If incubators are the quintessential generators of new businesses, they need to provide more flexible and more intensive support
Incubators have such a variety of stakeholders, objectives and approaches that evaluation is not really possible, says a recent report from Nesta; but what is unques-tionable is that the number in the UK has grown from about 25 some thirteen years ago to around 300 to-day, the majority of them linked to R&D functions and universities. The one thing that is common to their aims is that of developing ideas into businesses and so generating employment, economic activity, and/or wealth.
Nesta’s report draws on research to suggest that important elements of the incubation process include:
- the implementation of a selection process
- professional and business assistance
- working together with incubatees – who are co-located
- strong encouragement of peer-to-peer networking
- addressing the multiple needs of new ventures
- offering continual exposure to the incubation environment and services, and
- incubators developing mixed revenue streams, eg from rents, services, support, consulting, conferences, investments, grants etc.
The report suggests that the main benefits that incubatees gain are:
* the development of credibility;
* shortening of the entrepreneurial learning curve;
* quicker solution of problems, and
* access to an entrepreneurial network;
and the relative importance of each depends upon the nature of the incubator.
Without ‘fit’ there is failure: support must be skilfully matched to needs
If incubators tend to focus on high-growth firms, the report points out that because they are inherently associated with uncertainty, incubators adopt a portfolio approach, and this stretches the knowledge and understanding of the incubator manager in order to meet all sorts of different needs, as it does his/her access to tools and facilities.
The report goes on to point out that different incubators in different regions house businesses with different needs; and that these needs change as the business evolves.
It adds that ‘not all universities have a cultural fit with entrepreneurial endeavour’. Some areas and some funders are more interested in increasing employment than in nurturing exceptional businesses. Moreover, the support needed by early-stage ventures is different (eg concept development and business planning) from those with an already established model, product or clientele [eg funding and contacts]. In all these cases, the support needed depends upon the nature and prior experience of the entrepreneur; and all of this clearly places increasing demands on the capabilities of the incubator manager.
Unsurprisingly incubatees don’t like incubators whose programme is predetermined rather than re-evaluated depending on the changing needs of tenants: a critical function of incubators seems to be the ability to learn and adapt to their changing needs.
The report also mentions a study where the better performing incubators had ‘proactive crisis intervention’ and ‘proactive development intervention’. Surely it is not ‘proactive intervention’ that is needed but support. In the new Accelerators, the wide variety of mentors provides a steady stream of support in the form of feedback, advice and contacts.
The report’s main message is that without ‘fit’, there is failure. It derogates public sector venture capital for attempting to operate where there is no concomitant entrepreneurial environment; as it does working with a hi-tech model outside an area of hi-growth activity; or attempting to emulate strategies of organisations in the US by organisations or in areas in the UK that bear little comparison. And it emphasises the importance of the ready availability of ‘a wide range of other actors, from research institutions to serial entrepreneurs to specialist advisers, grant-providers, angel investors and many more’. The report also stresses that an incubator takes time to establish itself [and its own credibility].
This report certainly emphasises how enormously wide is the range of capabilities needed of the incubator manager, and at differing moments – so wide and at such different moments that it raises the question of whether a range of mentors is not an essential element in providing effective support for incubatees.
Mentors for early-stage ventures: horses for courses
Mentoring in business is topical; but it is chancy and as yet not common; though it is increasingly seen as a vital element in incubators. What examples suggest and what new mentoring schemes require is better ways of determining what might be needed, and more sophisticated ‘dating’ mechanisms.
Finding the right mentor
Successful mentoring (like coaching) is widely accepted as a two-way process, where the initiative can be on either side, but where the match decidedly needs to be mutual. Mike Southon (FT writer and self-confessed serial mentor) first asks mentees to provide a psychometric profile of themselves plus a one-page summary of where they are and where they want to get to; while sportspeople are increasingly proactive in choosing their own coaches. Southon accepts that thereafter each new chord in the tune needs to sound good; but the fact is that the whole relationship needs to be imbued with the highest chance of success from very early on.
What makes for successful mentoring?
Southon (http://www.ft.com/mikesouthon) suggests that there are three key characteristics in a good mentor: the creator – who comes up with new business ideas; the mechanic – who works out how to achieve a task – to deliver new products and ideas; and the star – who uses his personal charm to persuade people to buy them. Opening doors and providing contacts, he suggests is a vital part of the role. The former Chairman of UKBI – the association of UK incubators, says that the most common needs among budding entrepreneurs are for: understanding the customer; marketing skills; and financial support. Yet another analysis suggests three clearly different kinds of supporter; the personal coach, who can help entrepreneurs to make the most of their personal strengths and weaknesses; the technical expert, who can help them to develop the product or service; and the business mentor, who can help their understanding of the evolution of the business. And there are different sides to support – among them, critiquing, offering advice, providing contacts and providing emotional support.
Different mentors providing different kinds of support
At the Pervasive Media Studio at Watershed, Bristol, one of the conclusions of a recent project was that next time round, it might be prudent to put two mentors into place with each entrepreneur. In an incubator, the kind of support needed of a mentor depends significantly on what is already available from other members of the incubator – technical help in the development of the product is frequently found from other members of the incubator. It also depends crucially upon the stage of development of the project (See http://whatmore.posterous.com/ – a Study of Innovation Workshops).
There was a period when the BBC was seeking from outside its ranks ideas for new programmes, for which they adopted from Stanford Research Institute a process for developing ideas into fully-fledged proposals that could be pitched to their commission-ing managers. ‘Watering Holes’ brought individuals with ideas for new programmes for a week together with a small number of experts whose ‘downstream’ experience could help to shape the idea into a more marketable proposition, among them producers/directors, audience experts, marketing and finance people. http://www.nhk.or.jp/bunken/english/reports/summary/200701/03.html
Mentoring is at the heart of the Techstars’ approach, (a US ‘Accelerator’) (http://www.techstars.com/), says a recent Nesta report (http://www.nesta.org.uk/library/ documents/StartupFactories.pdf). The first month of the programme consists almost entirely of meeting experienced tech entrepreneurs and investors and receiving often brutal feed-back on their businesses: unless a team can attract five mentors to help them, Techstars feel they are unlikely to succeed. (It should be added that Techstars’ entrepreneurs are in teams; and mentors often become both investors in and members of those teams.)
‘Accelerators’ with big banks of ‘Supporters’
At the extreme are two accelerator programmes, one European and the other UK, both of which have huge panels of mentors. Springboard in the UK has over a hundred mentors (http://springboard.com/), and its entrepreneurs are required to submit problems or to pitch to a number of them each day for first five weeks of their thirteen week programme, thus making it possible for them to develop business concepts that have a better chance of success before they are launched onto the market. Y Combinator – among the earliest US Accelerators, relies on events in the course of its cycle which are based around obtaining input, advice and challenge from experienced founders and investors; and advice from a small group of founders and partners of the accelerator, and increasingly from alumni. And Seedcamps (http://www.seedcamp.com/) has available some 300 contacts, and its entrepreneurs can make use of any of these contacts as they need them – both during the week of the competition and over the course of the following three months during which the winners are under the Seedcamps umbrella. This approach also highlights how cash is not the most important investment at this early stage; as it highlights how different situations call for very different forms of ‘investment’.
The future of mentoring
Nesta reports that it has now run two year-long rounds of its Creative Business Mentor Network; but the government’s plans for a national business mentoring scheme, launched in November, 2010 and expected to be up and running this summer, have not yet been reported as fully fledged. What is required is better ways of determining what might be needed, and more sophisticated ‘dating’ mechanisms.