Good Incubation

1
Paul Miller and Jessica Stacey

April 2014
The craft of supporting
earlystage social ventures
GOOD
INCUBATION
Nesta is the UKs innovation foundation.
An independent charity, we help people and organisations bring great
ideas to life. We do this by providing investments and grants and
mobilising research, networks and skills.
Nesta is a registered charity in England and Wales with company number 7706036 and charity number 1144091. Registered as a charity in
Scotland number SCO42833. Registered ofce: 1 Plough Place, London, EC4A 1DE.

www.nesta.org.uk Nesta 2014
Acknowledgements
Thanks to Lily Ash Sakula, Jo Casebourne, Ana Maria Florescu, Madeleine Gabriel,
VickyMarie Gibbons, Melanie Hayes, Kieron Kirkland, Joe Ludlow, Glen Mehn, Geoff
Mulgan and Dan Sutch. Special thanks to Laura Bunt for helping to get the project off
the ground and to Jennie Winhall for her work on our social venture archetypes.

William Jennings Brown (18601925)
Do not compute the totality of
your poultry population until all the
manifestations of incubation have
been entirely completed.
CONTENTS
EXECUTIVE SUMMARY 4
PART I 6
Chapter 1 THE OPPORTUNITY 6
UK snapshot: EXAMPLES OF SOCIAL VENTURE INCUBATION 9
Chapter 2 MODELS OF SOCIAL VENTURE INCUBATION 12
The founders view: SOCIAL VENTURE INCUBATION STORIES 12
IMPACT ACCELERATORS 15
SOCIAL VENTURE COWORKING SPACES 17
SOCIAL VENTURE ACADEMIES 19
IMPACT ANGEL NETWORKS 21
SOCIAL INNOVATION PRIZES AND CHALLENGES 23
Chapter 3 METHODS OF SOCIAL VENTURE INCUBATION 25
TALENT SPOTTING AND SELECTION 25
MENTORING 26
FOCUS ON IMPACT 27
ACCESS TO NETWORKS 28
COLOCATION 29
FINANCE 30
Chapter 4 LOOKING AHEAD 36
TRENDS WITHIN SOCIAL VENTURE INCUBATION 36
THE RISKS OF SOCIAL VENTURE INCUBATION 38
RECOMMENDATIONS DEVELOPING AN ECOSYSTEM 39
CONCLUSION 40
PART II Appendix 41
TYPES OF EARLYSTAGE SOCIAL VENTURE 41
TEAM FORMERS 42
PROPOSITION SEEKERS 42
CUSTOMER HUNTERS 44
MODEL CLARIFIERS 46
SCALERS 48
ENDNOTES 50
The craft of supporting earlystage social ventures
GOOD INCUBATION
4 GOOD INCUBATION THE CRAFT OF SUPPORTING EARLYSTAGE SOCIAL VENTURES
EXECUTIVE SUMMARY
EXECUTIVE SUMMARY
Social ventures are increasingly seen as an important way of solving the social and
environmental challenges of our age. The world of social (or social impact) investing has
developed to nance and support these ventures, taking them to scale when they have a
proven and measurable social impact and revenue model.
However, the impact investment world has struggled thus far to develop a reliable pipeline of
earlystage potential investments commensurate with the growing amount of capital that is
available for laterstage ventures. To ll this gap social venture incubation has grown as a set of
techniques to help founders develop ventures that are investable propositions.
Incubation is a collection of techniques that can be used to prove an idea, develop a team and
derisk ventures for laterstage investors. Incubation happens in accelerator programmes, co
working spaces, social venture academies and learning programmes, competitions and through
the work of very earlystage investors. Over the past ve years all of these types of programme
have increased in number around the world.
This report charts the rise of social venture incubation with a particular focus on what can be
learned by this burgeoning sector from programmes around the world. It is intended for people
and organisations wanting to support social ventures either as policymakers, investors or people
running incubation programmes, to ensure that ventures have the best support.
Earlystage startups have particular needs in order to grow. But even within that group there is
great variation. In this report we differentiate between startups not just based on their age, scale
or sector, but by what support they need:
1. Team formers need support nding cofounders or early employees.
2. Proposition seekers need help rening the combination of problem to solve, idea and
potential customer.
3. Customer hunters need help with access to potential customers.
4. Model xers companies with revenues that have found limits in the scale of their business
model.
5. Scalers need marketing support as well as recruitment and other services associated with
rapid growth.
