Objectives

The function of the business selection process is choosing, from amongst candidate companies, those with the greatest potential for success. This is a complex process, because the concept of success is a relative value. Each incubator has its own criteria, that result from the decisions taken during the modelling and planning of the incubator. For more information, see guideline Modelling and Planning an ICT-Enabled Business Incubator. Definitions of partners, mission, vision, objective, focus, model and purpose of the incubator are highlighted

The business selection process must be compatible with the incubator’s internal and external environment. During this process companies are chosen that contribute to improving the indicators used for evaluating an incubator’s performance. See area Evaluating and Reporting on the Incubator.

Key Issues

It is important to ensure that there are a large number of candidate companies. This gives a better chance of selecting high quality companies. That is: the more businesses that take part in the selection process the higher the probability of selecting companies with greater chances of success.

The management team must publicize the incubator at the whole community level and, specifically, amongst potential candidates. See guideline Marketing the Business Incubator.

At the same time procedures must be implemented that make it possible to seek out companies/entrepreneurs to participate in the selection process. See guideline Prospecting for New Entrepreneurs.

The selection process has three critical parts:

1. Definition of criteria
2. Process stages
3. Professionals involved:

The choice of selection criteria must give due consideration to the incubator’s characteristics and performance evaluation system. The following aspects are taken into account:

• The stage of the enterprises: A clear definition about which stage an enterprise will be accepted into the incubator. Several questions must be answered at this point.
  • Must the enterprise be legally constituted?
  • Is it necessary for the enterprise to have a business plan?
  • Should the enterprise already be marketing its products?
  • Must the product be considered a finished product?
  • Can the enterprise be a department/division of an already constituted company?
• Purpose of the Incubator: The importance of the purpose and objective of the incubator is highlighted in the guideline Defining the Incubator’s Purpose. The incubator’s objective (eg public benefits like job creation, or private benefits like profit-making) will influence the selection criteria. Profit-seeking incubators, for example, favour those enterprises with a greater probability of generating financial returns. For non-profit incubators, the social results of the enterprise may be more significant,.
• The Incubator’s Focus: normally, the type of enterprises selected aligns with the incubator’s focus. See guideline Defining the Incubator’s Focus. This is evaluated in the first stages of the selection process. If the incubator supports technology-based enterprises, for example, applications that are not in line with this orientation must be rejected.
• The Incubator Partners: the selection criteria must include companies with attuned aims. That is: companies are selected should have a similar vision to the incubator’s partners. What is important to the incubator’s partners must be evaluated, for example:
  • The number of jobs that are generated
  • Technological innovations produced
  • Level of the enterprise’s potential turnover
  • Alignment with specific economic sector(s)

  Note: the objectives of the partners shape the selection criteria, but do not determine them.

• Mission, vision and objectives: the incubator’s mission, vision and objectives must be assessed critically. This will produce criteria that aid in selecting companies that are compatible with the incubator. Generally, this information influences all the criteria used in the selection process and shapes the profile of the enterprise to be supported:
  • Are there technological innovations?
  • Are jobs generated?
  • Is there profit for the incubator?
  • Is there economic diversification?
  • Will the applicant’s success contribute to a struggling economic sector?
  • Is there consolidation of a given productive arrangement?
• Characteristics of the enterprise: criteria must be defined that make it possible to evaluate:
  • Feasibility of the Enterprise: An important assessment is the enterprise’s ability to develop in a consistent, sustained manner, independently of the incubator’s focus. Criteria that can be used are:
    • Economic-financial feasibility: evaluations consist of a check that the quantity of resources required is compatible with the quantity of resources available to the entrepreneurs (or obtained from third parties). The time needed to get a return on investments, plus the rate of return and profitability levels.
    • Technical feasibility: Is the technology required for product development available and/or can be it developed by the entrepreneurs?
    • Degree of innovation: to what extent does the proposed process/product differ from currently existing solutions?
    • Team capacity: Is the experience and knowledge of the nominated team adequate to develop the product/service? An assessment should made of the team’s entrepreneurial profile. This is critical to the success of the undertaking and could be done through interviews with psychologists or through various questionnaires or exercises.
  • Impact on society: the incubated enterprises must contribute to the improvement of society as a whole. Keeping this in mind, the following criteria also need evaluation:
  • Technological impacts: evaluation of the contribution of the enterprise in terms of updating technologies used by companies/communities. See guideline Technological Benefits.
  • Social impacts: the enterprise’s potential to improve the quality of life of society. See guideline Social Benefits .
  • Economic impacts: evaluation of the enterprise’s contribution to the development of the region/country in which it is located. The potential for following must be evaluated:
    • Is there job generation?
    • What is the level of annual income?
    • What is the export potential?
    • What is the potential for generating taxes?
  • Environmental impacts: depending on the focus of the incubator’s actions, an enterprise’s environmental impacts may become significant. A rating could be made of any detrimental environment impact of the processes, products and/or subproducts of the new enterprise.

Selection stages should be planned with an increasing degree of selectivity. The applicant enterprises should be evaluated with regard to their alignment with the incubator’s characteristics, followed by more specific steps for evaluating the merit/quality of the enterprise. Important questions are:

• Preliminary evaluation: the selection process’s first stage chooses those enterprises most in line with the incubator’s characteristics;
• Training: will the selection process include a preparatory course for entrepreneurs (Elaboration of the Business Plan, for example)?
• Interview: time should be planned for the incubator’s management team (or a professional designated by that team) to have contact with the entrepreneurs.
• Evaluation Committee: The involvement of different professionals is essential to the success of the selection process. Consideration should be given to evaluation of the enterprise/entrepreneurs by professionals from outside the incubator.

It is essential that enterprises are evaluated from different points of view. In general terms, this can be divided into four groups, who could form an Evaluation Committee:

• Academics: include researchers and professionals knowledgeable in the technical area/technology focused on by the company
• Market: involves the participation of businesspeople, venture capitalists, and marketing professionals, who can evaluate the enterprise from the business point of view.
• Government and development institutions: ensure a macro vision of the selection process, by evaluating the impacts of the enterprise on society as a whole.
• Representative of the incubator’s management team: ensure integration among the different enterprise visions involved.

Responsible Parties

Incubator Managers and Board of Directors.

Indicators

• Number of candidate companies
• Selection/stage percentage
• Variability of evaluations

Results

The final result is the selection of companies with a high probability of success. In terms of the selection process itself, the level of subjectivity will be reduced and the entire process systematized.

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