Comparative study technology incubators in Quebec and abroad

7. Findings and Recommendations

The following findings and recommendations come out of the interviews conducted with managers of incubators and the analysis set out above, but go beyond the evaluation questions.

At present, it is very difficult to start up an enterprise in Quebec, primarily because of the scarcity of startup capital. The inadequate financial resources available to emerging enterprises and young entrepreneurs, and the intolerance for delays and errors that this produces, are high on the list of factors in the failure of new technology enterprises. This precarious situation is an obstacle to renewing the province's industrial base.

Recommendations:

• It is essential that the governments of Quebec and Canada consider the issue of enterprise startup in general and incubation in particular. It is crucial that they decide whether this is a priority, and if so, commit the appropriate resources to it.
• It is particularly urgent that startup capital funds be developed in Quebec. These could be "evergreen" renewable funds. In addition, given the unique nature of startup capital, government intervention could be required.

Management response: As part of the work being done on the 2008-2011 Strategic Plan, a startup initiative is being developed. Several aspects are being considered, including the question of incubators.

Recommendation: More specifically, providing incubators with startup funds, even small ones, appears to be an excellent way of stimulating the creation of technology enterprises. First, these funds allow for rapid action to be taken by the players most familiar with needs and opportunities. Second, funds made available for this purpose can work as a lever for obtaining additional funding. For example, institutional funding often requires that the entrepreneur have access to matching funds from other sources.

Management response: There are no plans to create a startup fund at present.

Recommendation: Another solution might be to provide tax credits for payments for incubation services. That way, governments could mitigate the current scarcity and make incubators and business advice more accessible for enterprises, and thus facilitate their startup process.

Management response: Responsibility of the Department of Finance and/or submissions could be made to that Department.

It is not apparent to the authors of this study that the current emphasis on self-funding by incubators is justified. Funders do want to optimize the effects of their funding, and the self-funding criteria can act as incentives for incubators. However, this study has shown that most, if not all, managers of incubators in Quebec, while they are aware of the need for government contributions, want to expand their self-funding in order to reduce their dependence on public funds, which are sometimes uncertain and always come with constraints or conditions. A balance in relation to self-funding might therefore come about naturally, particularly if managers of incubators are enterprise professionals who are committed to the success of their organizations.

Recommendation: Funders, working with managers of incubators, could reassess the weight placed on self-funding requirements in making grants to incubators.

Management response: Options for funding incubators are currently being studied and discussions should be held with representatives of the incubators.

As this study and others done earlier, in particular the MDEIE evaluations, demonstrate, it is possible to evaluate incubators' performance adequately, but it is more difficult to compare their performance and identify best practices. Not all incubators evaluate their own and their clients' results in the same way, and they compile data based on this.

Recommendation: Ensure that projects are properly coded and that the indicators in the performance measurement framework are used consistently.

Management response: The QOCD already has mechanisms to ensure that indicators are used properly and projects are correctly classified.

Recommendation: Develop new common indicators, as needed, to compare incubators' performance.

Management response: The DPB and the QOCD will develop these new indicators as needed.

The reluctance of some incubator managers to participate, particularly outside Quebec, where only nine incubators out of the 20 contacted agreed to respond, was an impediment to doing the study. Tecsult has identified three sources of their reluctance:

1. incubators are too often asked to participate in all sorts of evaluations and surveys (this might also explain the low response rate for the client survey);
2. some managers felt that the study repeated things that already existed; and
3. some managers felt that this study did not analyse all the factors that influence incubators' performance, and, for example, ignored external environmental factors.

Recommendations:

• It would be useful to identify the considerable information about best practices in technology incubation that is currently available and do a complete review of it.
• In order to understand technology incubation better and identify best practices in the field, it would also be wise to study the particular environment in which incubators operate. That environment may have an enormous influence on incubators' performance. It might also be useful to do case studies in order to properly understand the unique dynamics of enterprise startup.

Management response: The usefulness of expanding our understanding of the incubation field will be evaluated in the next few months.

At present, there is a global trend toward integrating the various components of the technology startup and business development ecosystem. Those components are the research, entrepreneurship and funding (risk capital) communities, and government agencies.

Recommendation: Because this increasing integration should prove beneficial, in that it will optimize the process of commercializing innovation and reduce time lags and errors, it would be wise to encourage it. In this regard, technology incubators are in a good position to play a major role as intermediaries in the ecosystem because of their links with its various components.

Management response: Work on the Startup Initiative takes interaction among the various technology SME startup and development players into account.