Viljandi Incubator : How to waste 684,000 Euros

Viljandi Creative Incubator : Wasting 684,000 Euros

One sign of a bubble is when there is too much money chasing an insufficient number of good ideas. The Viljandi Creative Incubator (Viljandimaa Loomeinkubaatorid) was set up to fail from the start.

According to EAS records, they have received 684,715 EUR in funding over the past few years:

Who in their right mind would spend that sum on an incubator located in a tiny city of 20,000, to help companies produce clothing and handicrafts?

Let's look at some numbers.

Incubated Firms

According to their current webpage, there are 3 companies in incubation. Looking at an archived version of their site, another company (Tuuli Jõesaar) used to be on their list. To be fair, let's look at the results of all 4 companies:

1. Kristiina Libe - Clothing design and production. Her website (a blog) is by invitation only, so we're going to assume this was not a success.
2. Margit Varik - Clothing accessories design and production. Only post on her website is from November 2011, and there's no pricing listed, so we're going to assume this was not a success. (Though we will say her designs are nice.)
3. Karolina Lehtma ja Liisi-Ly Viikin - Clothing design and production. Their site is just a Pinterest page with no contact information, nor pricing. We're going to assume this was not a success.
4. Tuuli Jõesaar - Leather accessories design and production. Her website (a blog) was last updated in August 2012, and all the posts seem to be detailing the process to develop a product but still nothing for sale. We're going to assume this was not a success.

So of all 4 companies in the incubator, all of them have failed to succeed. This is the type of result that 684,715 EUR can buy?

Our Take

This project was set up to fail from the start, and we think the people who make the decisions were smart enough to know this. It appears the funding came via ERDF (a regional development fund) so it had to be spent outside major cities like Tallinn. Thus, they wasted this money in Estonia's 6th largest city -- a city with so few people that there are more people living on one street in Tallinn's Lasnamäe district than in all of Viljandi. Our theory is that they figured they had to spend the money or they would lose it, so might as well create a few jobs in Viljandi, for a project that was doomed to fail.

Why was it doomed to fail? As we can see from the 4 incubated companies, the focus was on the clothing and textile industry. This industry is extremely competitive, with enormous downward cost pressure and where marketing and building a brand is extremely costly. As far as we can tell, none of the people behind the incubated companies, nor behind the incubator itself, have experience in this area. It's one thing to be able to sew pretty dresses, but it's another thing to mass produce clothing, market a brand, and obtain wide distribution.

There is also little ability to protect the designs, so what's to prevent a major manufacturer like Zara from coming out with a similar product? We do know that Zara has the scale and efficiency to undercut (on costs) and out-produce any Estonian producer.

We do like Viljandi as a city, and we do like some of the designs of these incubated companies (with the exception of the dead rabbit photos from Jõesaar's site). However, the idea of an incubator in Viljandi to promote Estonian clothing producers is just a stupid waste of money.