By Ainslie Pierrynowski (AIMS on Campus Student Fellow)
In recent years, a new kind of organization has expanded across Atlantic Canadian landscape.
These agencies, termed “business incubators” and “business accelerators,” can be found in locations ranging from Sydney to Charlottetown to St. John’s and beyond. But what, precisely, do these programs do? Both help to support emergent companies. While business incubators assist aspiring entrepreneurs in starting companies, business accelerators help new, small companies to achieve rapid growth. Such organizations typically provide technical and financial training, networking opportunities, assistance with marketing, access to funding, and other prerequisites for business success. Payment methods vary. Funding might come from private sponsors, clients might give the organization shares of their companies as payment, or clients might initially pay a reduced fee and then pay the remainder of the costs after completing the program. The size, scope, and focus of these programs can also differ. They may be tailored to a specific industry, like Prince Edward Island’s bioscience business incubator EmerGence, or a certain audience, like the Joint Economic Development Initiative (JEDI) Business Incubator, which serves Indigenous entrepreneurs in New Brunswick.
It is precisely this diversity of services that makes these agencies a potential boon for Atlantic Canada’s economy. In particular, business incubators and accelerators enable entrepreneurs to develop much-needed financial literacy skills. Moreover, for new or prospective entrepreneurs, business incubators and accelerators can provide funding that might otherwise be unavailable. This service is especially important for the region’s businesses because Atlantic Canada’s financial infrastructure is lacking when compared to nearby finance hubs like Montreal and Boston. Likewise, several recent reports and articles suggest that obtaining capital remains a persistent, critical challenge for Atlantic Canada’s entrepreneurs.
As a matter of fact, success stories seem to abound among Atlantic Canada’s business incubators and accelerators. Saint John’s business incubator Project ICT created about eighty jobs as of November 2013. Technology start-ups are beginning to take hold in Cape Breton. Yet, there are several additional steps which business incubators and accelerators can—and should—take to help grow the region’s businesses.
First, business incubators and accelerators must reach out to entrepreneurs in rural areas. As I wrote in a previous op-ed, small and medium-sized enterprises (SMEs) can have grant outsized economic benefits to post-industrial and rural communities. Business incubators and accelerators could help SMEs to emerge, survive, and grow in rural Atlantic Canada. After all, 87% of companies that originated in business incubators survive their first five years, whereas only 44% of companies that did not get started in business incubators do so. Nonetheless, most business incubators and accelerators in Atlantic Canada seem to be located in urban centres. This means that business incubators and accelerators may be difficult for rural entrepreneurs to access due to distance, as well as a lack of public transit and infrastructure. In turn, with around half the population of each Atlantic province living in rural communities, these areas offer untapped opportunities for business incubators and accelerators to find clients. For these reasons, business incubators and accelerators need to find new ways of connecting with entrepreneurs in rural Atlantic Canada. Online business accelerators Spark and Ignite—both created by Bridgewater’s Mashup Lab to service rural Atlantic Canada—could serve as useful templates for organizations who want to make business incubator or business accelerator services accessible to rural entrepreneurs.
Second, economic diversification must be a priority for business incubators and accelerators. The region’s economic decline and heavily reliance on seasonal industries like tourism, forestry, and fishing have produced a weakening, vulnerable economy beset by seasonal unemployment. As a result, business incubators and accelerators seeking to create lasting companies—and to combat the region’s economic slump—must turn to burgeoning economic sectors and non-seasonal industries. There is promising evidence that Atlantic Canadian business incubators and accelerators are attempting to move beyond traditional industries, such as Fredericton’s Energia, an accelerator for energy, clean technology, and cybersecurity, as well as Halifax’s CleanTech Accelerate Program.
Third and finally, more business incubators and accelerators must target young entrepreneurs, especially when it comes to SMEs. SMEs represent about 98% of employer businesses in each of the Atlantic provinces. Nevertheless, two demographic trends—namely, continued youth outmigration from the region and the fact that many Canadian small business owners are approaching retirement age (almost 60% of them are over 50 years old)—put the continued future of Atlantic Canada’s SMEs in jeopardy. These developments, together with Atlantic Canadian youth’s relatively low earnings and high unemployment rate compared to young people in the rest of Canada, suggest that the business incubators and accelerators should follow the lead of New Brunswick’s Pond-Deshpande Centre and implement youth-focused programs.
Overall, business incubators and accelerators have the potential to help revitalize Atlantic Canada’s economy. Indeed, ICT Propel Trevor MacAusland described Atlantic Canada as a “hidden treasure” for venture capitalists. As more business incubators and accelerators find a niche in Atlantic Canada, it seems that that treasure won’t stay hidden for much longer.