was offered to contribute to the Public Private Partnerships (PPPs) for

Cluster Development component of the program. The management team of EIF has

chosen project for creation of technology cluster for engineering sector. The project was 1 “Enterprise Incubator” Foundation (2014) ICT Industry Report 2013


chosen taking into account the studies2 that show how important are creation of business

clusters in modern technological world, as well as the project will also contribute to the

global strategy of the company. This should be an initiative, which will be focused on

technology transfer as a method for sourcing innovation, enterprise and economic development, and improving global competitiveness of the engineering sector of Armenia.

This report paper summarizes a research conducted to develop specific approaches for

creation of a Technology Park in Armenia, based on the exploration of worldwide experience.

1.1. Overview of proposed approach Jrvezh Engineering City (JEC) is to be a one of the catalysts for the transformation of the

regional and national economy. The proposed model presented in this project is designed

to promote R&D and new venture creation and will use technology commercialization and

entrepreneurship as the engine for economic growth. Armenia’s recognition as a high

technology innovation center depends on an investment in human and business capital

that will provide the necessary infrastructure and talent to entice investments. The Jrvezh

Engineering City (JEC) program is designed to accelerate the development of high tech

and engineering industry in Armenia and to serve as a focal point for fostering regional

economic development within Armenia, its bordering trading partners and the USA.

Ultimately, these achievements will result in the creation of new wealth and new high-value jobs. The technology park will provide such services as:

1. Identification of Armenia’s innovation with global, commercial potential;

2. Transfer of USA, European and other Global market technologies into Armenia for the

formation of new enterprises;

3. Identification of Armenia’s entrepreneurs in high-tech sector to lead new businesses;

4. Training of Armenia’s entrepreneurs for international business in high-tech sectors;

5. Connections to international capital and know-how networks;

2 Junfu Zhang, (2003) Growing Silicon Valley on a landscape: an agent-‐based approach to high-‐tech industrial clusters


6. Generation of business engagement agreements between foreign and JEC entities that

can lead to future international business and technology transfer agreements;

7. Transfer of technology commercialization methodologies and entrepreneurship

education to local entrepreneurs and partners in order to bring sustainability to the region beyond the duration of the program.

1.2 Highlights from selected model for the project The Jrvezh Engineering City project model was selected after exploration of literature on

worldwide experience in technology park creation and technology commercialization.

Taking into consideration economic, geographical and industry issues existing in Armenia, Highlights of the Technology Park model are presented below:

1. The park will focus on developing adequate physical facilities to house small, medium

size and large technology companies. Including business incubator and co-working space

for small enterprises, as well as office building opportunities for medium and large companies.

2. The businesses and entrepreneurs invited to partake of the services and support

provided by the park would be selected on the basis of the economic significance and

importance of their business for the overall economy of Armenia, the level of development

of the products or product prototypes proposed, and the interest shown by the financial community and potential investors.

3. The economic results of this model could be significant and relatively short-term. The

gains achieved by strengthening and perfecting existing competitive enterprises could

provide seed money for future investments and open the door to the establishment of lines

of like products.

4. This proposes funding innovators and entrepreneurs with a focus on technology, as well

as, assisting currently successful businesses and industries to further growth by providing technological innovations in their business/industry.


5. In order to ensure future innovators and entrepreneurs in Armenia, considerations will be

given to funding universities and research centers in the areas of technology and laboratories.

6. This model assumes identification of industries with high growth potential, assessment of their needs and challenges and detection of the solutions for future cooperation.

7. The universities and educational institutions are an important component of the value chain where the park is expected to build strong linkages with public and private sectors.


2. Project Concept

2.1. Project background The policy to support investment in technology and science and its manipulation and

exploitation through technology transfer is supported at Presidential level with the intention of it being a greater part of the economy of Armenia in the future.

The growing market of offshored engineering services on one side, and Armenia’s

traditions and current capabilities on the other side, provide opportunities for Armenia to

penetrate global markets for engineering services. The intensified search for young talent

and access to market insights drives the global companies internationalize their R&D

activities. Since the 1980s, Engineering Service Outsourcing (ESO) has expanded from

basic scanning and digitizing engineering drawings to the outsourcing of new product

development, value-engineering and engineering consulting. Market sources estimate that

global spend on engineering services was around $930 billion in 2012, and will reach $1.4 trillion by 2020 – a 50 percent growth in less than a decade3.

Engineering sector survey4 identifies an opportunity for Armenia to become an engineering

R&D center for second-tier multinationals (current experience: National Instruments, ST Engineering, etc.). The strengths of Armenia for this purpose are:

• Inherited engineering traditions and workforce

• High level of education in mathematics and physics

• Limited yet expanding application of modern software packages

• Advanced information technology industry supporting to provide engineering

services by application of IT instruments

• Advanced IT industry and improving education in this sector favor the demand for

high-qualified specialists to be increased

• Educational and supporting initiatives of international organizations 3 Jim Routzong (2013) Robust Growth For Engineering Services Outsourcing 4 Economy and Values Research Center (2010) ENGINEERING DESIGN SECTOR RESEARCH AND FEASIBILITY STUDY


This objective, however, requires a deliberate strategy to develop missing and upgrade the existing capabilities.

2.2. Mission, Objectives and Benefits

2.2.1. Mission

The mission of Jrvezh Engineering City (JEC) is to promote, stimulate and support

prosperity and growth of the engineering sector of Armenia, by recruiting and supporting

technology based start-up, local and foreign companies that employ highly skilled workers and develop the competitive strengths of the industry.

Armenia’s emergence as a high technology, innovation center and as a business gateway

in the Caucuses depends on an investment in human and business capital that will provide

the necessary infrastructure and talent to entice investments.

The primary focus of JEC is to assist regional, technology entrepreneurs to successfully

develop and market their concepts/products/services by benefiting from synergy within

engineering city tenants. As well as accelerate the development and growth of technology

companies in the Engineering sector of Armenia. The target clients are innovative

technology entrepreneurs and currently successful medium/big sized companies with

defensible intellectual property, large market potential and principals, who show a strong desire to grow their business.

The ultimate mission of JEC is to foster the development of the image of Armenia as center

for innovation and R&D in the region. The political developments in the region in the near

future particularly expected membership of Armenia in the Eurasian Economic Union (EEU)

and Eurasian Economic Community (EurasEC) can give opportunity of positioning Armenia

as the innovation hub for the Union. The JEC should be aimed to become catalyst for these

prospective by providing competitive facilities and expertise for innovative technology solutions and high-tech product development.


2.2.2. Objectives

Main objectives of JEC project are:

• Creation of enabling infrastructure to foster R&D in the country, including facilities

and workforce development for high-tech engineering companies.

• Creation of innovation and entrepreneurship cluster for developing technology

solutions and promoting innovation, which asumes generation of critical amount of

innovation oriented brains, experts, visoners and business people in one place.

• Creation of favorable environment for attracting investments, by providing full

assistance in establishment of the business for foreign companies, including

facilities and workforce.

• Encourage job creation, by providing an environment conducive for fast growth of

the tenant companies.

2.2.3. Benefits of stakeholders

The JEC Program will benefit the overall Armenia’s economy by creating new opportunities

and generating high-value jobs. JEC expects to enhance the existing eco-system by

deploying key methodologies and facilitating new deal flow, which leads to the creation of new technology-based ventures and enhances existing Armenian technology companies.

Multiple stakeholders bring a variety of concerns and strengths to the project. All

stakeholders hope to benefit by the image of a successful program, and in turn bring credibility to the incubator clients.

The benefits of a JEC for different stakeholders are as follow:

For Tenants - It will enhances the chances of success, raise credibility, help improve skills,

create synergy among client-firms and facilitate access to market, information and capital. Specifically:

• Access to global markets

• Access to foreign innovation

• Entrepreneurship and technology training


• International business development support

• New business deals

For Government- The engineering cluster will help to overcome market failures, promote

regional development and generate jobs, incomes and taxes.

For Private Sector- It helps to develop opportunities for acquiring innovations.

For Public Sector- It creates self-esteem and an entrepreneurial culture, together with local incomes as a majority of the graduating businesses stay within the regional area.

