If you’re an active angel investor who frequently brings more than just money to the table, founding a business incubator to add more structure in mentoring and growing startup ventures could be your thing.
Why? According to National Business Incubation Association (NBIA), incubators might reduce the risk of small business failures, which means you’d have a better chance getting your investment back and then some, not to mention the psychological reward of giving back to the community and seeing your portfolio companies succeed.
Historically, NBIA member incubators have reported that 87 percent of all firms that have graduated from their incubators are still in business. In the general population, 66 percent of new firms survive at least two years, and 44 percent survive at least four years.
It is important to note that these figures are not directly comparable, due to differences in survey methodology, time frame and other factors. However, looking at them side by side does strongly suggest that business incubation reduces the risk of small business failure and offers a valuable comparison.
In A Business Chef Specialized in Startup Cuisine, we briefly introduced InNOVAcorp, a business incubator whose incubation model has been recognized by NBIA as one of the crème de la crème in the incubation industry. We also asked President and CEO Dan MacDonald (aka “Big Mac”) to tell us more about the type of startups that would make them drool.
In part 2, Big Mac gives us a quick overview of InNOVAcorp’s industry-recognized business model as a start for you to understand how a successful incubation program is run and determine whether starting one is right for you.
* Edited interview
VH: What advice would you give to those who wish to start and run a successful incubation program to stimulate innovation and entrepreneurial spirits?
DM: I’d suggest they look into the expertise offered by the National Business Incubation Association (NBIA) and the Canadian Association of Business Incubation (CABI). These organizations have pulled together best practices from over 1,800 organizations around the world. Also take a look at InNOVAcorp’s model and approach at www.innovacorp.ca.
VH: InNOVAcorp’s High Performance Incubation (HPi) business model is recognized internationally as a best practice technology commercialization approach. What makes InNOVAcorp stand out from other incubation programs in terms of helping startups commercialize their technologies?
DM: InNOVAcorp has been recognized internationally by the NBIA, which has 1,900 members from over 60 countries. In May 2009, InNOVAcorp was recognized as one of the two best incubation business models in the world.
What makes InNOVAcorp unique is our combination of traditional incubation infrastructure, an international network of business mentors, and especially, the manager of an early seed and venture capital fund.
Our approach to attracting deal flow and our credibility in the business community helps make our model highly effective.
VH: Regarding deal flow, what can you tell us about the recent I-3 Technology Startup Competition?
DM: For InNOVAcorp to identify the “next great opportunity,” like most VCs, we need to review a relatively large number of opportunities. We have several approaches to maximizing the quantity and quality of our opportunity pipeline, including the I-3 Technology Startup Competition.
I-3 Technology Startup Competition has a proven track record in identifying high-potential opportunities and helping the business community to understand ways to support startup companies.
Through this competition, more than C$700,000 worth of seed investment and business building services, e.g. legal, accounting, marketing, and printing, will be awarded to 10 startup companies.
The competition took place in 5 geographical zones across the province. The award package for zone winners includes seed capital and in-kind contributions for the development of startup ventures:
VH: What kind of deals does InNOVAcorp prefer? Why?
DM: InNOVAcorp prefers syndicated deals. While we may not be the largest investor measured in monetary amount, we’re able to bring our expertise to coordinate the round.
The structured approach is directly related to the:
VH: How much does InNOVAcorp typically invest in a startup?
DM: InNOVAcorp invests between C$50,000 and C$250,000 of pre-seed capital through its HPi Microfund, and invests between C$250,000 and C$3,000,000 of seed and venture capital through its Nova Scotia First Fund.
Link:
* For series, references are published in the last installment of the series.
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