Statistics clearly show that businesses going through an incubation programme maximize their chances of success. But perhaps one of the most crucial contributors to this success is the screening and selection process that incubators apply to entrant clients, in the hope of graduating them as (more) successful businesses. It goes without saying, therefore, that the importance of the selection criteria is crucial to the viable operation and reputation of a business incubator. It is vital to get that first step right in order to select and capitalize on winning business ventures.

For any business to succeed (either inside or outside any incubator), the following common “technical” denominators or the Four Fundamentals are inevitable:

1. The “Who”: Vital to business success is the availability and commitment of the founder(s) and the management team, as well as the complementarities demonstrated (relevant backgrounds, expertise and experience in the business sector)


2. The “What”: Obviously the service/product portfolio, and its unique selling proposition carries much weight in what will eventually determine performance


3. The “So what”: The ‘why should I care’ approach defines the size and nature of the gap in the market, the competition and why the idea is likely to succeed


4. The “How much”: The aavailability of funds and potential financial sustainability needs to evident from the start, notably through the business model adopted

On entry criteria

Entry criteria must be aligned with the objectives of the incubator and, if appropriate, the sector focus. A creative industries incubator is unlikely to be of much help, to a biotech start-up and vice versa. So in addition to the Four Fundamentals, other criteria should be factored in, such as degree of innovation, protectable knowledge (or IP), employment potential, growth potential, export potential, social dimension, time-to-market (like quick trading time-scales) and so on.

The people factor

The importance of people in the selection criteria cannot be stressed enough because it is the team that drives the venture forward - hence the importance of the interview of the team member(s) behind the idea. Additionally, because the team is entering the environment of the incubator, other points should be carefully assessed, such as:

• the level of motivation of the candidate(s)


• the quality and availability of the team,


• the willingness of the team to listen to advice, and their availability and need to participate in incubator programmes such as trainings, mentoring, networking, animation and social events,


• the possible interaction and synergies with companies housed in the incubator,


• and their blending within the incubator community (“rub shoulders”, share, etc)

In this respect, some incubators use formal psychological tools to assess the mindset of the entrepreneur and viability of the business (http://www.utas.edu.au/australian-innovation-research-centre) while others use informal ways of testing “entrepreneurial aptitude” – a mix of methodologies is always good. In any case, the typical entrepreneurial traits to look for include: independence, high internal locus of control, self-confidence, creativity, tenacity, realistic goals, flexibility, willing to work hard, organizational abilities, honesty and honour (yes, those are important), and most importantly, focus. Other aspects, such as health considerations might have an impact or family responsibilities – there are subtle elements to factor in to the final decision. The main objective will be however to establish a similar set of criteria to guarantee an objective, unbiased selection process.

And at the end of the day, the final go-no go decision to accept the venture in the incubator is given by the selection committee of the incubator. So as one might expect, the composition of this committee is of paramount importance. It is worthwhile having selection criteria for members of the selection panel and the following suggestions might be helpful. Ideally a member

• should be of an entrepreneurial mindset;


• may be sourced from the know-how network of the incubator, such as board of directors, entrepreneurs, investors, coaches, and mentors;


• should represent the diverse expertise required, such as business management experience and capabilities(including financial, HR resources, marketing and stakeholder management), and possess relevant technical expertise when required.

Useful links to help with psychological assessment and business viability
www.raizcorp.com and www.savilleconsulting.com

Trust your gut

At the end of the day, selecting an incubatee and finding the winning business idea is not an exact science and of course, no matter how good the project and team and no matter how rigorous the selection process, no one has a magic “crystal ball”. Perhaps the entrepreneurs whom the incubator thinks will do best, don’t, whereas unexpected ones may shine, or even those rejected by the incubator! Think of the Wright brothers - five people came to the test flight, as everyone thought it was just a ‘bad idea’. Sochiro Honda was rejected by Toyota for being ‘unfit’ for the job he applied for. So, yes, it can be about chance or “gut” feelings, so a portfolio approach is critical, since one cannot get it right every time. However, it is important to note that incubators should not fall under the pressure of filling space and inducting any type of project in order to play the “numbers game” and divert itself from its main objectives. At the end of the day experience, gut feeling and a thoroughly researched business idea will often combine in spotting the ‘unnatural’ that evolves into a successfully incubated idea or service. Selecting the one that stands out, and is different, yet compatible with industry and market trends is what we as incubator managers have to focus on. We are in the business of unnatural selection and it is the incubators of today that will evolve the wealth generators of the future.

