“On the 11th floor of an art deco office block in downtown San Francisco, people are starting to gather. The ‘antique’ elevators are causing a few problems getting the 300 or so investors up from the street level to the Greenstart office where Demo Day is about to begin… As the pumping music fades away a video starts playing of a pair of feet walking their way through startup life. Mitch Lowe takes to the stage as the audience applaud and starts to build up the event – he can’t help but enthuse about the ‘awesome’, ‘amazing’, ‘really cool’ startups we’re about to see.“
If you’ve ever wondered what happens at an impact accelerator, it’s stuff like that. There’s plenty more similar examples in Good Incubation: The craft of supporting early stage social ventures – Nesta‘s newly published report on ‘the rise of social venture incubation‘ which focused on ‘what can be learned by this burgeoning sector from programmes around the world‘.
The underlying premise of the report, written by Nesta’s Jessica Stacey and Paul Miller, a partner at social tech accelerator, Bethnal Green Ventures, is that the emergence of ‘impact investment*’ has been a mixture of good news and bad news.
The good news is that growing numbers of specialist funds and wealthy individuals now want to invest in businesses that can provide both a social return (something different and good happens as a result of people using their products or services) and a financial return (they make a profit and deliver a return to investors).
The bad news is there’s nothing for them to invest in. As a result: “‘social venture incubation’ has grown as a set of techniques to help founders develop ventures that are investable propositions.“
Good Incubation provides a good overview of the current incubation models: Impact accelerators, Social venture co–working spaces, Social venture academies, Impact angel networks, Social innovation prizes with general explanations of what they do, case studies and figures for numbers of each appearing across the globe.
Assuming, as seems likely, that the report’s authors were given the brief of explaining what ‘social venture incubation‘ is and highlighting some of challenges it faces in establishing itself as sub-sector of the business support industry and the social investment market, they’ve done a decent job.
What Good Incubation doesn’t do is ask (or provide answers to) any of the key questions about whether or not ‘social venture incubation’ is actually a good idea. Some of these questions (there are plenty more) include:
Is creating more social start-ups the best way to create investment ready social ventures? No one is seriously suggesting that the a key reason why there’s not many big social investment deals taking place in the UK is that that there’s a shortage of small, early-stage social ventures that don’t sell anything.
There is a danger that by supporting, funding and (in the case of accelerators particularly) encouraging into existence, lots more of these early stage start-ups, state-funding is artificially stimulating the development of hundreds of zombie businesses which have no prospect of ever becoming sustainable. This may not do much harm but it doesn’t do much good either. Would it make more sense to give more support to a small number of ventures that have a realistic prospect of scaling up?
Is incubating businesses the best way to support social innovation? While it’s clearly in the interests of social investors for more social ventures to reach the point where they can take on investment with a realistic prospect of delivering both social and financial returns, is this the most useful way to deploy state and charitable funds?
We do need to find new and better ways of meeting social need and we do need to create business models for supporting those new and better ways of meeting social need. It doesn’t logically follow that we have to support the same people to discover them both simultaneously. Are there better ways that funders including government, Nesta and grant-makers such as Nominet Trust can support people to develop and test new ways of doing social good without (initially) focusing on whether a business is being created in the process?
Do incubators create businesses that look like incubators? Assuming that we do want to support the development of lots more social ventures, the way incubators operate may be a key factor in determining the kind of social ventures we end up with. For example, the government-backed Social Incubator Fund is supporting a number of time-limited accelerator programmes such as Public Service Launchpad.
It seems likely that some types of businesses are more suited to being driven forward through ‘an intensive 14 week programme’ than others – it doesn’t seem to be a great model for supporting businesses dependent on the gradual development of partnerships with potentially wary and slow moving public sector bodies such as schools or local NHS agencies. To what extent is support being channeled towards the types of businesses that can be most easily accelerated rather than those that are either most socially useful and/or most likely to ultimately become sustainable businesses?
Good Incubation does a good job of helping us to understand emerging approaches to social venture incubation on their own terms. The next step is to look at their wider relevance: to social investment, to social innovation and to society as a whole.
*Some of what we call ‘social investment’ in the UK fits neatly under the global ‘impact investment’ banner, some of it doesn’t.