Franchise duo launch start-up incubator Inkuberra

Rod Young, founder of DC Strategy, and Simon McNamara, founding shareholder of Grill’d, have launched Inkuberra, a business incubator for fast-growth start-ups.

The duo, who have significant experience in building franchised companies, say that Inkuberra, which means ‘to incubate’, will predominately focus on food retail businesses with proven concepts.

Young and McNamara will be aided by brand and marketing strategist Anthony Morrell to help “supercharge” the businesses they invest in.

McNamara tells StartupSmart that Inkuberra will be aimed at the early-stage start-ups that are often overlooked by other investors.

“We’ve been doing this individually for awhile and we feel there’s a real gap in the market for Inkuberra,” he says. “Private equity isn’t interested in early-stage businesses as they want more proof and, in many cases, larger businesses in the first place.”

“We’re focused on earlier-stage businesses that have got some runs on the board but don’t know how to scale themselves. We can make those improvements in the model to grow it further.

“We’re looking at three main things – proof of concept, the individual running the company and the category the business is in. We have no fixed opinion over whether the business is franchised or not.”

“We’re getting involved in food retail as that’s where our experience is. We don’t have that experience in the manufacturing or service industries. We’re not IT specialists, for example.”

“The sweet spot for us is probably three or four outlets, to provide proof of concept. The businesses need to be profitable, but if they aren’t that profitable due to overheads, that’s fine – we’re after proof of concept.”

McNamara says that the founders have invested their own capital into the business, adding that they have enough for “three of four investments” at present. Inkuberra aims to make a standard investment of $300,000 to $500,000 in each business, with an equity stake generally between 30% and 40%.

Inkuberra already has one deal in the pipeline that McNamara hopes to finalise by February. He says the incubator will be initially aiming at “six or seven” investments so that the founders have the required time to spend growing the businesses.

“The money is the lesser part of it,” he says. “We feel we can add a lot of skill and expertise to a business and help drive them forward. Our skills are very complementary and we can add a lot of value. We will be more involved than other investors, but we will be giving direction and opening doors rather than running the businesses in a hands-on way.”

McNamara says Inkuberra may take on further funding, depending on how the venture fares. “We’ll take it one step at a time, but if we have a lot of success, we have the capacity to borrow. If there are opportunities out there, it would be crazy to not entertain them. But we will need to see where the market is at the time.”

This article first appeared on StartupSmart, Australia’s premier site for people starting a business.