Accelerator and incubators have popped up in almost every city in Canada that is supporting its ‘innovation ecosystem.’ This economic development strategy gained interest after the stock market crash in 2008. But it wasn’t until around 2012 that this strategy has gained popularity as more startups find success.
If you updated this data collected by MaRS in 2013 I would bet more than 50% would be 2012/2014 ‘founded’ years.
There is a increased profile for young entrepreneurs today as a result of the market for credit that these organizations compete in. There are also many companies that have grown with significant VC investment or had lucrative exists that were more than just paying back the investors. The challenge is that little is known on what specific role incubators or accelerators have played in these companies success.
What did they do that helped? What has changed since that company was in the program? What has changed in the larger community?
With a new government in Canada there is now a focus on an election promise that was directed at this economic development strategy – funding accelerators, incubators, and research. Recently published articles written by Marcus Daniels along with features on Jim Balsillie and John Ruffolo’s lobbying efforts to provide a ‘voice’ for technology startups focus on the need for change in the accelerator and incubator landscape in the country
Marcus sums an observation and challenge shared by many.
Across Canada there is too much duplication and isolation at the accelerator level. Solving this problem begins by recognizing that the needs of founders in both tech and other high-growth areas have changed.
While some some accelerators have evolved, many have failed to adapt and are creating initiatives that keep the lights on, as opposed to new programs to incentivize the best entrepreneurs on the planet to build their ventures in Canada.
I think the key message from Marcus is that accelerators have failed to adapt to the things that have a meaningful impact on building companies in Canada. Instead, they focus on the activities that provide them the funding they need to keep the lights on.
Balsillie’s quote from his article focuses a lot more on building a set of business metrics for accelerators and incubators:
“If you’re going to give more to incubation, create an accountability framework that’s based on real business output,” Balsillie said.
“We’ve never had any performance metrics — there’s a lot of spin and hype. Which part of it is real outcome and which part is pixie dust?”
Great! A call for metrics that matter — but what are they? I tried to figure that out with post on startupnorth but those assume they operate as a business with a focus on profit. I posted a more detailed look at metrics that matter as well.
What we are talking about are government funded programs that are tasked to ‘hack the market’ and give early stage companies a better chance than they would have normally in Canada to grow.
The challenge, as I see it, is that it is much harder (and simpler) than most people have generally estimated. It is also a longer term commitment to the founders than most organizations are currently tooled for.
The programs are all increasing in size as they try and tackle any and all activities that might help build an ecosystem. The hard part is understanding or believing that it is much simpler to help founders (see note at the end). There are just a few key activities or opportunities that an early stage founder can use and not find themselves. But for each and every founder it takes the care and understanding to deliver personalized services/support.
Balancing services is hard and only a few have figured out how to do this well.
Helping companies exist, grow, and be successful is an Art not a Science.
The challenging in understanding this Art of building companies is likely rooted in a misunderstanding of startup ecosystems and what/who/where/how they can be manipulated. That is where metrics for programs can get messy.
For fun, read this post on ecosystems for a perspective from Europe.
‘Ecosystem’: the problem is that the very term has become a bit of a cliché. Everyone uses it. For most people, its meaning has been lost along the way. It has become irritating to hear everyone talking about the damned ‘ecosystem’, all the more so because in reality it’s often not an ecosystem but a toxic environment for startups.
The emphasis of the post that follows the above quote is the that ecosystem is forged by entrepreneurs that are out there building companies. That is something that Brad Feld states in his Boulder Thesis as well.
Can ecosystems be forged by accelerators and incubators or by the entrepreneurs participating in them? Do those entrepreneurs require those programs? Do they slow things down or speed things up? Do they make businesses better than they would have been without the program?
No one knows with any certainty and I don’t think it will be easy to figure out because founders enrol in everything that is available. All the programs will promote their success but it is challenging to find out what is really going on because 2+ programs will be promoting the same success. Read The Market for Credit and Supporting Entrepreneurs.
Over time successful entrepreneurs will give back to the community (funding, advice, connections) but unless we know what is currently working (and not working) then it makes it possible for critics and point out the burning money.
What would happen if all the programs stopped? Would any of the entrepreneurs that will find success notice? If the truly successful programs are indeed successful should they not now be obsolete given that there is now a successful group of founders re-investing time and expertise?
My guess is that if all the government backed programs shut down the following things would happen:
- Venture Capital firms would fund a few (1-3) as a way to optimize their lead generation.
- Higher Education would continue to develop programs and tie them in tighter with education and their overall fundraising initiatives. But many schools might not try which I think would hurt students.
- Less people would attend startup events and conferences in Canada (which is actually a bad thing).
In Canada we are not at a stage were shutting down programs is a wise course of action. But I think with the next phase of investment there are a few things that should be discussed or changed:
- Give government funded programs the goal to be obsolete in 5-10 years. How do they achieve that (it is not that they have to be)? That would help them identify what success looks like.
- Enlist a research group from the Rotman School of Management (or a collaboration of top notch research driven business schools) to collect, clean up, analyze, and report on the data across all programs. Graduate students are designed to do this better than anyone. Then everyone is better informed on what works and we can do more of that.
- Fund co-operative education for all undergraduates across the country. That experience creates entrepreneurs, open students up to products/customers, and builds global networks all young people can use to be successful.
Note: The Creative Destruction Lab is demonstrating how a program can operate on a shoe string budget and have a significant role in educating students. Metrics wise it has ~36 Alumni companies that have collectively achieved ~$200M in value in a few short years. No program in Canada comes close to that but many other programs in Canada are connected to those companies. EDIT: No program should take credit for a company’s success but they should celebrate it. Also, I had the wrong value for CDL.
Another note: This post isn’t about organizations that have a longer term vision and are trying to solve bigger problems. They may have accelerator or incubator programs as part of their larger offering but overall they are something different.