And yes, let’s agree to disagree. We’re overloading Blog’s post already. Hey, I sent you a message in your own blog.

Is that a reply to my real options suggestion? If so, that is what exactly real options analysis is for: it’s a tool that an investor can use to evaluate the feasibility of a project. The traditional discounted cash flow valuation method is best suited for high-certainty projects. Business incubation has too high a portion of uncertainty that DCF becomes inappropriate and has the tendency to discard potentially profitable projects/endeavours (such as business incubation).

“I only mentioned Silicon Valley to point out that physical proximity of engineering schools to the business community has been a cornerstone of major technoclusters globally.”

And all I’m saying is that I’m not entirely convinced that physical proximity should be considered part of said cornerstone. But, like I said, let’s agree to disagree for now.

I only mentioned Silicon Valley to point out that physical proximity of engineering schools to the business community has been a cornerstone of major technoclusters globally.

Yes, incubators will work best in parallel with schools that have a good R&D program.

It doesn’t have to be one or the other though. One other way to convince them is to have them see business incubation from a real-options perspective.

Your suggestion to locate an IT/Eng’g school within the premises sounds like a good idea. But I think plans to put up an incubator should be done parallel to that since the graduates of these schools will need access to a good support network once they start a business.

As for your view of patterning the physical location of our schools and IT parks against what’s happening in Silicon Valley…let’s just agree to disagree on that one for now.

Have a school that generates skilled manpower and ideas (both technology and business) in a business setting, and you have an “organic incubator” right there.

In Silicon Valley, having Stanford and the hi-tech business together within 5 minutes of each other made incubators uneccessary. “The entire district is a large incubator,” is what they say.

It would be ideal, for instance, to use the large lot around MTS as a business park, and move the IT and Business colleges of Ateneo to the Matina campus.

Since these are factors out of any one party’s control, it’s best to have the school partnered with the park directly. It might be good for SM, for instance, to open a branch of APC (which has a very good IT program, BTW) within the park.

In the Philippines, I would guess that our lack of experience in incubator management would mean it will probably be a continuous outflow of money for several years since we don’t have any other supporting structures in place (VC’s, academic R&D, etc.). That said, IT Parks will probably have to practically treat the space as “donation” from a financial standpoint.

(I guess I’m not giving them the benefit of the doubt. Either the incubator investors have to be battle-hardened super high risk tolerant people, or just be able to appreciate non-profits. The latter sounded more plausible in the Philippine setting.)

The greatest challenge for incubators is to avoid falling to compromise, preferring tenants who do little innovation but pay the rent on time, as opposed to the risky technological companies who are under funded. The moment this happens, it almost ceases to become an incubator.

“I guess what I’m trying to say is that IT parks will be able to appreciate incubators if they are able to appreciate the general value of non profit organizations in a broader perspective.”

But why do you say non-profit organisations? Business incubators can be operated as for-profit organisations as well. In fact, some studies suggest that for-profit incubators are better at producing successful tenants.