There are ve models of incubation that have emerged to support earlystage social ventures:
1. Coworking spaces offering work space and opportunities for founders to access co
founders, networks and, increasingly, training.
2. Social venture academies offer training for social venture founders and access to
mentoring.
3. Impact accelerators offer nance, training, access to networks and usually ofce space.
4. Social venture prizes and competitions offer nance, prole, mentoring and often access to
expertise and staff of larger organisations.
5. Impact angel investor networks offer nance, mentoring and access to growth expertise.
EXECUTIVE SUMMARY
As a eld, social incubation is still very young, with most programmes being less than ve years
old. However, there are lessons to be learned from trends in the way that programmes have
changed over time:
Vertical specialisation specialising in a particular industry or on a particular social or
environmental problem, such as health or energy saving technologies, and so being able to
focus on connecting ventures to a smaller group of more relevant investors.
Domain specialisation providing one particular type of support to a level over and above
other similar programmes, for example by having worldbeating design expertise inhouse
that is able to push forward ventures in a particular way.
Educating customers and investors nding ways to encourage large organisations to
become customers of ventures in their early stages. This involves changing the attitudes
of angel investors, demonstrating that there are nancial gains to be made among social
ventures, and changing the attitudes of philanthropists to show that they may have more
impact by investing their money rather than giving it away. This can take the form of lobbying
and campaigning for better procurement rules through to developing ongoing relationships
with particular organisations that will work with a number of incubated startups.
Diversication some incubators are expanding into other geographic areas, or diversifying
their offering to support ventures at different stages of their scaling journey.
Opening up data as programmes develop track records, they are making more data public
about their performance which enables founders and investors to make comparisons.
The report ends by highlighting some of the perceived risks and downsides of social incubation
and suggests some principles for social investment ecosystem development. It looks at how
supply and demand can be best matched and makes recommendations for ensuring that the
sector continues to learn and improve, and that it meets the needs of founders and the impact
investment world.
Chapter 1
THE OPPORTUNITY
Introduction
Creating and growing a social venture is hard. It takes dedication, perseverance, nance and not
an insignicant amount of luck. You have to nd customers, hire the right people and deal with
the burden of administration and regulation as well as proving that you are having a positive
impact. So perhaps its no surprise that social venture founders go looking for support to help
them get started and grow. A new sector has started to emerge to provide that support social
incubation.
This report is for policymakers, investors and those running incubation programmes who want
to ensure that social ventures have the best support possible. It attempts to draw lessons from
incubation programmes around the world.
What are social ventures?
Throughout this report we use the phrase social venture to denote an organisation that is trying
to achieve a social or environmental impact through business principles. Specically, this report
focuses on social ventures that aim to achieve impact at a large scale. In our experience, social
ventures that are aiming to achieve large scale, rapid growth need a different sort of support
from those that aim to stay smaller or grow more slowly.
Social ventures can have any legal form but in the UK, those that are trying to scale up their
impact quickly often opt to be companies limited by shares. This is because companies limited
by shares can issue equity, and the nance requirements of highgrowth organisations are best
suited to equity investing equity investment provides patient capital that entrepreneurs can
use to build their business without being burdened by repayments in the short term.
What is incubation?
Incubation is a collection of techniques that can be used to prove an idea, develop a team and
derisk ventures for later stage investors. In researching this report, we found a rich variety of
methods and techniques for supporting earlystage social ventures being adopted in a range of
different contexts.
In fact, we rarely use the word incubator in this report as weve found that it can mean all kinds
of different things to different people. Instead weve tried to research and write about specic
types of social incubation, differentiating between accelerators, coworking spaces, academies,
angel networks and competitions and describing them separately. Over the past ve years all of
these types of programme have increased in number around the world.
PART I Chapter 1
PART I
The funding gap
Theres a widespread belief amongst policymakers across the world that social entrepreneurs
can tackle some of the pressing problems we face if only we can get them operating at scale.
1
But if social ventures are to grow, they require nance. Recognising this, organisations across
the public, private and charitable sectors have started to promote social investment. More
commonly known as impact investment in the US, social investment aims to generate social
returns alongside (or, for some investors, instead of) nancial returns. For governments, social
investment is often seen as a way to promote economic growth, support public service delivery
and encourage social innovation.
2
For charitable foundations it can be a way to further their
mission
3
and for large private companies, to make good on their commitments to corporate
social responsibility.
4

The UK Government, for example, has pledged 400 million of capital from dormant bank
accounts towards Big Society Capital, which has been matched by 200 million from the
main UK banks.
