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How Venture Development Organizations relate to the incubation industry

February 2012

The U.S. Economic Development Administration recently funded a project by the State Science & Technology Institute of Westerville, Ohio, to create the Regional Innovation Acceleration Network to establish and support a virtual community of Venture Development Organizations across the United States. But what exactly are VDOs? And how do they relate to traditional business incubation programs?

To find out, NBIA asked Mark Skinner, vice president of SSTI and RIAN director, to describe some of the characteristics of a VDO. Skinner says that although VDOs share a series of attributes, few economic development programs possess them all.

As it stands, the VDO designation is basically a benchmark, a series of features and qualifications that incubation programs or accelerators, among other groups involved in economic development, might have. These include a regional aspect, a network aspect, access to capital and other attributes. SSTI's RIAN Web site (www.regionalinnovation.org) offers tools to determine which attributes a particular program possesses.

RIAN participants developed this list of attributes over a course of formal, informal and anecdotal study, Skinner says. "We took a small group of people to the U.S. Department of Commerce's Economic Development Administration and said we want to study this and see if it [the aggregation of attributes that have since become VDOs] is an emerging trend in tech-based economic development."

At the beginning of the project, Skinner asked about 40 organizations if they'd like to participate in discussions about ways they might benefit from the administration's interest in regionalization. The group began by examining the emerging organization models in economic development and the traits that they share.

"We had conference calls and focus groups," Skinner says. "We went to meetings of groups such as NBIA and asked questions. It turned out that 102 different organizations participated. We came up with a list of 16 characteristics that a really good [tech-based economic development] organization should have."

What do these characteristics involve? Access to capital is important, Skinner says. So are expertise and experience —programs should involve successful entrepreneurs, and the boards of directors should include experienced private-sector individuals. "They should have an entrepreneurial mindset," Skinner adds. "They should be at least as entrepreneurial as the companies they are trying to assist, not existing largely to acquire grants for their programs."

VDOs, he says, possess a strong regional component. "Sometimes, incubators have been a bit too insular — our chairs have faced in. We need to think more on the regional level." This change in approach involves establishing networks of organizations, venture funds, public-sector institutions and the like to maximize the likelihood of economic development —as many best practice incubators already do.

What role ought high scores in VDO benchmarks play in federal program funding? "I'm not in the position to decide this," Skinner says. "My impression is that the federal government is always going to look for organizations heavily supported by the communities where they are located. And in this or a possible future administration, money is going to be scarce." –Dennis E. Powell

Keywords: advocacy, economic development, networking

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