Discussion Paper

Improving Performance and Data Collection of Business Accelerators and Incubators

Objective

This paper is intended to stimulate a discussion as to how government, entrepreneurs, investors, educators, and industry can work together to establish a performance measurement framework that can be applied nationally to business accelerators and incubators (BAIs).

Themes of Discussion:

  • Objectives and Principles—Benefits of a performance measurement framework to governments, BAIs, and firms; and principles for its design and operation.
  • Governance—Data exchange and consolidated collection.
  • Standardization of Data—Consistent performance metrics, data points, and definitions.

Ultimately, the Government is seeking input from stakeholders on the viability of BAIs sharing their performance measurement data to help inform BAI stakeholders on a) how various BAI programs influence start-up performance, and, b) how to establish an appropriate performance measurement framework model that can be applied to business acceleration and incubation programs across Canada.

Introduction

Background

The Government is engaging Canadians in developing an Innovation Agenda that can drive growth, create jobs, and allow Canadians to seize the opportunities of the transformative times we live in. The goal is to ensure that Canada will be globally competitive in promoting research, translating ideas into new products and services, accelerating business growth and propelling entrepreneurs from the start-up phase to international success.

A key element of the Innovation Agenda is to strengthen Canada's network of BAIs across the country. Most entrepreneurs now consider accelerators and incubators part of the start and scale journey. This has driven the demand for the launch of hundreds of BAI programs around the world, prompting questions on how differences across programs influence start-up performance.

Public and private sector investment in BAIs—both in Canada and internationally—stem from their potential to play an important role within the broader innovation ecosystem to support firm survival and growth.Footnote 1

The boom of growth in the number of BAIs in Canada and the U.S. peaked in 2012. Increasingly, top Canadian founders are demanding access to pre-seed capital, corporate connections and tailored programming (instead of general, on-size-fits all programming). BAIs are continually adapting programs to provide assistance to start-ups that is relevant to market demands.

In 2013, the Government of Canada made major ongoing investments in incubators, accelerators and the venture capital ecosystem to drive the growth of innovative start-ups. The Government directed the Business Development Bank of Canada (BDC) to invest $100 million over five years to support the start-up ecosystem, including: investing in start-ups graduating from top accelerators; investing in accelerators themselves; supporting up-and-coming venture fund managers; and supporting partnerships in the start-up community.

At the same time, the Government of Canada created the Canadian Accelerator and Incubator Program (CAIP), a $100 million fund, to support the growth and sustainability of programs across the country. Delivered by the National Research Council's Industrial Research Assistance Program (NRC-IRAP), CAIP provides support over a five-year period in the form of non-repayable contributions to a limited number of best-in-class accelerators and incubators. Recipients were required to demonstrate matching contributions on at least a 1:1 basis during the period of the contribution funding.

In 2014, the Government announced sixteen Canadian accelerator and incubator organizations that were selected and ready to advance in the selection process under the CAIP's strict eligibility criteria.

In 2015, the Government of Canada (Innovation, Science and Economic Development; Global Affairs; and BDC Capital) and the Government of Ontario's Ministry of Economic Development, Employment and Infrastructure supported research by the Centre for Digital Entrepreneurship and Economic Performance (DEEP Centre) to investigate the role, effectiveness, and outcomes associated with business accelerators and incubators. While BAIs play a significant role in supporting firms, the DEEP Centre recommended the following to improve their performance by:

  • Focusing on high-potential firms and scaling up;
  • Improving performance measurement and data collection;
  • Better engaging corporate Canada;
  • Creating an executive mentorship network for high-potential firms;
  • Upgrading the internationalization of programming; and
  • Developing a formalized investor engagement model.

Consistent with the Government's approach to defining outcomes and measures of success, in 2016 (Budget 2016) the Government announced that it will work with stakeholders to develop a performance measurement framework for business accelerators and incubators in Canada. "This framework will enable these organizations to benchmark their performance and drive improvement, help companies choose their best options for support, and assist governments at all levels in increasing the effectiveness of public investments in this area."

Most BAIs in Canada are relatively recent creations. New BAIs are forming all the time, and, as they experiment with new formulas, there is considerably fluidity in organizational structures, governance arrangements, partnership models, and program design. This process of reinvention and fine-tuning will continue as BAI adjust their approach in response to market conditions, including the needs of their clients, funders and partners. The DEEP Centre recommended focusing more attention on assessing accelerator and incubator performance, both within and across various types, as stakeholders in the entrepreneurial support ecosystem will need to regularly revisit their assumptions about the various functions and services BAIs provide in supporting the growth and survival of innovative Canadian firms.Footnote 1

Alignment with Government Priorities

The proposed initiative will advance the Government's priorities and the Minister of Small Business and Tourism's mandate to expand support for accelerators and incubators, clarify innovation and business development programs, make it easier for SMEs to take advantage of incubator and accelerator programs, ensure programs are supportive of SMEs seeking to being more productive, innovative and export-oriented, engage other governments to create alignment, and seek ways to reduce administrative burden on small business.

