by Bridget Lair
Innovacorp's best-in-class business model has helped the incubator build globally competitive innovation and capital markets, earning Innovacorp NBIA's 2010 Randall M. Whaley Incubator of the Year and Dinah Adkins Incubator of the Year award in the technology category.
Even though Halifax, Nova Scotia, Canada, is a dynamic coastal city, it faces many economic development challenges. The excellent quality of life and low cost of real estate are countered by a low level of infrastructure, including limited access to broadband connectivity and few professional services or high-level career opportunities. In an area where job creation is historically low, out-migration is high and capital investment is difficult to generate, Innovacorp developed a program to vanquish these barriers and facilitate sustainable economic growth in Atlantic Canada and across the country.
Recognized internationally as a best-practice method of commercializing technology, Innovacorp's High Performance Incubation business model, or HPi™, focuses on three areas: incubation infrastructure, mentoring, and seed and venture capital investment to help entrepreneurs overcome barriers to business growth.
The combination works, and the program's client metrics prove it. In FY2010, Innovacorp clients and graduates generated approximately C$280 million and created 1,455 high-paying jobs with a combined payroll of C$64 million. And since 2003, Innovacorp leveraged the Nova Scotia First Fund to attract more than C$106 million in investment capital.
Stephen Hartlen, who served as Innovacorp's interim president and CEO from March 2010 to January 2011 and former vice president of mentoring, says Innovacorp's largest obstacle is the same as that faced by other incubation programs: managing client pipeline growth to ensure delivery of high-quality services. "The goal is to help start-ups succeed – to create scalable and attractive capital," he says. "To do that, we need to balance capable entrepreneurs, great mentors and available resources including infrastructure and investment."
Virtually all Innovacorp's efforts center on global competitiveness. The goal is to make Nova Scotia's small population center an entry and exit point to the global economy. "All budding products must have an appeal beyond our borders because it is not good for the growth of the economy otherwise," Hartlen says. "To become a market leader, businesses need to harness the talent, knowledge and infrastructure worthy of the top corporations in the world. Innovacorp clients are 98 percent export-oriented and offer high average per-person payroll."
Innovacorp receives more than 100 applications annually, but only accepts five to 10 of those applicants as clients. Every client benefits from tailored business advisory services; however, investment through the venture network is limited to select high-potential companies. A rigorous client classification system helps Innovacorp identify high-growth companies and pinpoint areas where they are in need of assistance. The goal is to continually build go-to-market expertise in key sectors: information technology, life science and clean technology.
Hartlen says identifying high-potential early-stage companies, vetting them before they enter the incubator and laying down rules of engagement are vital components for success – for the incubator and for client companies. "At Innovacorp, clients undergo a period of diligence anywhere from three to 12 months before entering the incubator," he says. "Then we develop a client agreement to establish our relationship so the client understands their obligation to us and ours to them. We mutually agree to what milestones we will use – so we all know where we are going."
Innovacorp is a government-owned Crown corporation and receives C$4.5 million of its C$7 million annual budget from the province. Hartlen says the incubator generates the remaining funds internally, primarily from client fees. The organization manages a balanced budget at 90 percent occupancy.
Innovacorp's incubation infrastructure emphasizes cluster synergies at three facilities: The Technology Innovation Centre targets information and communications technology and engineering sciences; the Innovacorp Enterprise Centre, a world-class Leadership in Energy and Environmental Design-certified facility, focuses on the life science industry; and the grow-out facility houses incubator graduates building stage-two companies.
Mentorship services, from volunteers and paid mentors, are a key component in the HPi model. Innovacorp employs a core team of 37 subject-matter experts from private industry, including a senior management team of six and an investment team of four. In addition to staff assistance, clients are assigned a third-party mentor to help manage industry-specific issues. According to Hartlen, serving every client's needs for targeted assistance proves economically unviable, even with a large staff. "A robust external mentor network is critical," he says.
Recognizing the importance of having unbiased programmatic data to demonstrate success and identify areas in need of improvement, Innovacorp uses economic indicators, incubator metrics and client satisfaction data in program planning and evaluation. The data help Innovacorp gauge whether it is fulfilling its mission to fuel sustainable economic growth and commercialize technologies throughout Nova Scotia.
Innovacorp's Venture Advisors, a mentor team headed by a part-time chief financial officer, collects client financial statements and summarizes the information. Because the entry agreement requires data reporting, persuading clients to provide financial information poses no challenge for Innovacorp. "Clients understand it is part of their obligation," Hartlen says. "We have never had a problem with noncompliance. The data, as a collection, provide leverage for the industry and for Innovacorp."
Innovacorp hires a third-party polling company to evaluate client services. The extensive surveys identify strengths and weaknesses, helping Innovacorp improve its operations. Hartlen says client comments often exhibit themes, and the staff selects two challenges to work on each year. That process helps Innovacorp emphasize client satisfaction and informs its annual business plan.
Innovacorp may benefit from a large staff and broad resources, but the key to its success is its strategic framework and innovative policies and procedures. Like most incubators, Innovacorp is continually working to expand program capacity, maximize program impact and strengthen go-to-market expertise. These efforts contribute critical components necessary to strengthen Nova Scotia's knowledge economy and build sustainable regional wealth. "We want to afford every opportunity for our clients and our region," Hartlen says.
Stage: Clients must be an early-stage Nova Scotia technology company.
People: The start-up's business plan must be reasonable, and staff must present some expertise.
Barrier: There must be some barrier to market entry, and the product must be an innovative technology — preferably with defendable intellectual property.
Market: There must be a large national or international market.
1400 —1801 Hollis Street
Halifax, Nova Scotia, Canada
Year established: 1995
Incubator size: 137,500 square feet (in three facilities)
Incubator clients: 45
Incubator graduates: 30
Organizational structure: Innovacorp is a provincial Crown corporation, under the jurisdiction of Nova Scotia Economic and Rural Development.
Keywords: NBIA programs, selecting clients, In-house loan and equity financing program
Phone: (740) 593-4331
Fax: (740) 593-1996
340 West State Street, Unit 25
Athens, OH 45701-1565