5
The European Investment Fund has recently launched the Social Investment
Accelerator fund of funds to help grow the market for impact investing in Europe.
6
The initial
fund is 60 million but is expected to grow rapidly.
Government intervention combined with private sector interest has led to a dramatic growth in
the number of impact funds. A recent report found 380 impact funds with a total of over $40
billion under management and showed that we are in the midst of a rapid rise.
7

At the moment though, by their own admission, many social investors are having trouble nding
enough high quality ventures to invest in. This is largely because in general, these funds set a
high threshold for their investments for example, they seek to invest in social ventures that are
revenue generating, have a proven business model, measurable social impact and a management
team with a strong track record. And because of the high transaction costs of making social
investment deals, most social investors look for ventures that have capital requirements of more
than 150,000. A recent survey of impact investors by JP Morgan and the Global Impact Investing
Network found that only 18 per cent of investors look at seed or startupstage companies.
8
The majority of new social ventures are unlikely to meet these criteria. As Omidyar Network
put it, based on their work around the world, ...we noticed lots of new investors piling into the
impact investing arena, many with the expectation of nding a steady stream of relatively mature
businesses offering both social impact and riskadjusted returns. We have found a real shortage
of such deals.
9

While there is money available for earlystage ventures and projects through government and
charitable grants, this funding often comes with constraints or is ringfenced for particular
activities and doesnt prepare ventures for very high scale nor to be investable by laterstage
investors. Compared to other entrepreneurial domains, the ow of new ventures sometimes
known as the social investment pipeline seems to have a kink at the tap.
PART I Chapter 1
PART I Chapter 1
In part, the rise of social incubation is a response to this gap in the social investment pipeline.
For example, in July 2012, the UK Cabinet Ofce created a 10 million scheme called the Social
Incubator Fund specically to increase the nance available at early stages of enterprise and
offer a portfolio of intensive support in order to improve the quality and quantity of early
stage social ventures going on to seek nancial support from other social investors.
10
The increase in available investment is matched by increasing interest in social entrepreneurship.
A recent survey of business schools in Europe and the US found that many of the top
programmes (including Harvard Business School, INSEAD, Yale and UC Berkeley) had increased
the content in their courses relating to social entrepreneurship by 100 per cent or more over the
past decade due to demand from students.
11
Whats more, there appears to be no shortage of people wanting to start the type of social
ventures that impact investors would like to support. When Bethnal Green Ventures and Wayra
UnLtd launched in the UK, it wasnt clear whether there would be demand for incubation for
social entrepreneurs willing to set up companies limited by shares and take on equity investment
but neither accelerator found problems in attracting this type of venture.
12, 13
Perhaps, as
technology commentator and adviser Tim OReilly remarked at the Code for America Demo Day,
its becoming cool to want to make a difference.
Our research
This report is based on interviews with over 20 managers and advisers to incubation
programmes from around the world as well as founders of ventures supported by those
programmes, undertaken in 2013 and 2014. We also visited programmes to see rsthand some
of the techniques they use.
However, its important to note were not entirely detached researchers. Were also deeply
involved in this eld. Paul Miller helps run Bethnal Green Ventures in the UK and at Nesta weve
supported several social incubation programmes including some mentioned in this report.
Many of the insights come from our own experience of working with social ventures directly and
testing different approaches.
This report isnt intended as a comprehensive or denitive survey of the eld we recognise that
it is still very early in the development of social incubation and it is a rapidly changing sector.
Our intention is to start a conversation about the techniques available to social incubation
programmes and how they can be best used to support social ventures.
PART I Chapter 1
UK snapshot: EXAMPLES OF SOCIAL VENTURE INCUBATION
Bethnal Green Ventures supported by the Cabinet Ofces Social Incubator Fund, Nominet
Trust and Nesta, Bethnal Green Ventures offers 15,000 investment, ofce space and a three
month programme of support to earlystage Tech for Good ventures.
ClearlySo Angels the UKs rst angel investor network specically for social ventures was
launched in London in 2012. The network provides investment and mentoring to selected
ventures.
Emerge Venture Lab rst opened in 2011, Emerge Venture has its origins in the Said Business
School and Hub Ventures in Oxford. The team has now focused solely on education startups
and launch their rst sectorspecic accelerator programme in London in 2014.
Healthbox London developed in Chicago in the US by Sandbox, Healthbox has now
expanded to run a health technology startup accelerator programme in London. The rst
UK programme was in 2012 supporting earlystage ventures with investment, education and
mentoring. Under a new name of the Health Social Innovators Fund it is one of the recipients
of the second wave of the Cabinet Ofces Social Incubator Fund.