Rationale

Building a prosperous Canadian knowledge economy depends in no small part on scaling the next generation of globally competitive Canadian companies. Dynamic, growth-oriented firms play a central role in successful innovation systems—directly, by investing and collaborating in the development of new innovation; and indirectly, as supply chain actors and as magnets for talent. Identifying and scaling these companies to become international business and innovation leaders is the true measure of Canada's ability to stimulate broad employment gains and sustainable economic growth through innovation.

The Innovation Agenda's challenge is to ensure that firms are prepared and able to move beyond steady but slow growth – to scale into the leaders of a globally-competitive economy capable of providing a greatly expanded number of markets with an increased variety of goods and services where firms must compete primarily through product and marketing innovation.

Canada is poised to succeed. After more than a decade of public and private investment into the entrepreneurial ecosystem, the number of firm founders is impressive and the innovation pipeline is overflowing with more robust ideas than ever. Despite this, not all of these firms are making the same journey.

To determine the role of BAIs in empowering innovation and economic growth in Canada, a national performance measurement framework is required to enable evidence-based identification of gaps, opportunities, and impact of BAI programs in Canada. It will inform Canada's ability to track high-growth firms, deploy capital to priority clusters, and compete in the global innovation race.

There is an opportunity to target support towards start-up and scale-up companies through BAIs, so that these companies have an equal, if not greater, chance of scaling than global competitors. The Innovation Agenda can bring these sectors together to better support and scale firms on the cutting edge of their industries and to encourage more Canadian entrepreneurs to adopt innovative, globally competitive business strategies.

Discussion Topics

The Government is seeking collaboration from a selected group of BAIs actively collecting, tracking and reporting on data that enables evidence-based identification of gaps, opportunities and impact. The organizations involved will provide input on the benefits and challenges of a national performance measurement framework for BAIs including the sharing and standardization of data. Leveraging the experience of a selected group of BAIs, the Government is seeking input on the viability of BAIs to share their performance measurement data to help inform BAI stakeholders on a) how various BAI programs influence start-up performance, and, b) how to establish an appropriate performance measurement framework model that can be applied to business acceleration and incubation programs across Canada.

Themes of Discussion

  1. Objectives and Principles—Benefits of a performance measurement framework to Governments, BAIs, and firms; and principles for its design and operation.
  2. Governance—Data exchange and consolidated collection.
  3. Standardization of Data—Consistent performance metrics, data points, and definitions.

1. Objectives and Principles—Benefits of a performance measurement framework to Governments, BAIs, and firms; and principles for its design and operation.

What should be considered so that key stakeholders in Canada's BAI ecosystem (BAI, angel and venture capital investors, research centres, government programs, and entrepreneurs) could benefit from a national performance measurement framework?

Questions for Exploration

  • What should the goals of a shared performance measurement framework be for each stakeholder?
  • What principles should guide the development of a performance measurement framework?
  • How can buy-in be obtained from accelerator and incubator organizations?

2. Governance—Data exchange and consolidated collection.

What should be considered so that key stakeholders in Canada's BAI ecosystem would participate in data sharing as part of a national performance measurement framework and coordinated reporting on how BAIs influence start-up performance?

Questions for Exploration

  • How could a national performance measurement framework be adapted to the varied approaches already in place (by accelerators and incubators in Canada, different models for government support, different sectors, and different policy objectives)?
  • What needs to be in place to support data exchange and consolidated collection?
  • What are the barriers to collaboration that would need to be addressed?
  • Which BAI stakeholders should be part of an organizational governance structure to support data sharing?
  • What types of organizations could undertake consolidated collection and analysis?

3. Standardization of Data—Consistent performance metrics, data points and definitions.

Most participants in the entrepreneurial support ecosystem would likely agree that the essential measures for success of start-up assistance programs are linked to the growth and competitiveness of the firms they support. If BAIs are successful in selecting and nurturing business ideas, incubated firms, on average should enjoy higher survival rates, grow faster, employ more people, and attract more capital than non-incubated firms. BAIs also produce a variety of outcomes that are not captured in conventional firm performance metrics, including founder development, developing an entrepreneurship culture, and attracting new talent and investment to a region.Footnote 1

What metrics, data points and definitions should be considered to enable reliable data aggregation and comparison across the Canada's BAI ecosystem?

Questions for Exploration

  • What are your views on the reporting requirements of current government and private sector support for accelerators and incubators? How could they be improved?
  • What are the objectives and related performance metrics that your accelerator or incubator needs to report on? Does this differ for different supporters (e.g., provincial, federal, private sector)?
  • What process is required to identify a consistent set of indicators being used by BAIs and/or required by supporters?
  • How can stakeholders come together on a shared consistent set of metrics and definitions?
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