These are the desired outcomes of the Jrvezh Engineering City and emerging evidence

suggests that the benefits indicated above are realizable and, in many cases, prevail over

the net subsidy. It is worthy to mention that, often during the initial period of incubation, the

start-up entrepreneurs mainly create jobs for themselves and conserve their limited funds

and only when they graduate and leave the incubator some of them start to grow

exponentially creating employment, incomes and taxes, so the benefits in such cases can be achieved only in the long run.5

2.3. Technology Park Overview Technology parks are aimed to create environment for production and commercialization of

new technologies, by encouraging collaboration between tenant companies and research

centers. Tenants of technology parks are usually small or medium companies, which have

big potential for growth and new product development initiatives. In order to facilitate

successful fulfillment of the growth potential and implementation of these initiatives, the

technology park provides:

• supportive business environment and facilities

• professional, technical, administrative and legal assistance

• training and skill development services

• IT services

5 Junfu Zhang (2003) High-‐Tech Start-‐Ups and Industry Dynamics in SiliconValley


It is commonly adopted practice to create partnerships between technology parks and

universities6. This gives tenants opportunity to:

• use pool of graduate and undergraduate students through internships

• have access to technology and intellectual property belonging to the university

• contractual use of university owned laboratories

• access to the university library system

The Technology Business Incubator (TBI’s) is an integral part of most technology parks

and a one of major contributor to their success7. Another concept of innovative

environment, which is suggested to be included in Technology Park is co-working space.

Both concepts will be discussed in the next chapters.

2.3.1. Business incubator

Business Incubators are defined as a location in which entrepreneurs can receive

proactive, value-added support and access to critical tools, information, education,

contacts, resources and capital that may otherwise be unaffordable, inaccessible or

unknown. The tenant companies generally remain in the incubator for approximately two to

four years8, after which it is intended that they graduate and become independent, self-

sustaining businesses.

Well-structured incubators provide business support services in order to enhance and to

develop business; upgrade skills and techniques; and to provide technological advice and

assistance, financial resources, and initial marketing assistance; and access to potential

investors and strategic partners, to name a few. Traditionally, incubators have a

management team who oversee the day-to-day operations, as well as, be the service

system to the enterprises. This focused help to selected firms has been shown to increase

their chances of long-term survival and ultimate success; the evidence also indicates that 6 Mahdi Moudi, Hamid Hajihosseini (2011) Science and Technology Parks, Tools for a Leap into Future 7 Rick Petree, Radoslav Petkov, Eugene Spiro, Institute for East-‐West Studies (2000) Technology Parks – Concept and Organization 8 Charles W. Wessner (2008) UNDERSTANDING RESEARCH, SCIENCE AND TECHNOLOGY PARKS: GLOBAL BEST PRACTICES


the initial subsidy provided by the government in funding the incubator is returned in

various forms including increased taxes and social benefits such as stimulating

entrepreneurship and cultural change.

Technology business incubators are a specific type of business incubators, which focus on

new companies with more advanced technologies. The nature of technology incubators is

closely related with high technology development that is why universities and research

centers act as the main forces behind their development.

A typical Technology Business Incubator provides its clients not only with the rental space

at an affordable price but also a full range of business and specialized services aimed to

intensify technology utilization. TBIs generally have strict admission and exit criteria and

the set of business support services is designed to include those that facilitate technology

transfer and commercialization of new technologies. A common characteristic of

Technology Business Incubators is the physical and intangible supports they provide to

tenant firms, which are aimed to helping them commercialize knowledge-intensive products

and services.

The main objectives of TBIs in developing countries are economic development,

technology commercialization, property venture/real estate development and

entrepreneurship9.

All over the world technology business incubators are confirmed as one of the important

tools for the technology entrepreneurship and sustainable economic development of

specific regions. By providing business supporting services and enabling overhead costs to

be reduced by sharing facilities, TBIs can significantly improve the survival and growth of

start-ups and small companies at an early stage of development.

9 Organisation for Economy Co-‐operation and Development (1997) Technology Incubators: Nurturing small firms


2.3.3. Co-working spaces

Co-working space is an idea, which has emerged from the commercial desk share

practices. The “co-workers” are individual or small team of entrepreneurs who are working

in common space10. The share of the space brings to share of knowledge, practices and open communication between entrepreneurs.

Generally co-working spaces offer the co-workers verity of membership packages, which include reserved desk for the client plus additional services depending on package.

The governing body is responsible for creation of enabling atmosphere and encouraging

the synergy within the co-workers space. Creation of the co-working community should be

the goal for management team.

For specific project of JEC, it is suggested that the Co-working space should be integrated

in the building of Business Incubator and be governed by same management team as

Business Incubator. This can bring to win-win situation by giving opportunity to tenants of

Business Incubator to have interactions with professionals from different areas, as well as

tenants of Co-working space can be interested to support one of the start-ups at Business

Incubator.

10 Anne Leforestier (2009) The Co-‐working space concept


3. Technical Design Jrvezh Engineering City will be located on 3 acres of land nearby Bagrevand Street of

Jrvezh district. Significant factor for choosing this location is the fact that National

Instruments and several small engineering companies are already constructing their offices

on the neighboring lands. Initially basic infrastructure will be constructed on these 3 acres,

including construction of roads and utilities (gas, water, electricity, and internet), landscape gardening, and fencing.

2000 sq m of land will be used for construction of the Business Incubator, including building

and common use spaces. The Business Incubator’s building will include incubation space

800 sq meters; Co-working Space 800 sq meters and the rest of the space will be used for administrative and common use purposes.

The rest of the land will be divided to 40-45 land pieces of 500 sq m each and sold to

engineering companies to construct their offices. The revenues generated from sales of

land-pieces will be used to cover initial investments in the development of basic

infrastructure. The engineering companies will be demanded to follow certain design rules when constructing their offices to maintain certain image of the technology park.


4. Organizational structure

The following Organizational Chart has been designed to maximize the efficiency and effectiveness of the Jrvezh Engineering City team, while controlling overhead expenses.

4.1. Board of Trustees Together with the directors of first tenant companies of JEC will be established JEC

Foundation. The Board of Trustees of the Jrvezh Engineering City will be appointed by JEC

Foundation. The Trustees should be representatives of companies that are tenants of JEC

or organizations that share the vision for JEC and are capable and willing to provide

expertise that would contribute to the ability of the JEC to fulfill its mission. The Board of

Trustees should consist of seven (7) members. The officers of the Board shall be

President, Vice-President, Secretary and Treasurer and will be determined by the Board of

Trustees. The suggested membership of the Board is as follows: 1. Representative from Ministry of Economy

Board of Trustees

Execu^ve Director

Legal Consultant

Accountant/ Finance Manager

Business Development Manager

Opera^ons Manager

IT specialist Administra^ve Assistant Cleaning Stuff Maitenance

Worker Security Stuff


2. Representative from EIF

3. Representative from Yerevan’s Mayoral Office

4. Representative from local financial institution

5. Representative from tenant Company



The first three (3) members of the Board will be reappointed every three (3) years while the

remaining four (4) members will be reappointed every two (2) years. This rotation of

membership of members of the Board allows for continuity of leadership within the Board

while bringing in new members. Initial Board members will be appointed by the JEC

Foundation, but after the appointment of the initial Board, new Board members should also receive approval for membership by the currently seated Board members.

4.1.1 Board Duties

The primary functions of the Board of Trustees are:

• To establish policy guidelines for Technology Park operations

• To assist in screening prospective Technology Park tenants

• To be responsible for hiring the Executive Director

• To ensure the overall financial viability of the Technology Park

• To provide corporate governance and act as an external control mechanism

• To assist the Technology Park’s Executive Director in creating links to investment and

professional resources that support the success of Technology Park clients, and

• To promote the Technology Park in the community and generate awareness and

understanding of the Technology Park as an important economic development tool for

the region.

4.2 Staffing At start-up, the proposed JEC management staff would include a full-time Executive

Director, a Business Development Manager, an Operations Manager and a part-time


Financial Manager and Legal Consultant. The staff would provide services to JEC’s tenants

and clients, organize trainings, cultivate resource networks, manage facility development,

and manage ongoing operations. Subsequent increases in staffing hours and levels would depend on increases in workload and funding availability.

4.2.1 Executive Director

A full-time Executive Director should be hired to manage the operations of the Jrvezh

Engineering City and provide direct business assistance to clients. He/she would report directly

to the Board of Trustees and will be ultimately accountable for the performance of JEC. The

Executive Director provides the daily energy and hands-on mentoring that is catalytic to JEC’s

mission. He/she must be experienced in technology start-ups, have a well-rounded

understanding of business management, facilitative leadership ability, and positive

interpersonal skills. A strong Executive Director will have an established network of venture

capitalists, angel investors, and bankers to support new venture financing. The Executive

Director should be well connected to professional and technical knowledge networks in the

community and serve as a channel to a resource network of service providers that provide

expert assistance to JEC’s clients.