Hub Launchpad funded by the Cabinet Ofces Social Incubator Fund and Accord Housing
Group, Hub Launchpad was initiated by the Impact Hub in Westminster, London. They run
a shorter preaccelerator education and ideation programme followed by threemonth
accelerator programmes in London or Birmingham focusing on particular themes including
public service innovation and open civic innovation.
Impact Hub with locations in Islington, Kings Cross and Westminster and a planned space in
Birmingham, Impact Hub (previously known as The Hub) is a network of coworking spaces
for individuals and ventures interested in social innovation. They host events, provide ofce
space and run programmes to support social ventures.
Social Incubator North successful applicants from the East Midlands and North of England
receive a 25,000 interestfree investment loan as well as tailored onetoone business
support and access to business premises. They are supported by the Cabinet Ofces Social
Incubator Fund.
The Young Foundation Accelerator based on a series of workshops, the Young Foundation
provide support to promising social ventures in London and Wales. As well as workshops
the programme includes onetoone mentoring and coaching as well as a critical friend
for selected ventures. Under the name of The Young Academy it is one of the recipients of
the second wave of the Cabinet Ofces Social Incubator Fund. Working alongside partners
Esme Fairbairn, Bank of America Merrill Lynch, Metropolitan Housing Trust and UBS it will
focus on ventures that tackle inequality in education.
UnLtd Big Venture Challenge specically designed to help social ventures and enterprises
gain impact investment, the Big Venture Challenge provides selected ventures with education,
prole and connections to impact investors. The nance provided is tied to meeting goals and
securing match investment of between 50,000 and 250,000. The programme is agnostic
on legal structure, and openminded on the use of prots.
Wayra UnLtd launched in 2013, Wayra UnLtd adapts the successful accelerator programme
model used by telecoms giant Telefonica in supporting commercial technology startups in
South America and Europe and applies it to social ventures in the UK. Its supported by the
Cabinet Ofces Social Incubator Fund, Telefonica and UnLtd.
PART I Chapter 1
What social ventures need
As we have met hundreds of founders over the course of our research and through the work of
Bethnal Green Ventures, weve found that there are eight most cited needs mentioned by early
stage social innovators. These are the things that they know they require to get to the point where
they have the traction, evidence, resources and systems in place to attract further investment.
1. People to work with
Finding cofounders and early employees with complementary skills is perhaps the most
important thing you can do as a very early stage social venture founder. Most laterstage
investors will say Its all about the team and having the right people working in the
venture will be a big part of their decision. Proving that the right management team is in
place is especially important for rst time founders.
2. A proposition to test
All social ventures should start from a clear understanding of an important social or
environmental problem and then an idea about how they can improve the situation. Its got
to be something they care about big enough to motivate the team but small enough that
they can make a difference. Showing laterstage investors the evidence from these tests
will be one of the most compelling pieces of information.
3. Potential (and actual) customers
Even before a venture has built anything, come up with a name or written a business
plan, they should nd somebody who wants to pay for what they want to offer Steve
Blank calls it customer development and the problem of not being able to nd a paying
customer is an important risk to eliminate for laterstage investors.
4. A source of advice about the basics
There are a huge number of tasks that every new organisation has to do and rst time
founders can save a lot of time by nding a person or organisation that they can ask basic
questions. How do you set up a bank account? How do you register for taxes? How do
you best set up email? Laterstage investors will want to know that there are no surprises
lurking because the venture has been set up incorrectly.
5. A source of trusted strategic advice
Beyond these administrative basics, a new venture doesnt come with its own strategy
guide, so a trusted strategic adviser can be a huge help in navigating all of the possibilities
and opportunities. This could be a longterm mentor, an angel investor or a nonexecutive
board member. Laterstage investors will be more comfortable when a venture has access
to someone whos done it before, who can help them think through choices.
6. Money
Its easy to get xated on the funding before youve actually got the other basics right,
but earlystage nance is a vital step for most founders. Some may have the resources
to support themselves but others will require external nance. With some earlystage
ventures its unlikely that they will have large capital requirements for anything other than
founder salaries, whereas others may be more capital intensive from the very minute they
need to trial something.
PART I Chapter 1
7. Somewhere to work
You can start a social venture anywhere but it can be exhausting after a while if you dont
have a dedicated space to work together or meet. It might not be your own dedicated
ofce but somewhere you identify as the place you work denitely seems to help early
stage ventures.
