C HAPTER 4: I NCUBATORS : A N A NGEL I NVESTOR ’ S B EST F RIEND ?
process. This includes such help as refining the USP, active mentoring, providing the start-up with training, expertise and new businesses tools, and facilitating access to the financial community and to a range of business services, such as accounting, legal, public relations and recruitment. Two examples of the training programs available to new business owners are the Ventures Innovation Incubator at the TIME Centre (Simon Fraser University), and the Exceler@tor (University of Toronto). Both programs offer workshops and training sessions for start-ups located in the incubator and for new technology businesses in the wider community. The TIME Centre has also held a one-day workshop focused on board governance for start-ups, designed to forge links between start-ups and the investment community. One of the ways in which incubators help start-ups is by bringing them in contact with one another and with the wider business community. It is important for new businesses to have face- to-face contact and opportunities to network and share experiences. The Harvard Business Review, in an article entitled Networked Incubators , talked about the importance of these interactions in distinguishing successful incubation models 3 . Incubators, whether housing the start-ups in a collective space, or reaching them more remotely, are creating opportunities for new businesses to meet and interact. These interactions help to generate new ideas and encourage business owners to drive their enterprises forward. The provision of shared physical space and equipment is still a core part of most incubation programs. This is especially critical for specific business sectors, such as biotechnology, which have a protracted pre-revenue development phase and where labs and equipment are very expensive. Incubators providing such facilities include the Laval Biotechnology Incubator, which provides inexpensive space and pools costly equipment so that the start-ups can focus on testing and building their businesses, rather than covering significant capital and operating costs. This is also true in IT incubators such as the Exceler@tor, where sophisticated IT technology infrastructure can be shared by the 25 companies housed in this Toronto facility. As incubators evolve from sympathetic landlords to a source of significant knowledge and resources, they will dramatically increase the chances that a new company will succeed and grow and that an angel's investment will be rewarded. The incubator will reduce the company’s burn rate, both by reducing its operating costs and helping it to secure more flexible financing terms. It will improve access to technology infrastructure and partners. It will allow start-ups to become better prepared to present themselves to the investment community. And it will provide a tightly formed network of colleagues and mentors, while helping enterprises to develop the necessary skills to thrive. PROVIDING A SOURCE OF HIGH QUALITY DEAL FLOW Incubators have traditionally set three major requirements for admission: technological innovation, willingness to learn and significant market opportunity. This makes them an ideal source of high quality deal flow for angel investors. In addition to helping turn technology innovations into businesses that are investor-ready, incubators can also prepare the start-up for negotiating a specific deal. The ability of an incubator to facilitate this marriage between new companies and angel investors will greatly increase the deal conversion rates and lead to higher levels of investment success.
3 “Networked Incubators,” Harvard Business Review, September 2000.
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