4.2.2 Financial Manager/Accountant

A part-time Financial Manager/Accountant should be hired to establish and maintain financial

procedures and management for the JEC. He/she would report to the Executive Director and

will be responsible for advising and supporting tenants and clients of JEC in financial issues

and related matters by enabling them to make sound business choices. As an accountant

he/she would be responsible for applying accounting principles and procedures to analyze

financial information, prepare accurate and timely financial reports and statements and ensure

appropriate accounting control procedures.

4.2.3 Business Development Manager

The Business Development Manager should be hired on full time basis. He/she would report to

the Executive Director and will be responsible for identification of potential clients and tenants

for the Jrvezh Engineering City and assist in the development of business networks that can

help JEC to achieve its strategic objectives. The Business Development Manager will oversee

the networking program of JEC, as well as, the launch and management of the service provider


network. The Business Development Manager needs to have extensive industry contacts and

practical, entrepreneurial experience.

4.3.4 Operations Manager

The Operations Manager will manage JEC’s facility and oversee daily operations and

administration of the Jrvezh Engineering City, including special events for client companies.

He/she should be responsible for identification of opportunities to increase profitability of JEC

by attracting new clients. On a daily bases he/she should ensure a smooth operation of various

processes and activities that will take place in JEC. The Operations Manager will report to

Executive Director.

4.3.5 Legal Consultant

The Legal Counsel will be responsible for handling legal issues of the JEC by preparing and

reviewing various legal documents, such as contracts, licenses, leases, sales, purchases, real

estate, etc. provided to JEC’s tenants with legal advice. He/she will apply for registration or

copyrights of the products, devices, processes, and trademarks of JEC’s tenants. Per the

Executive Director’s request, he/she will provide legal counsel to JEC’s tenants/clients on a

broad range of legal and regulatory issues. This is a part-time position with reporting to the

Executive Director.

4.3.6 Support Staff

• IT Specialist - Would be responsible for maintaining the computer systems of the JEC

by identifying computer system requirements, installing upgrades, and monitoring

system performance. He/she would also be responsible for ensuring the servers are

backed up, and that the server data is secure from unauthorized access. The IT

Specialist should assist and consult JEC’s tenants and clients in IT related issues.

He/she will report to the Operations Manager.

• Administrative Assistant - Should provide day-to-day administrative and secretarial

support to the managerial staff of JEC. He/she will report to the Operations Manager.

• Security Officer - It is proposed that four (4) security officers will work at JEC’s facility

to ensure 24-hour security of the park, and they will report to the Operations Manager.


• Maintenance Worker - Given the size of the park, JEC’s management should hire

three (3) workers.

• Cleaning Staff - Given the size of the park, JEC’s management should hire five (6)

cleaners to keep the park in a clean and orderly condition.


5. Service Offerings The Technology Park will provide services for two categories of tenants: first are the tenant

engineering companies of the park and second start-up/team tenants of the Business

Incubator.

A. Services offered at Technology Park: Technology Park services are designed to

increase the probability of successful development and growth of tenants beyond

what a tenant company could achieve on its own.

1. Standard Services A

2. Training Services

3. Networking

B. Services offered at Business Incubator: For the incubated firms Business

Incubator should go beyond providing basic infrastructure (telephone, fax, office/lab,

internet, etc.) and provide value-added supporting services which will allow them to

be more competitive. Offer of the value-added services is a key to the incubator’s

ability to successfully spinout graduates into the community and generate jobs and

wealth in the region.

1. Standard Services B

2. Additional Services

3. Enterprise Counseling

4. Training Services

5. Financial and Commercialization Services

6. Technology Counseling and R&D Support

7. Networking

Some of services have same names for both blocks and they are differentiated by A

(Stands for services of Technology Center) and B (stands for services of business

incubator) indexes, same logic will be used in the detailed descriptions of the services.


5.1 Standard Services: A: The Technology Park will sell land pieces to selected engineering companies with prices

lower than the market prices. The tenants of the Technology Park will automatically

become members of JEC Foundation and pay membership fee, which will include Standard

services:

Office services

• Land to build office

• Security

• Postal services including usage of JEC’s address for receiving and sending mail

• Library containing relevant books and resource materials

IT services

• Access to high-speed internet

• Access to hosting and software

• Telephone line (local calls only)

• Company listing and information of the business on JEC’s website

B: The business premises at Business Incubator will be available at a discounted rental fee

and JEC should encourage tenants to leave them after the incubation period is finished.

Standard services will include:

Office services and equipment usage

• Office space for businesses including utilities and furniture

• Security

• Postal services including usage of JEC’s address for receiving and sending mail

• Shared office administration such as secretarial services and a receptionist

• Library containing relevant books and resource materials

IT services

• Access to computers

• Access to high-speed internet


• Access to hosting and software

• Telephone line (local calls only)

• Company listing and information of the business on JEC’s website

• Shared printers, photocopying and fax equipment

5.2 Additional Services Access to the conference hall, meeting rooms, parking spaces, cafeteria and other

premises located in JEC’s building will be available for the Business Incubator tenants, as

well as, clients under commercial conditions.

Additional services include:

• Conference hall, conference and meeting rooms

• Conference equipment (projector, pc, microphones, etc.)

• Parking space

• Cafeteria services

5.3 Enterprise Counseling Business incubators have a critical role in supporting and nurturing early-stage businesses

through the provision of high quality business counseling. Evidence from the best practices

suggests that business counseling provided by incubator management can help to

decrease market failure rate for the tenants.

This type of business support services, typically provided in-house by incubator

management, include business planning, advice on accessing capital, marketing, the

identification of suitable business partners and general strategic advice. Other types of

services, such as specialist legal services and market research tend to be provided by

external specialist providers with whom incubator management have established

relationships. JEC’s enterprise counseling will include the following services:

Consulting

• Business plan creation


• Consulting of diverse areas including business plan development, tax and customs,

financial management, accounting and website development

• Consulting on acquisition and protection of license

• Consulting and advisory service

o Legal

o Financial

o Managerial

o Technology

o Accelerate new business creation

o e-business Marketing Assistance

• Market assessment

• Consulting services and advisory in field of promotion and public relation

• Accelerating speed to market

• Exploring and identifying opportunities for export

Some of the services mentioned above can be provided as paid services also for tenants of

the Technology Park.

5.4 Training Services Training services of a technology center should provide insight into the principles of market

economy and business environment, as well as, help to upgrade professional and technical

skills of tenants. The Jrvezh Engineering City will have its Training Center which will serve

incubated start-ups as well as tenant engineering companies. The Training Center will

provide access to the range of general business-related trainings and specific technical

trainings designed for client. Business-related trainings will be applicable to any

engineering company and start-up operation including financial, legal, organizational,

marketing, insurance, etc. Appendix VII lists a sample of training courses which will

include, but not be limited to, the following services: (depending on demand and needs of

tenants some additional training can be provided):


• Professional business training courses

• Business management skills (planning, organizing, directing and controlling),

assessment and training

• General business skills training (marketing, finance, operations, bookkeeping and

team building), assessment and training

• Technical trainings (will be designed for specific need of the tenant)

• Language courses

5.5 Financial and Commercialization Services Enterprises going through the start-up phase often need financing and providing incubator

tenants with seed capital will help to accelerate their growth. Besides provision of seed

capital, the financial services of JEC will include assistance in financial arrangements and

fundraising, as well as, advice on their daily financial transactions. Thus, financial services

will include:

• Provision of seed capital for commercialization of products/services

• Assistance in fundraising

• Access to favorable financing resources

• Shared bookkeeping and accounting services

5.6 Technology Counseling and R&D Support Business Incubator should develop strong linkages with local universities and professional

networks, in order to develop embedded association with their resources. Importantly, this

will create the aura of respectability for both JEC and its tenants. Arrangements should

enable graduate students to work, at reduced remuneration and/or credits at tenant firms,

as well as, for university faculty to augment their incomes through consultant services.

This will help Business Incubator to:

• Provide tenants/clients with faculty/technologist consulting services, student interns

and employees

• Provide access to research specialists

• Assist with early engineering and prototype development

• Provide access to laboratory services and instruments


• Provide information on innovations and new technology

• Identify and match with partners from universities and research organizations

5.7 Networking Networking is very important and the Jrvezh Engineering City should help its tenants to

develop connections to resources to which otherwise they might not have access. Network

services will provide links and establish relationships with other organizations that can

promote and sustain the interests of JEC’s tenants.

