What is the Value-add of incubators?
Over the last decade, incubators have been popping up all over the country. There are economic development incubators, venture capital incubators and industry specific. On the tech side, Accelerators are the newest label to be put onto incubators. Despite all of this growth, one question that seldom appears to emerge, is “What value does your incubator add”?
The concept of “value added” is one that rarely emerges in the ever changing world of technology. Value added is no longer “trending” in this world of “build it and they will come”, yet the concept of value add is one that all companies, regardless of industry, company age or experience need to maintain to ensure their long-term success.
Value add is simple, it is the value that you create for your users, your customers and market. It is what makes you different and special in a world filled with competition. It is the service you provide, that has a real, tangible outcome.
In the case of incubators, what is the value add? Most would say for technology incubators, it is the networks, the social connections, the ability to facilitate the flow of capital and investment to young entrepreneurs to commercialize their products/services. Every VC is seeking the next dropbox or Facebook. The job of incubators and accelerators is to function as the intermediaries (middlemen) of old, and connect these two resources.
3 Key Differences
1. While the connection to capital, is most certainly an important value added service, in other circles-mainly those crazy socialist Europeans (note the sarcasm here) are more concerned with a firms longevity rather than its immediate bottomline. The reasons are both social and historical, but it is sufficient to note that Europeans tend to be less concerned with concepts such as quarterly returns, and more concerned with yearly, and multi-year returns. They pioneered concepts of “patient capital” and social innovation. Where North American incubators are connecting individuals to capital, European are offering business support services-Entrepreneurship training, business administration support & yes, financing.
2. Europeans also tend to be more invested in the “entrepreneur” rather than the idea. Rather, than focusing on finding the next facebook, they seek to find the next Mark Zuckerburg. What an original concept, invest in people and the results will come.
3. Finally, more European incubators then tend to invest for longer, in these companies (3-5 years) to get the returns they seek. They are not so much concerned with getting the current cohort out the door, and finding the next batch. The long-term investment is to ensure the long-term success of the company, and the people who work for it.
What differences do these entrepreneurial models create in the end company? What metrics should be used to evaluate incubators? MARS recently released a report calling for an IMPACT metrics for measuring incubator success. The time has come to measure and demand outcomes. Standards need to be created for education, program and service offering and not just simply seeking the next high tech dollar.