8. Emotional support and mentorship
The emotional strain of starting something new is incredibly important, but often
underestimated. Too many founders feel the weight of the world on their shoulders and
dont nd a way of sharing it around. Startups that have a supportive network reduce the
risks of burnout and making simple mistakes for laterstage investors.
There are many ways that each of these needs can be met. Sometimes founders work it out on
their own, sometimes they reach out for help, sometimes they nd others who offer help freely.
The partners at Bethnal Green Ventures have noticed there are some important characteristics of
teams that help dene the type of support they require. Theyve developed a set of archetypes
of earlystage ventures that help both incubators and the ventures themselves decide what kind
of support they might benet from the most:
1. Team formers need support nding cofounders or early employees.
2. Proposition seekers need help rening the combination of problem to solve, idea and
potential customer.
3. Customer hunters need help with access to potential customers
4. Model xers companies with revenues that have found limits in the scale of their business
model.
5. Scalers need marketing support as well as recruitment and other services associated with
rapid growth.
A detailed breakdown of these archetypes and their incubation needs has been included as
an appendix on page 41. The next two chapters further describe the models and techniques of
incubation that have emerged to meet these needs.
PART I Chapter 2
Chapter 2
MODELS OF SOCIAL VENTURE
INCUBATION
In the economics and business literature, incubators are recognised as a way to support
businesses at an early stage. For decades, they have been used by the public and private
sectors as a tool to stimulate innovation and business growth.
In 2004 Hackett and Dilts described business incubation as a shared ofce space alongside a
strategic system of monitoring and advice.
14
However, Nestas review of incubation literature
Incubation for Growth (2011) found that over time, many different types of incubation have
emerged with very different business models.
15
Yet there are still very few studies that capture
the full impact of incubation and show what really works.
In the social sector, incubation is a much more recent term and has become a vibrant area with
a great deal of innovation and different models owering around the world. Its perhaps best to
think of incubation as a phase rather than as a dened model in itself. The frameworks of support
that have emerged seem to fall into groups, and, although no typology will be perfect, weve
developed a basic categorisation. Some are formally constituted organisations while some are
programmes within other organisations. These groups are:
Impact accelerators.
Social venture coworking spaces.
Social venture academies.
Impact angel networks.
Social innovation prizes.
Weve only included frameworks that support external ventures rather than those that develop
ideas inhouse and then spin them out. These organisations (such as Participle, the Young
Foundation and Sidekick Studios in the UK, or Ideo.org in the US) have also grown rapidly in the
last ve years and achieved a great deal but deserve a research project all to themselves.
The founders view: SOCIAL VENTURE INCUBATION STORIES
Adebayo Adegbembo, founder of Genii Games and Asa
www.geniigames.com
In 2012 Adebayo (Bayo) Adegbembo entered CoCreation Hub
(CcHUB) Nigerias Tech in Education hackathon and came
runnerup, receiving $2,000 for Asa, a series of apps to teach
children about their cultural heritage in Africa.
Its about cultural identity amongst kids, explains Bayo. We
know they are fast losing their culture, they know nothing about
their roots, and we want to bring them back in connection with
that. We want to develop tools so kids can learn and develop
these cultural skills.
PART I Chapter 2
The prole and money from the hackathon was useful, but the introduction into the CcHUB
community has proved to be the real prize. After the hackathon Bayo started renting a desk in
the CcHUB coworking space, paying membership on a quarterly basis and gaining access to
his own work space, ofce facilities, mentorship and business support.
The venture developed quickly once Bayo joined the hub. We entered CcHUB in February
2012 and the app came out in July 2012, said Bayo. In the 24 months since then, weve seen
user growth from around 3,000 at launch to over 10,000 registered users with over $30,000 in
direct revenue.
According to Bayo, the CcHUB community played a really important role in the earlystage
development of the business.CcHub is like a family. Its like a one stop shop... everything
we needed to develop Asa is here! Illustration, content, development, nance.. its a great
community he said.
Bayo now has a place on the CcHUB incubator programme, receiving space and incubation
services and an investment into his venture. Hes working with two employees and hes aiming
towards protability by the end of 2014, so he can move out of the hub and expand.
Before entering the hackathon competition Bayo had been struggling for three years to make
it as an entrepreneur. If it werent for CcHUB I would not be where I am today, he said. My
story is I tried to make things on my own, and when I stumbled upon CcHUB it just had the
whole package HR, nance, networks, mentors.. theres a whole lot of value in that. Im proud
to be part of it.