JEC should also encourage the networking between tenants themselves. The research

suggests that it is quite common for business relationships to develop between tenants.

The important aspect of the internal networking encouraged by business incubators is the

informal exchange of ideas and advice between tenants. The development of these types

of synergies presupposes a degree of homogeneity, which in turn, is a function of the

business incubator’s admission criteria. Apart from business relationships, networking can

also serve the important purpose of helping entrepreneurs to overcome a sense of isolation

that is often associated with their activities.

For Jrvezh Engineering City’s and Business Incubator’s tenants, the following network

services will be available:

• Promote industries and networking opportunities

• Assistance with professional networking internally with other entrepreneurs and

externally with the business community

• Networking with other incubators and different support institutions (universities, local

government, local business centers etc.)

• Roundtables to discuss shared resources, ideas and services


6. Tenant selection Tenant selection and graduation (for teams/startups) have a critical role in order to have a

prosperous technology park. The ultimate goal of a tenant selection process is to determine

whether a good match exists between the park’s resources and mission and the applicant’s

needs and potential. This is a major phase in supporting the first principle of an effective

technology park which is delivering a positive impact on economic health by maximizing

the success of emerging companies. The JEC will have the following application processes

for two types of clients engineering companies who want to establish their offices in the

Technology Park and team/startups that want to be included in Business Incubator.

6.1 Technology Park Tenant Selection Two different models are proposed for the tenant selection process for the Technology

Park.

6.1.1 Application process

In this model the selection of tenants is being made in two steps:

1. Application: firstly all interested candidates are requested to send full application,

where they should indicate information about the current stage of business development,

financial documents for last two years, number of employees, market potential, and overall

potential for success.

2. Evaluation: and secondly evaluation process will be conducted by management team,

where they should check if the applicant’s business mission and objectives are in line with

the mission and objectives of JEC, eventual selection is being made by Executive Director.

Evaluation criteria can be the followings

• The business should be in Engineering/High-Tech sector.

• Applicants should be for-profit ventures.

• The applicant business must have the capacity for growth and provide economic

benefits to the area including creating new jobs and opportunities for regional

suppliers and vendors.

• The applicant must show the ability to pay JEC’s rents.


• The applicant must not be in direct competition with existing JEC’s businesses.

6.1.2 Tenant Recruitment In the second proposed model process of selection is going in opposite direction to the first model,

marketing team of JEC should conduct research based on specific criteria in order to identify

prospective tenants for Technology Park and present list of identified companies to the Executive

Director. After approval of the Executive Director marketing team should prepare individual

proposals for each candidate and contact them for recruitment. Criteria for the selection of

prospective tenants can be as in the previous section.

6.2 Business Incubator Tenant Selection

6.2.1 Application Process:

The proposed application process for prospective clients of Business Incubator includes

the following two steps:

1. Complete Application: All prospective clients would complete a brief application form.

A completed application provides JEC with a brief description of the applicant’s business

proposal, the current business status, and an initial sense of the required services and

facilities.

2. Provide Business Description or Business Plan: Prospective clients that complete

Step 1 and are determined to be potentially eligible would be required to support their initial

application with a business plan or written business description. JEC’s Executive Director

and an individual with expertise in the applicant’s industry would review the document. It

should provide more in-depth information about the current stage of business development,

status of the management team, market potential, and overall potential for success. At this

point, if the business description or business plan adequately addresses screening

selection criteria, the Executive Director could approve the applicant for acceptance to

JEC.

6.2.3 Evaluation Criteria

The criteria used to evaluate prospective clients throughout the application process should

be based on the mission and objectives of JEC and be compatible with the services and


facilities that can be supported by JEC. Below are the entrance criteria that shall be used to

evaluate prospects for the Business Incubator:

• The business should be a technology-related firm producing offerings that can be

commercialized within four years.

• Applicants should be for-profit ventures.

• The applicant business must have the capacity for growth and provide economic

benefits to the area including creating new jobs and opportunities for regional

suppliers and vendors.

• The applicant must show the ability to pay JEC’s rents while they develop a positive

cash flow.

• The applicant must have a management team that is capable of handling technical

and operational aspects of the business or understand the need for and be willing to

obtain needed technical assistance.

• The applicant must not be in direct competition with existing JEC’s businesses.

• The applicant must want to take advantage of and be able to benefit from the value-

added services and guidance of JEC. The applicant business must be willing to take

advice from the professional network and/or the Executive Director.

• Applicants should be in the early-stage of development – generally within the first

two years of business operations – not yet profitable and still growing.

6.2.4 Graduation Policies

Graduation criteria are key factors in the future success of companies leaving the program

of an incubator. Successful graduation of a client from the incubation unit is the objective of

JEC. Indeed, graduation is when a client company has matured to the point that they do

not need JEC’s assistance and are ready to operate independently. The elements which

should be examined for graduation of tenants from JEC are the existence of:

• An experienced management team

• Financial stability (grant + revenues to operate for 6-12 months)

• Significant product sales and a backlog of orders

• No continuing need for incubator services


Besides the above criteria, the policies for graduation from JEC should address time limits.

A maximum amount of time for a client to receive services should be 48 months, and this

can be customized by type of business and extended on a month-to-month basis for an

additional year if indicated.

Successful graduates of Business Incubator will be offered to become tenants of

Technology Park.


7. Marketing JEC is an initiative that will serve to bridge the Armenian entrepreneurs to access sources

of innovation and new markets from the region, USA, Europe and other global markets.

JEC marketing activities must be seen as an integral and fundamental part of JEC’s

management and success. The marketing objectives can be divided into Global and

Local/Regional marketing objectives as illustrated below. Both will ideally work hand-in-

hand to achieve the overall program objectives:

Local /Regional Objectives:

• Create awareness about new engineering ventures based on transferred innovation

• Encourage the development of local SMEs with a engineering/high-tech edge

• Establish technology-based businesses from entrepreneurial pool within Armenia

International Objectives:

• Attract technology ventures from interested customers, partners, scientists and

investors

• Facilitate linkage between international capital and know-how networks

• Secure new sources of U.S.A., European and other Global innovations to

be commercialized in Armenia for local and regional markets

• Liaise with promising technologies for commercial development and

training representatives

Strategic Alliances:

In the new economy, strategic alliances enable businesses to gain competitive advantage

through access to a partner's resources, including know-how, technologies, capital and

people. The JEC will team with EIF as strategic partners, who will add complementary

resources and capabilities, enabling JEC to grow and expand more quickly and efficiently.

The alliances listed below will add direct and indirect value to JEC.

JEC will build its reputation based on the quality of its strategic alliances and ability to

enhance the development of SMEs in country, which will ultimately increase private sector

competitiveness. JEC will seek to position itself as the ‘go-to’ organization for the transfer

of international technologies into Armenia.


8. Budget and Financial Plan The budget for project will be provided in the framework of Trade Promotion and Quality

Infrastructure program of International Bank for Reconstruction and Development. Which

will cover 1) construction of basic infrastructure (including utilities, roads, etc.) and common use spaces; 2) construction of Business Incubator building.

This section of the business plan reviews the financial plans including income statement and cash flow. Following are a list of assumptions used in calculating the financials:

• Annually four tenants will be accepted in the Technology Park and will become

members of JEC Foundation. The membership fee of 250 $ will include security and

common expenses.

• Annually four tenants will be accepted in the Business Incubator.

• Success rate is calculated in the following manner: 3 out of four tenants will

complete the first two years successfully and two will complete third and fourth years

successfully.

• Tenants must graduate within four years.

• Tenants will pay 50% of the average market rental fees of AMD 2,500

• Additional Co-working space will be available for client rental at market prices 70$

per desk. It is assumed 5 clients will be accepted annually.

• Conference Hall and Meeting Rooms are estimated to be occupied twice per month

• Food services from cafeteria will be outsourced with an estimate of 600 $ monthly

profits.

• Tenants will receive a preliminary funding of 35,000 $ as seed funding

• Inflation rate is 4% per year

• The Incubator will have 50% equity in each tenant business and will receive 50% of

dividends after graduation.

• On the average each tenant will have five employees during the incubation period

and eight employees during the first year after graduation. Following this period, the


number of employees will increase by 20% annually until it reaches a total of

seventeen (17) employees.

• Productivity index within the Engineering/High-tech industry per employee is 28.2k $

with an increase annual productivity of 14.2%; productivity was calculated using

data from survey conducted by EIF.

