This entry is an excerpt from the OECD’s International Compendium of Entrepreneurship Policies (2020), which contains 16 case studies from 12 OECD countries. The Compendium examines the rationale for entrepreneurship policy, presents a typology of policy approaches and highlights principles for policy success. Case studies span policies for regulations and taxation, entrepreneurship education and training, advice and coaching, access to finance, internationalization, innovation, and holistic packages for ecosystem building. (OECD Publishing, Paris, https://doi.org/10.1787/338f1873-en.)
This case study illustrates how the Government of Canada sought to establish a critical mass of high quality business accelerators and incubators across the country.
The programme supported leading accelerators and incubators in expanding their activities such as mentoring and business development services for high-potential Canadian start-ups and small- and medium-sized enterprises (SMEs), including young entrepreneurs. The goal was to develop innovative scale-up companies.
CAIP was an initiative under the Government of Canada's Venture Capital Action Plan, which provides CAD 100 million (EUR 68 million) to Canadian business incubators and accelerators to expand their support services to start-ups and SMEs. The funding was provided over five years – fiscal years 2014/15 to 2018/19. The programme provides non-repayable funding to business incubators and accelerators that can develop innovative, high-growth firms, which themselves represent high-potential early-stage investment opportunities.
As a program under the Canadian government's Venture Capital Action Plan, it was designed by the Ministry of Finance, with support from other federal ministries and agencies. It was implemented through the National Research Council of Canada Industrial Research Assistance Program (NRC IRAP).
Funding recipients were selected through a one-time request for proposals. The process was launched on 23 September 2013, with a submission deadline of 30 October 2013. Approximately 100 proposals were received. Proposals were first assessed by NRC-IRAP to ensure that eligibility criteria were met. Eligible proposals were then evaluated by an independent panel of five experts with experience in venture capital asset management and business development. 16 recipients were announced in June 2014.
The terms, conditions and obligations for the receipt of contribution payments were outlined in contribution agreements between NRC-IRAP and the CAIP recipients. Obligations included reporting key performance data annually. All CAIP recipients were required to demonstrate matching contributions on at least a 1:1 basis during the period for which funding was received.
The government continued to support Business Accelerators and Incubators (BAIs) through other projects after the end of the programme.
The Government required two evaluations of CAIP – a mid-term evaluation in 2016 that focussed on the relevance and implementation of the programme and a second evaluation in 2018 that examined the extent to which objectives were achieved, delivery efficiency, and the potential for extending the programme.
The first evaluation responded to questions that were established by the Office of Audit and Evaluation of the NRC and CAIP management. The methodology included:
- A review of available programme data;
- A review of programme documentation;
- A review of literature about the performance of incubators and accelerators;
- A review of programme management processes, including 6 interviews in other departments and agencies;
- 46 interviews with programme managers and staff, funding recipients and other stakeholders.
The second evaluation also used information from multiple information sources:
- Document and data review, including a detailed analyses of incubator and accelerator performance data;
- Online survey of 549 firms supported by CAIP-assisted incubators and accelerators;
- In-depth interviews with a sample of 46 supported firms;
- In-depth interviews with 15 CAIP-assisted incubators and accelerators;
- In-depth interviews with 5 CAIP delivery staff and 5 external stakeholders;
- Cost-benefit analysis.
The second evaluation sought to assess the impact of the programme against key expected outcomes:
- Accelerators and incubators expand their range of programmes and services
- Early stage firms become investment ready
- Early stage firms benefit from innovation support resources such as expertise and networks
- Wealth creation in Canada
List of Key Performance Indicators (KPIs):
- Incremental programmes and services offered by accelerators/ incubators
- Number of incremental expertise providers (mentors)
- Number of early stage firms which receive investment
- Average investment received by early stage firms
- Number of early stage firms supported
- Number of staff at early stage firms
- Share of early stage firms satisfied with programmes and services
- Average satisfaction rating on benefits to firms from innovation networks
- Number of additional jobs created
- Share of early stage firms which generate or increase their revenue
- Early stage firm survival rate
The most recent evaluation identified five key findings:
- CAIP is aligned with evolving government priorities related to support for innovative start-ups and scale-ups, including the priority of strengthening Canada’s network of accelerators and incubators.
- Available data suggests that CAIP-funded incubators and accelerators have increased their numbers of client firms, and in many cases they evolved from small, early-stage firms to more mature firms.
- CAIP-funded incubators and accelerators have delivered new or expanded services, which was valued by client-firms, which would not have been possible without the programme.
- Available data suggests that CAIP funding and the resulting assistance provided to incubators’ and accelerators’ client-firms have contributed to wealth creation in Canada, notably through revenue and equity growth in client firms.
- The delivery of CAIP was challenging, notably delivery costs that were more than double the planned costs and insufficient time to understand and adjust programme delivery, and resulted in some valuable lessons learned.
Two main implementation challenges were identified. First, the delivery of CAIP was more challenging than expected due to its complexity, which may be the result of insufficient time allocated for planning. NRC-IRAP was selected as the delivery mechanism for CAIP given their experience with contribution agreements. However, the NRC-IRAP infrastructure needed substantial adaptation to meet the new parameters required by CAIP. For example, negotiating the contributions for CAIP was much more time consuming relative to other agreements negotiated by NRC-IRAP. The development of new processes and guidelines took longer than anticipated, suggesting that CAIP was under-funded during the early implementation phase.
A second challenge was the complexity of reimbursing eligible expenses incurred by business incubators and accelerators. Evaluations indicated that the incubators and accelerators found the process complex and burdensome. Programme managers recognised the need for strong oversight but also found that reviewing claims was complex and time consuming, especially when most contribution agreements involved several parties.
Lessons for other ecosystems:
CAIP was a complex programme to deliver, but evaluations identified several positive outcomes, including enabling incubators and accelerators to grow and deliver higher quality support; enabling incubators and accelerators to reach a much larger client base; stimulating client firm growth (e.g. revenue growth, investment increase); and positive spill-over effects for the economy.
Key lessons learned for the design and implementation of similar programmes were:
- Sufficient time for detailed planning and development of administrative requirements and processes should be allocated prior to the launch of new programmes similar to CAIP.
- Sufficient resources should be allocated for programme delivery of new programmes similar to CAIP once the level of effort required is understood.
- Reporting requirements should be clearly specified (in accordance with a well-defined performance framework) and understood prior to signing a contribution agreement. In the years following the introduction of CAIP, a performance measurement framework for accelerators and incubators was developed and piloted to be used as a basis for reporting within the funding agreements that the Government of Canada has with business accelerators and incubators.
- For programmes such as CAIP, where beneficiaries engage through an intermediary, programmes should consider working with other innovation and capacity support programmes to develop a concerted approach to collecting performance data. This would ensure information is available to assess the value of government investments.