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 examines the Canadian government's effort to establish a critical mass of high quality business accelerators and incubators across the country.
The program supported the expansion of activities undertaken by leading accelerators and incubators, such as mentoring and business development services for high-potential startups, small- and medium-sized enterprises (SMEs), and 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 provided CAD 100 million (EUR 68 million) to Canadian business accelerators and incubators to expand their startup and SME support services. Funding was provided over five years – fiscal years 2014/15 through 2018/19. The program provided grant funding to business accelerators and incubators for developing innovative, high-growth firms, to grow the number of high-potential early-stage investment opportunities.
The program was overseen by the Canadian government's Venture Capital Action Plan, and was designed by the Ministry of Finance with the support of 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. NRC-IRAP conducted an initial assessment to ensure that eligibility criteria were met. Eligible proposals were then evaluated by an independent panel of five experts each with experience in venture capital asset management and business development. The panel selected 16 recipients in June 2014.
NRC-IRAP terms, conditions and obligations for receiving an award included reporting on key performance data annually and demonstrating at least 1:1 matching contributions during the funded period.
2014 - 2019
After the program concluded, the government continued to support business accelerators and incubators through other projects.
The government required two program evaluations: a mid-term evaluation in 2016 that focused on the relevance and implementation of the program and a follow on evaluation in 2018 that examined the extent to which objectives were achieved, delivery efficiency, and the potential for extending the program.
The first evaluation responded to questions about NCR and CAIP management developed by the Office of Audit and Evaluation. The methodology included:
- Reviewing available program data;
- Reviewing program documentation;
- Reviewing literature about the performance of accelerators and incubators;
- Reviewing program management processes, which included 6 interviews with other departments and agencies;
- Conducting 46 interviews with program managers and staff, funding recipients and other stakeholders.
The second follow on evaluation utilized information from multiple sources:
- Document and data review, including a detailed analyses of accelerator and incubator performance data;
- Online survey of 549 firms supported by CAIP-assisted accelerators and incubators;
- In-depth interviews with a sample of 46 supported firms;
- In-depth interviews with 15 CAIP-assisted accelerators and incubators;
- In-depth interviews with 5 CAIP delivery staff and 5 external stakeholders;
- Cost-benefit analysis.
The second evaluation assessed the impact of the program against key expected outcomes:
- Accelerators and incubators expand their range of programs 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 programs 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 programs and services
- Average satisfaction rating on benefits to firms from innovation networks
- Number of additional jobs created
- Share of early-stage firms that generate or increase their revenue
- Early-stage firm survival rate
The most recent evaluation identified five key findings:
- CAIP is aligned to evolving government priorities related to supporting innovative startups and scale-ups and strengthening Canada’s network of accelerators and incubators.
- Available data suggests that CAIP-funded accelerators and incubators have increased the number of client firms and, in many cases, these have transitioned from small, early-stage firms to more mature scale-ups.
- CAIP-funded accelerators and incubators have delivered new or expanded services that client-firms value, which would not have been possible without the program.
- Available data suggests that CAIP funding and assistance provided to accelerators’ and incubators’ client firms contributed to wealth creation in Canada through these firms’ revenue and equity growth.
- The delivery of CAIP was challenging, actual delivery costs were more than double what had been planned and insufficient time was allocated to understand and adjust program delivery, and resulted in 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 program to deliver but evaluations identified several positive outcomes. The program enabled accelerators and incubators to grow and deliver higher quality support, which enabled accelerators and incubators to impact a greater number of clients stimulating increased firm growth (e.g. revenue and investment) with positive spill-over effects for Canada’s economy.
Key lessons learned for the design and implementation of similar program include:
- Allocate sufficient time for detailed planning and the development of administrative requirements and processes prior to the launch of new program similar to CAIP.
- Allocate sufficient resources for program delivery after the level of effort required is well understood.
- Specify clear reporting requirements (in accordance with a well-defined performance framework) prior to executing contribution agreements. In the years following the introduction of CAIP, a performance measurement framework for accelerators and incubators was developed. The government of Canada required that business accelerators and incubators receiving public support report against this framework.
- Develop a concerted performance data collection approach among supported programs and other innovation and capacity building programs. For programs such as CAIP in which beneficiaries engage through an intermediary, a concerted approach is necessary to ensure that information is available to assess the value of government investments.