• All utility costs are based on figures provided by GEDF

8.1 Projected income statement: Appendix II presents the projected income statement for the JEC. This exhibit indicates a

ten years profit and loss statement beginning 2015 with an anticipated break-even period in

the 9th year with a total amount of 9K $.

Three significant streams of revenue received by the incubator consist of Membership fees,

Rental fees, and share of Equity. Other sources of revenue will include the cafeteria,

conference hall and meeting rooms. Expenses incurred by the JEC will consist of salaries,

training, utilities and maintenance, stationary and supplies.

8.2 Projected cash flow Appendix III presents the projected ten-year cash flow. The cash inflow sources are the

revenues and expenses are the cash outflows. The projection of initial invested capital has

not been calculated, as well as revenues generated from the sales of the land-spaces and therefore the replacement costs have not been considered in the cash flow.

8.3 Scenario analysis Sensitivity analysis for optimistic and pessimistic scenarios has been performed considering the following variables:

• 2% increase and decrease in market rental fee for both scenarios

• Number of tenants entered in incubator will change to six in an optimistic scenario

and number of successful tenants will change to four out of six during the second

year and to three in third and fourth years.


• In worst case scenario three out of four tenants will be successful by the second

year, two in the third year and one during the fourth year.

• Rental fee for the conference hall and meeting rooms will increase and decrease by

2% for each scenario.

After taking into consideration the above mentioned changes, break-even will still be in 9th

year, but having 100K $ profit in the end of the eighth year in an optimistic scenario. In a

pessimistic scenario the incubator will have a loss of 25K at the end of the tenth year. Pessimistic and optimistic scenario analysis can be found in Appendix IV and Appendix V.


9. Opportunities and risks As with any new venture, there are potential risks to the success of the program. The

incubation of technology ventures requires a collaborative effort involving government, the

scientific community, academia, business, support organizations/associations and

investment networks. The current and future stakeholders of JEC must be prepared to work

together for the joint objectives.

The local infrastructure must be prepared to provide the proper incentives and environment

to innovate.

Lack of proactive and favorable government initiatives can limit the success of the

program.

Unfavorable credit for offset valuation of the program can limit the available funding to

accomplish all objectives outlined in the program.

The depth of potential and innovative technology and the commitment of local

entrepreneurs can hinder the ability to attract interest in a competitive foreign market. The

participants must be prepared to work with different business cultures in the rest of the

world, which may seem contradictory to the behavior of the local region. This program can

be transformational, but requires concentrated dedication, support and patience for

change.

One key factor is that this is a market-driven program and is vulnerable to economic factors outside the control of the program.

9.1 Strengths: 1. Early involvement of a sector champion in the project, in face of National Instruments.

2. Strong connections with partner educational institutions throughout the region.

3. Existing modern engineering laboratories at Armenian National Engineering

Laboratories, a center which is managed by EIF

4. A supportive funding organization, namely the World Bank and experienced partner

EIF.

5. A potentially strong local fund, financed by rents and services, which will enable operating security and a ready source of modest grant matching funds.


9.2 Challenges: 1. Creation of effective synergy between established companies at Technology Park with

the startup tenants at Business Incubator.

2. Identifying and responding to the demand for services in the region, as well as, for

those smaller entrepreneurs who must travel extensively from the region to meet with

experts and clients.

3. There is a possible need for small amounts of early stage, proof of concept funding for

technology start-ups.

4. Ensuring that the JEC facility is utilized effectively and devoted to economic

development activities.

5. Expand services to existing technology companies, which have high growth

opportunities.

6. In some cases, helping an existing company grow revenue and jobs has a higher return

than helping raw start-ups. Meeting this need requires having the right skill sets,

increasing JEC’s ability to provide timely consulting and working with private sector

resources to avoid inappropriate duplication.

7. Expanding regional technology leadership to assist regional efforts to develop particular industries and clusters.


APPENDIX I – JEC Business Incubator Tenant

Services Innovation Continuum Process


APPENDIX II -- Projected Income Statement

Revenu

e201

5201

6201

7201

8201

9202

0202

1202

2202

3202

4Ren

tal3Rev

enue:

Memb

er&fee&

from&T

P12'

000&&&&&

&&&&&&

24'000

&&&&&&&&&&

36'000

&&&&&&&&&

48'000

&&&&&&&&&

60'000

&&&&&&&&&&

72'000

&&&&&&&&&&

84'000

&&&&&&&&&&

96'000

&&&&&&&&&&

108'00

0&&&&&

&&Ren

tal&rev

enue&fr

om&BI

14'400

&&&&&&&&&&

14'976

&&&&&&&&&&

&15'

575&&&&&

&&&&&16'

198&&&&&

&&&&16'

846&&&&&

&&&&17'

520&&&&&

&&&&&18'

221&&&&&

&&&&&18'

949&&&&&

&&&&&19'

707&&&&&

&&&&&20'

496&&&&&

&&&&&Ren

tal&rev

enue&fr

om&CS

4'200

&&&&&&&&&&

&&8'4

00&&&&&

&&&&&&&&

12'600

&&&&&&&&&&

16'800

&&&&&&&&&

21'000

&&&&&&&&&

25'200

&&&&&&&&&&

26'208

&&&&&&&&&&

27'256

&&&&&&&&&&

28'347

&&&&&&&&&&

29'480

&&&&&&&&&&

Total

18'600

3333333333

35'376

3333333333

52'175

3333333333

68'998

333333333

85'846

333333333

102'72

033333

33116

'429

3333333

130'20

633333

33144

'054

3333333

157'97

633333

33Oth

er3reve

nues:

Revenu

e&from

&meetin

g&room

&and

&confe

rence&

hall

9'600

&&&&&&&&&&

&&9'9

84&&&&&

&&&&&&&&

10'383

&&&&&&&&&&

10'799

&&&&&&&&&

11'231

&&&&&&&&&

11'680

&&&&&&&&&&

12'147

&&&&&&&&&&

12'633

&&&&&&&&&&

13'138

&&&&&&&&&&

13'664

&&&&&&&&&&

Revenu

e&from

&cafet

eria7'2

00&&&&&

&&&&&&&

7'488

&&&&&&&&&&

&&&7'7

88&&&&&

&&&&&&&

8'099

&&&&&&&&&&

&&8'4

23&&&&&

&&&&&&&

8'760

&&&&&&&&&&

&&9'1

10&&&&&

&&&&&&&

9'475

&&&&&&&&&&

&&9'8

54&&&&&

&&&&&&&

10'248

&&&&&&&&&&

Total

16'800

3333333333

17'472

3333333333

18'171

3333333333

18'898

333333333

19'654

333333333

20'440

3333333333

21'257

3333333333

22'108

3333333333

22'992

3333333333

23'912

3333333333

Revenu

e&from

&equity

&invest

edI

&&&&&&&&&&

&&&&&&

I&&&&&

&&&&&&&&&&

&&I

&&&&&&&&&&

&&&&&&

I&&&&&

&&&&&&&&&&

&14'

000&&&&&

&&&&35'

560&&&&&

&&&&&68'

180&&&&&

&&&&&117

'390

&&&&&&&

191'48

5&&&&&

&&302

'908

&&&&&&&

Total3R

evenue

35'400

3333333333

52'848

3333333333

70'346

3333333333

87'896

333333333

119'50

033333

33158

'720

3333333

205'86

633333

33269

'703

3333333

358'53

133333

33484

'795

3333333

Expens

esSee

d&Mone

y140

'000

&&&&&&&

140'00

0&&&&&

&&&140

'000

&&&&&&&

140'00

0&&&&&

&&140

'000

&&&&&&&

140'00

0&&&&&

&&140

'000

&&&&&&&

140'00

0&&&&&

&&140

'000

&&&&&&&

140'00

0&&&&&

&&Sal

aries

70'000

&&&&&&&&&&

72'800

&&&&&&&&&&

&75'

712&&&&&

&&&&&78'

740&&&&&

&&&&81'

890&&&&&

&&&&85'

166&&&&&

&&&&&88'

572&&&&&

&&&&&92'

115&&&&&

&&&&&95'

800&&&&&

&&&&&99'

632&&&&&

&&&&&Tra

ining

25'000

&&&&&&&&&&

26'000

&&&&&&&&&&

&27'

040&&&&&

&&&&&28'

122&&&&&

&&&&29'

246&&&&&

&&&&30'

416&&&&&

&&&&&31'

633&&&&&

&&&&&32'

898&&&&&

&&&&&34'

214&&&&&

&&&&&35'