As you can see, selecting an entrepreneur for an incubator requires the assessment process to be flexible. Certainly, if the incubator is focussed on technology, then a service business may not fit at all, but it is important to spend enough time with the entrepreneur to find out from which angle they are approaching the problem before rushing to a conclusion. One size certainly does not fit all. And as said before, gut feeling is sometimes the best guide.

THE DYSON vs. BRANSON APPROACH

Entrepreneurs come in many shapes and sizes. Some are driven by a new technical innovation that they believe will change the world, or at least disrupt a significant market inhabited by old-fashioned products. Others see new ways of doing the same thing, just better, cheaper or faster. Two British entrepreneurs who personify these two extremes are James Dyson and Richard Branson. Much has been written about both but consider their business models.

Dyson came up with a radical new approach to creating suction and spent years trying to convince traditional vacuum cleaner manufacturers to licence his idea. No one was interested. Eventually he set up his own business and now produces a range of products for the domestic vacuum cleaner market. His products look different, are technically superior, but of a higher price than traditional cleaners. Despite this, they sell very well. He has now migrated the business into wash-room hand driers and space heaters, reversing the suction into a blowing action using the same patented techniques. His constant focus is on the technology and how it can disrupt traditional markets.

Richard Branson couldn’t be more different. He is the ultimate brand builder. Virgin is known all over the world for what? Music? Airlines? Cola? Telecoms? Media? Even banking? Many brand experts would tell you spreading a brand this wide is commercial suicide. Yet Branson succeeds very well. His approach is to identify a market where business is entrenched in a traditional way of working, and then bring his own approach to product development and customer service to radically improve the experience for the customer. He also delegates huge responsibility to his employees. It is said that the check-in staff at Virgin Atlantic airlines are allowed to buy tickets for customers on competitor airlines just to get a customer to their destination. Without having to refer up the chain! Branson’s adage is keep the staff happy, who keep the customers happy, who keep the shareholders happy.

Further Information

A lot of the information about selection paperwork is available online. A couple of good examples of client entry criteria can be found from CREEDA Business Development Centers in Australia, or the selection criteria laid out by Sheffield Technology Parks in UK.

In the case of Berytech Technology Pole in Lebanon, two different eligibility guidelines and application forms are used for project holders and startups wishing to join Berytech:

• A project that wants to take the idea to a startup level is required to fill-in the project holders application form and provide supporting documents such as CVs, studies, plans, etc.


• A freshly established startup (less than 2 years old) or about to be established, is required to fill-in the startups application form and provide supporting documents that also include formal presentations, legal documents, by-laws, registration details, etc.

These applications are then forwarded to a selection committee. They are analysed based on the following major key points:

• technological and scientific quality,


• innovative aspect and proposed target market,


• economic sustainability and viability,


• team expertise,


• derived added-value from Berytech to cater for the needs/expansion of the venture

Berytech’s evaluation criteria

• For ideas / projects


• For established start-ups

---

Nicolas Rouhana is Executive Director of Berytech Technological Pole, a Business Innovation & Incubation Center in Lebanon. He joined Berytech at its inception in 2002 and is part of the management team as well as technical advisor to Berytech Fund, a seed/VC-fund for Lebanese technology start-ups. He is Associate Professor at the Faculty of Engineering of University Saint-Joseph in Beirut (USJ) where he teaches computer networking and entrepreneurship courses to undergraduate engineers. Nicolas has a Telecommunications Engineering degree from USJ, a PhD in Networking Systems from Université Pierre et Marie Curie, France and is an EDP graduate of INSEAD, France.

www.berytech.org