583&&&&&

&&&&&Uti

lities

35'000

&&&&&&&&&&

36'400

&&&&&&&&&&

&37'

856&&&&&

&&&&&39'

370&&&&&

&&&&40'

945&&&&&

&&&&42'

583&&&&&

&&&&&44'

286&&&&&

&&&&&46'

058&&&&&

&&&&&47'

900&&&&&

&&&&&49'

816&&&&&

&&&&&Inte

rnet

4'500

&&&&&&&&&&

&&4'6

80&&&&&

&&&&&&&&

4'867

&&&&&&&&&&

&&5'0

62&&&&&

&&&&&&&

5'264

&&&&&&&&&&

&&5'4

75&&&&&

&&&&&&&

5'694

&&&&&&&&&&

&&5'9

22&&&&&

&&&&&&&

6'159

&&&&&&&&&&

&&6'4

05&&&&&

&&&&&&&

Station

ary8'0

00&&&&&

&&&&&&&

8'320

&&&&&&&&&&

&&&8'6

53&&&&&

&&&&&&&

8'999

&&&&&&&&&&

&&9'3

59&&&&&

&&&&&&&

9'733

&&&&&&&&&&

&&10'

123&&&&&

&&&&&10'

527&&&&&

&&&&&10'

949&&&&&

&&&&&11'

386&&&&&

&&&&&Ma

itenanc

e500

&&&&&&&&&&

&&&&&520

&&&&&&&&&&

&&&&&&

541&&&&&

&&&&&&&&&&

562&&&&&

&&&&&&&&&&

585&&&&&

&&&&&&&&&&

608&&&&&

&&&&&&&&&&

633&&&&&

&&&&&&&&&&

658&&&&&

&&&&&&&&&&

684&&&&&

&&&&&&&&&&

712&&&&&

&&&&&&&&&&

Conting

ency&re

serve

10'000

&&&&&&&&&&

10'400

&&&&&&&&&&

&10'

816&&&&&

&&&&&11'

249&&&&&

&&&&11'

699&&&&&

&&&&12'

167&&&&&

&&&&&12'

653&&&&&

&&&&&13'

159&&&&&

&&&&&13'

686&&&&&

&&&&&14'

233&&&&&

&&&&&Tot

al3Expe

nses

293'00

033333

33299

'120

33333333

305'48

533333

33312

'104

3333333

318'98

833333

33326

'148

3333333

333'59

433333

33341

'338

3333333

349'39

133333

33357

'767

3333333

Net3Pr

ofitC25

7'600

333333

C246'2

7233333

33C23

5'139

333333

C224'2

0833333

3C19

9'489

333333

C167'4

2833333

3C12

7'728

333333

C71'63

433333

3339'1

4033333

3333333

127'02

933333

33


APPENDIX III -- Projected Cash Flow

Operation

al+Ac

tivitie

s:2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

Cash+In

flow

Rental+Re

venu

e:Mem

ber&fee&from

&TP12'00

0&&&&&&&&&

24'00

0&&&&&&&&&

36'00

0&&&&&&&&&

48'00

0&&&&&&&&&

60'00

0&&&&&&&&&

72'00

0&&&&&&&&&

84'00

0&&&&&&&&&

96'00

0&&&&&&&&&

108'0

00&&&&&&&

Rental&revenu

e&from&

BI14'40

0&&&&&&&&&

14'97

6&&&&&&&&&

15'57

5&&&&&&&&&

16'19

8&&&&&&&&&

16'84

6&&&&&&&&&

17'52

0&&&&&&&&&

18'22

1&&&&&&&&&

18'94

9&&&&&&&&&

19'70

7&&&&&&&&&

20'49

6&&&&&&&&&

Rental&revenu

e&from&

CS4'2

00&&&&&&&&&&&

8'400

&&&&&&&&&&&

12'60

0&&&&&&&&&

16'80

0&&&&&&&&&

21'00

0&&&&&&&&&

25'20

0&&&&&&&&&

26'20

8&&&&&&&&&

27'25

6&&&&&&&&&

28'34

7&&&&&&&&&

29'48

0&&&&&&&&&

Total

18'60

0+++++++++

35'37

6+++++++++

52'17

5+++++++++

68'99

8+++++++++

85'84

6+++++++++

102'7

20+++++++

116'4

29+++++++

130'2

06+++++++

144'0

54+++++++

157'9

76+++++++

Othe

r+reven

ues:

Revenu

e&from&

meeti

ng&ro

om&

and&c

onfer

ence&ha

ll9'6

00&&&&&&&&&&&

9'984

&&&&&&&&&&&

10'38

3&&&&&&&&&

10'79

9&&&&&&&&&

11'23

1&&&&&&&&&

11'68

0&&&&&&&&&

12'14

7&&&&&&&&&

12'63

3&&&&&&&&&

13'13

8&&&&&&&&&

13'66

4&&&&&&&&&

Revenu

e&from&

cafet

eria

7'200

&&&&&&&&&&&

7'488

&&&&&&&&&&&

7'788

&&&&&&&&&&&

8'099

&&&&&&&&&&&

8'423

&&&&&&&&&&&

8'760

&&&&&&&&&&&

9'110

&&&&&&&&&&&

9'475

&&&&&&&&&&&

9'854

&&&&&&&&&&&

10'24

8&&&&&&&&&

Total

16'80

0+++++++++

17'47

2+++++++++

18'17

1+++++++++

18'89

8+++++++++

19'65

4+++++++++

20'44

0+++++++++

21'25

7+++++++++

22'10

8+++++++++

22'99

2+++++++++

23'91

2+++++++++

Total+R

even

ue35'40

0+++++++++

52'84

8+++++++++

70'34

6+++++++++

87'89

6+++++++++

105'5

00+++++++

123'1

60+++++++

137'6

86+++++++

152'3

13+++++++

167'0

46+++++++

181'8

88+++++++

Cash+Outflo

wSalar

ies70'00

0&&&&&&&&&

72'80

0&&&&&&&&&

75'71

2&&&&&&&&&

78'74

0&&&&&&&&&

81'89

0&&&&&&&&&

85'16

6&&&&&&&&&

88'57

2&&&&&&&&&

92'11

5&&&&&&&&&

95'80

0&&&&&&&&&

99'63

2&&&&&&&&&

Training

25'00

0&&&&&&&&&

26'00

0&&&&&&&&&

27'04

0&&&&&&&&&

28'12

2&&&&&&&&&

29'24

6&&&&&&&&&

30'41

6&&&&&&&&&

31'63

3&&&&&&&&&

32'89

8&&&&&&&&&

34'21

4&&&&&&&&&

35'58

3&&&&&&&&&

Utilit

ies35'00

0&&&&&&&&&

36'40

0&&&&&&&&&

37'85

6&&&&&&&&&

39'37

0&&&&&&&&&

40'94

5&&&&&&&&&

42'58

3&&&&&&&&&

44'28

6&&&&&&&&&

46'05

8&&&&&&&&&

47'90

0&&&&&&&&&

49'81

6&&&&&&&&&

Interne

t4'5

00&&&&&&&&&&&

4'680

&&&&&&&&&&&

4'867

&&&&&&&&&&&

5'062

&&&&&&&&&&&

5'264

&&&&&&&&&&&

5'475

&&&&&&&&&&&

5'694

&&&&&&&&&&&

5'922

&&&&&&&&&&&

6'159

&&&&&&&&&&&

6'405

&&&&&&&&&&&

Statio

nary

8'000

&&&&&&&&&&&

8'320

&&&&&&&&&&&

8'653

&&&&&&&&&&&

8'999

&&&&&&&&&&&

9'359

&&&&&&&&&&&

9'733

&&&&&&&&&&&

10'12

3&&&&&&&&&

10'52

7&&&&&&&&&

10'94

9&&&&&&&&&

11'38

6&&&&&&&&&

Mait

enance

500

&&&&&&&&&&&&&&

520

&&&&&&&&&&&&&&

541

&&&&&&&&&&&&&&

562

&&&&&&&&&&&&&&

585

&&&&&&&&&&&&&&

608

&&&&&&&&&&&&&&

633

&&&&&&&&&&&&&&

658

&&&&&&&&&&&&&&

684

&&&&&&&&&&&&&&

712

&&&&&&&&&&&&&&

Conting

ency&re

serve

10'00

0&&&&&&&&&

10'40

0&&&&&&&&&

10'81

6&&&&&&&&&

11'24

9&&&&&&&&&

11'69

9&&&&&&&&&

12'16

7&&&&&&&&&

12'65

3&&&&&&&&&

13'15

9&&&&&&&&&

13'68

6&&&&&&&&&

14'23

3&&&&&&&&&

Total+Expen

ses

153'0

00+++++++

159'1

20+++++++

165'4

85+++++++

172'1

04+++++++

178'9

88+++++++

186'1

48+++++++

193'5

94+++++++

201'3

38+++++++

209'3

91+++++++

217'7

67+++++++

Net+cash+g

enerated

+from

+operation

al+activ

ites

J117'6

00+++++

J106'2

72+++++

J95'13

9++++++++

J84'20

8++++++++

J73'48

9++++++++

J62'98

8++++++++

J55'90

8++++++++

J49'02

4++++++++

J42'34

5++++++++

J35'87

9++++++++

Investin

g+Activit

ies:

Cash+In

flow

Revenu

e&from&

equit

y&invested

J&&&&&&&&&&&&&&&

J&&&&&&&&&&&&&&&

J&&&&&&&&&&&&&&&

J&&&&&&&&&&&&&&&

14'00

0&&&&&&&&&

35'56

0&&&&&&&&&

68'18

0&&&&&&&&&

117'3

90&&&&&&&

191'4

85&&&&&&&

302'9

08&&&&&&&

Cash+Outflo

wSeed

&Mon

ey140'0

00&&&&&&&

140'0

00&&&&&&&

140'0

00&&&&&&&

140'0

00&&&&&&&

140'0

00&&&&&&&

140'0

00&&&&&&&

140'0

00&&&&&&&

140'0

00&&&&&&&

140'0

00&&&&&&&

140'0

00&&&&&&&

Net+cash+g

enerated

+from

+investing+ac

tivite

sJ14

0'000

+++++

J140'0

00+++++

J140'0

00+++++

J140'0

00+++++

J126'0

00+++++

J104'4

40+++++

J71'82

0++++++++

J22'61

0++++++++

51'48

5+++++++++

162'9

08+++++++

Net+cash+g

enerated

J257'6

00+++++

J246'2

72+++++

J235'1

39+++++

J224'2

08+++++

J199'4

89+++++

J167'4

28+++++

J127'7

28+++++

J71'63

4++++++++

9'140

+++++++++++

127'0

29+++++++


APPENDIX IV – Pessimistic Scenario Analysis

Reven

ue201

5201

6201

7201

8201

9202

0202

1202

2202

3202

4Re

ntal3R

evenu

e:Me

mber&

fee&fro

m&TP

12'000

&&&&&&&&&

24'000

&&&&&&&&&

36'000

&&&&&&&&&

48'000

&&&&&&&&&

60'000

&&&&&&&&&

72'000

&&&&&&&&&

84'000

&&&&&&&&&

96'000

&&&&&&&&&

108'00

0&&&&&

&&Re

ntal&re

venue&

from&B

I14'

112&&&&&

&&&&14'

676&&&&&

&&&&15'

264&&&&&

&&&&15'

874&&&&&

&&&&16'

509&&&&&

&&&&17'

169&&&&&

&&&&17'

856&&&&&

&&&&18'

570&&&&&

&&&&19'

313&&&&&

&&&&20'

086&&&&&

&&&&Re

ntal&re

venue&

from&C

S4'1

16&&&&&

&&&&&&

8'232

&&&&&&&&&&

&12'

348&&&&&

&&&&16'

464&&&&&

&&&&20'

580&&&&&

&&&&24'

696&&&&&

&&&&25'

684&&&&&

&&&&26'

711&&&&&

&&&&27'

780&&&&&

&&&&28'

891&&&&&

&&&&Tot

al18'

22833333

333334'

90833333

333351'

61233333

333368'

33833333

333385'

08933333

3333101

'865

3333333

115'54

033333

33129

'282

3333333

143'09

333333

33156

'977

3333333

Other3

reven

ues:

Reven

ue&fro

m&meet

ing&ro

om&

and&co

nferen

ce&hal

l9'4

08&&&&&

&&&&&&

9'784

&&&&&&&&&&

&10'

176&&&&&

&&&&10'

583&&&&&

&&&&11'

006&&&&&

&&&&11'

446&&&&&

&&&&11'

904&&&&&

&&&&12'

380&&&&&

&&&&12'

875&&&&&

&&&&13'

391&&&&&

&&&&Re

venue&

from&c

afeter

ia7'2

00&&&&&

&&&&&&

7'488

&&&&&&&&&&

&7'7

88&&&&&

&&&&&&

8'099

&&&&&&&&&&

&8'4

23&&&&&

&&&&&&

8'760

&&&&&&&&&&

&9'1

10&&&&&

&&&&&&

9'475

&&&&&&&&&&

&9'8

54&&&&&

&&&&&&

10'248

&&&&&&&&&

Total

16'608

333333333

17'272

333333333

17'963

333333333

18'682

333333333

19'429

333333333

20'206

333333333

21'014

333333333

21'855

333333333

22'729

333333333

23'638

333333333

Reven

ue&fro

m&equ

ity&inv

ested

I&&&&&

&&&&&&&&&&

I&&&&&

&&&&&&&&&&

I&&&&&

&&&&&&&&&&

I&&&&&

&&&&&&&&&&

7'000

&&&&&&&&&&

&17'

780&&&&&

&&&&34'

090&&&&&

&&&&58'

695&&&&&

&&&&95'

743&&&&&

&&&&151

'454

&&&&&&&

Total3R

evenu

e34'

83633333

333352'

18133333

333369'

57533333

333387'

02033333

3333111

'518

3333333

139'85

233333

33170

'644

3333333

209'83

233333

33261

'565

3333333

332'06

933333

33

Expen

sesSee

d&Mon

ey140

'000

&&&&&&&

140'00

0&&&&&

&&140

'000

&&&&&&&

140'00

0&&&&&

&&140

'000

&&&&&&&

140'00

0&&&&&

&&140

'000

&&&&&&&

140'00

0&&&&&

&&140

'000

&&&&&&&

140'00

0&&&&&

&&Sal

aries

70'000

&&&&&&&&&

72'800

&&&&&&&&&

75'712

&&&&&&&&&

78'740

&&&&&&&&&

81'890

&&&&&&&&&

85'166

&&&&&&&&&

88'572

&&&&&&&&&

92'115

&&&&&&&&&

95'800

&&&&&&&&&

99'632

&&&&&&&&&

Trainin

g25'

000&&&&&

&&&&26'

000&&&&&

&&&&27'

040&&&&&

&&&&28'

122&&&&&

&&&&29'

246&&&&&

&&&&30'

416&&&&&

&&&&31'

633&&&&&

&&&&32'

898&&&&&

&&&&34'

214&&&&&

&&&&35'

583&&&&&

&&&&Uti

lities

35'000

&&&&&&&&&

36'400

&&&&&&&&&

37'856

&&&&&&&&&

39'370

&&&&&&&&&

40'945

&&&&&&&&&

42'583

&&&&&&&&&

44'286

&&&&&&&&&

46'058

&&&&&&&&&

47'900

&&&&&&&&&

49'816

&&&&&&&&&

Intern

et4'5

00&&&&&

&&&&&&

4'680

&&&&&&&&&&

&4'8

67&&&&&

&&&&&&

5'062

&&&&&&&&&&

&5'2

64&&&&&

&&&&&&

5'475

&&&&&&&&&&

&5'6

94&&&&&

&&&&&&

5'922

&&&&&&&&&&

&6'1

59&&&&&

&&&&&&

6'405

&&&&&&&&&&

&Sta

tionar

y8'0

00&&&&&

&&&&&&

8'320

&&&&&&&&&&

&8'6

53&&&&&

&&&&&&

8'999

&&&&&&&&&&

&9'3

59&&&&&

&&&&&&

9'733

&&&&&&&&&&

&10'

123&&&&&

&&&&10'

527&&&&&

&&&&10'

949&&&&&

&&&&11'

386&&&&&

&&&&Ma

itenan

ce500

&&&&&&&&&&

&&&&520

&&&&&&&&&&

&&&&541

&&&&&&&&&&

&&&&562

&&&&&&&&&&

&&&&585

&&&&&&&&&&

&&&&608

&&&&&&&&&&

&&&&633

&&&&&&&&&&

&&&&658

&&&&&&&&&&

&&&&684

&&&&&&&&&&

&&&&712

&&&&&&&&&&

&&&&Co

ntinge

ncy&re

serve

10'000

&&&&&&&&&

10'400

&&&&&&&&&

10'816

&&&&&&&&&

11'249

&&&&&&&&&

11'699

&&&&&&&&&

12'167

&&&&&&&&&

12'653

&&&&&&&&&

13'159

&&&&&&&&&

13'686

&&&&&&&&&

14'233

&&&&&&&&&

Total3E

xpense

s293

'000

3333333

299'12

033333

33305

'485

3333333

312'10

433333

33318

'988

3333333

326'14

833333

33333

'594

3333333

341'33

833333

33349

'391

3333333

357'76

733333

33

?258'1

6433333

?246'9

3933333

?235'9

1033333

?225'0

8433333

?207'4

7033333

?186'2

9633333

?162'9

4933333

?131'5

0633333

?87'82

633333

333?25

'698

33333333

Net3P

rofit


APPENDIX V – Optimistic Scenario Analysis

Reven

ue201

5201

6201

7201

8201

9202

0202

1202

2202

3202

4Re

ntal3Re

venue:

Memb

er&fee

&from&T

P12'

000&&&&&

&&&&24'

000&&&&&

&&&&36'

000&&&&&

&&&&48'

000&&&&&

&&&&60'

000&&&&&

&&&&72'

000&&&&&

&&&&84'

000&&&&&

&&&&96'

000&&&&&

&&&&108

'000

&&&&&&&

Rental&

revenu

e&from

&BI14'

688&&&&&

&&&&15'

276&&&&&

&&&&15'

887&&&&&

&&&&16'

522&&&&&

&&&&17'

183&&&&&

&&&&17'

870&&&&&

&&&&18'

585&&&&&

&&&&19'

328&&&&&

&&&&20'

102&&&&&

&&&&20'

906&&&&&

&&&&Ren

tal&rev

enue&fr

om&CS

4'284

&&&&&&&&&&

&8'5

68&&&&&

&&&&&&

12'852

&&&&&&&&&

17'136

&&&&&&&&&

21'420

&&&&&&&&&

25'704

&&&&&&&&&

26'732

&&&&&&&&&

27'801

&&&&&&&&&

28'914

&&&&&&&&&

30'070

&&&&&&&&&

Total

18'972

333333333

35'844

333333333

52'739

333333333

69'658

333333333

86'603

333333333

103'57

433333

33117

'317

3333333

131'13

033333

33145

'015

3333333

158'97

633333

33Oth

er3rev

enues:

Revenu

e&from

&meeti

ng&roo

m&and

&confe

rence&

hall

9'792

&&&&&&&&&&

&10'

184&&&&&

&&&&10'

591&&&&&

&&&&11'

015&&&&&

&&&&11'

455&&&&&

&&&&11'

913&&&&&

&&&&12'

390&&&&&

&&&&12'

886&&&&&

&&&&13'

401&&&&&

&&&&13'

937&&&&&

&&&&Rev

enue&fr

om&ca

feteri

a7'2

00&&&&&

&&&&&&

7'488

&&&&&&&&&&

&7'7

88&&&&&

&&&&&&

8'099

&&&&&&&&&&

&8'4

23&&&&&

&&&&&&

8'760

&&&&&&&&&&

&9'1

10&&&&&

&&&&&&

9'475

&&&&&&&&&&

&9'8

54&&&&&

&&&&&&

10'248

&&&&&&&&&

Total

16'992

333333333

17'672

333333333

18'379

333333333

19'114

333333333

19'878

333333333

20'673

333333333

21'500

333333333

22'360

333333333

23'255

333333333

24'185

333333333

Revenu

e&from

&equit

y&inves

tedI

&&&&&&&&&&

&&&&&I

&&&&&&&&&&

&&&&&I

&&&&&&&&&&

&&&&&I

&&&&&&&&&&

&&&&&21'

000&&&&&

&&&&53'

340&&&&&

&&&&102

'270

&&&&&&&

176'08

5&&&&&

&&287

'228

&&&&&&&

454'36

1&&&&&

&&Tot

al3Reve

nue

35'964

333333333

53'515

333333333

71'117

333333333

88'772

333333333

127'48

133333

33177

'588

3333333

241'08

733333

33329

'575

3333333

455'49

733333

33637

'522

3333333

Expens

esSee

d&Mon

ey140

'000

&&&&&&&

140'00

0&&&&&

&&140

'000

&&&&&&&

140'00

0&&&&&

&&140

'000

&&&&&&&

140'00

0&&&&&

&&140

'000

&&&&&&&

140'00

0&&&&&

&&140

'000

&&&&&&&

140'00

0&&&&&

&&Sal

aries

70'000

&&&&&&&&&

72'800

&&&&&&&&&

75'712

&&&&&&&&&

78'740

&&&&&&&&&

81'890

&&&&&&&&&

85'166

&&&&&&&&&

88'572

&&&&&&&&&

92'115

&&&&&&&&&

95'800

&&&&&&&&&

99'632

&&&&&&&&&

Trainin

g25'

000&&&&&

&&&&26'

000&&&&&

&&&&27'

040&&&&&

&&&&28'

122&&&&&

&&&&29'

246&&&&&

&&&&30'

416&&&&&

&&&&31'

633&&&&&

&&&&32'

898&&&&&

&&&&34'

214&&&&&

&&&&35'

583&&&&&

&&&&Uti

lities

35'000

&&&&&&&&&

36'400

&&&&&&&&&

37'856

&&&&&&&&&

39'370

&&&&&&&&&

40'945

&&&&&&&&&

42'583

&&&&&&&&&

44'286

&&&&&&&&&

46'058

&&&&&&&&&

47'900

&&&&&&&&&

49'816

&&&&&&&&&

Intern

et4'5

00&&&&&

&&&&&&

4'680

&&&&&&&&&&

&4'8

67&&&&&

&&&&&&

5'062

&&&&&&&&&&

&5'2

64&&&&&

&&&&&&

5'475

&&&&&&&&&&

&5'6

94&&&&&

&&&&&&

5'922

&&&&&&&&&&

&6'1

59&&&&&

&&&&&&

6'405

&&&&&&&&&&

&Sta

tionar

y8'0

00&&&&&

&&&&&&

8'320

&&&&&&&&&&

&8'6

53&&&&&

&&&&&&

8'999

&&&&&&&&&&

&9'3

59&&&&&

&&&&&&

9'733

&&&&&&&&&&

&10'

123&&&&&

&&&&10'

527&&&&&

&&&&10'

949&&&&&

&&&&11'

386&&&&&

&&&&Ma

itenan

ce500

&&&&&&&&&&

&&&&520

&&&&&&&&&&

&&&&541

&&&&&&&&&&

&&&&562

&&&&&&&&&&

&&&&585

&&&&&&&&&&

&&&&608

&&&&&&&&&&

&&&&633

&&&&&&&&&&

&&&&658

&&&&&&&&&&

&&&&684

&&&&&&&&&&

&&&&712

&&&&&&&&&&

&&&&Co

ntinge

ncy&re

serve

10'000

&&&&&&&&&

10'400

&&&&&&&&&

10'816

&&&&&&&&&

11'249

&&&&&&&&&

11'699

&&&&&&&&&

12'167

&&&&&&&&&

12'653

&&&&&&&&&

13'159

&&&&&&&&&

13'686

&&&&&&&&&

14'233

&&&&&&&&&

Total3E

xpense

s293

'000

3333333

299'12

033333

33305

'485

3333333

312'10

433333

33318

'988

3333333

326'14

833333

33333

'594

3333333

341'33

833333

33349

'391

3333333

357'76

733333

33

Net3P

rofit

C257'0

3633333

C245'6

0533333

C234'3

6833333

C223'3

3333333

C191'5

0733333

C148'5

6033333

C92'50

633333

333C11

'762

33333333

106'10

633333

33279

'755

3333333


Bibliography

1. “Enterprise Incubator” Foundation (2014) ICT Industry Report 2013 2. Junfu Zhang, (2003) Growing Silicon Valley on a landscape: an agent-based approach to high-

tech industrial clusters 3. Jim Routzong (2013) Robust Growth For Engineering Services Outsourcing 4. Economy and Values Research Center (2010) ENGINEERING DESIGN SECTOR RESEARCH

AND FEASIBILITY STUDY 5. Junfu Zhang (2003) High-Tech Start-Ups and Industry Dynamics in SiliconValley 6. Mahdi Moudi, Hamid Hajihosseini (2011) Science and Technology Parks, Tools for a Leap into

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How to create innovation ecosystem in Armenia: case study of a technology park

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