Laura Orestano, director at SocialFare and founder of TamTamWork
www.tamtam-work.org
When Laura Orestano heard about the European Social
Innovation Competition in November 2013, she recognised the
opportunity to give life to a social innovation idea that had been
brewing in her head for some time.
Laura is Director of SocialFare, a Centre for Social Innovation
based in Torino in Italy, but prior to this she worked for a large
multinational group where she was in charge of new business
development and product innovation. It was here that she
realised that while packaging is key to conveying information
about the product, it can also be put to social use.
When the challenge prize came up I thought nows the time
to drive forward this idea, said Laura. Daily packaging can be used as a medium to address
social challenges, and the rst one we decided to focus on was job opportunities and work.
Laura and her colleagues at SocialFare worked up the idea and entered TamTamWork into
the competition. They were selected as a seminalist and were invited to attend a social
innovation academy workshop in Amsterdam. They then became a nalist and developed a
oneminute pitch to compete for the nal prize.
While the prize went to another venture, the prole from the event threw the team in the
path of interested investors. We were approached by a big investor soon after the awards
event, explains Laura, But we only had a proof of concept at this stage. We stayed in contact
with the investor and as soon as I got home we started working with different parties and the
team at SocialFare to design and test the idea and come up with a more rened and powerful
framework. Were doing our rst test launch in April this year. If the test works then well set
up a startup and go from there.
Laura says that while they didnt win the prize, it still acted as an important catalyst for
TamTamWork. We didnt pick the right angle for the nal pitch, but that was part of the
lesson. The exposure and reputation we gained has been useful, and weve built some good
relationships with other participants. Im convinced this is an idea that can really generate a
change, she said.
PART I Chapter 2
Raj Karmani, CEO and cofounder at Zero Percent
www.zeropercent.us
Its a week after demo day and Raj Karmani is still buzzing with
energy as his time on the Impact Engine accelerator wraps up in
Chicago.
He and his three team members have spent the past 16 weeks
with seven other teams going through an intensive period of
mentoring and support to develop their startup Zero Percent,
an online food donation marketplace that helps businesses
move surplus edible food to nearby soup kitchens and shelters,
reducing both hunger and waste.
Raj explains that the idea started when he was doing his PhD in
computer science. There was a bagel store between home and grad school, and they baked
fresh every day, but this led to a lot of waste because they couldnt always predict demand.
They were just throwing the food out. So I created an app that would allow the owner to say
what the food surplus was, how much and when it needed picking up. It allowed you to post a
donation and on the other side it connected with six charities needing food.
Raj developed this idea further by testing it in the dining halls at the University of Illinois,
which was the biggest food service operation in the area, and the app proved a big success.
Realising he was onto something, Raj joined the university incubator to learn more about
entrepreneurship, and its during this time that he connected with his team mates and heard
about Impact Engine.
We applied to the programme. I think from a list of 300 teams 30 were interviewed, and then
eight were selected, explains Raj. On the rst day we entered this big room, and it was like a
school programme. Everyone was at the same stage of development. This was different from
my experience in the incubator and I think its very important.
Over the next eight to ten weeks each week would have a theme or topic, and theyd get
different speakers in. It really opened our horizons. You realise theres things that you didnt
know that you need to know, and the whole learning process is accelerated.
The app we have now is not the app that we had when entering the programme, its
completely different. We learnt to do lean experiments, lean design and lean user testing. User
testing was hard as our four months on the programme ran into the holiday season, so the
charities we wanted to target were really busy. So we rented a Zipcar every day to do the food
pick ups this was a type of lean user research. You have to be open to try new things to try
and make things work.
At demo day the Zero Percent team were asking for $300,000 to scale up their operations
1520 times, and then to be able to replicate the model in other areas. At the time of writing
Raj couldnt announce any funding deals, but his smile revealed enough.
Getting investment and delivering protable returns alongside social returns is important to
the team. Were serious about being a forprot company. Food rescue is traditionally done
by charities, and if it were just about tech and volunteerism we could have started another
nonprot. But I believe our model can really create substantial value for everyone. We want
to grow through investment and we want to build that success story.
PART I Chapter 2
IMPACT ACCELERATORS
As the 2011 Nesta report The Startup Factories showed, the growth of accelerator programmes
in the tech world has been astonishing.
16
Since Paul Graham and his cofounders opened the
doors of Y Combinator in 2005 in Boston (and later Silicon Valley) their model of investing small
amounts into cohorts of earlystage startups has been replicated all over the US and the rest
of the world. SeedDB, which charts their performance, now lists 136 programmes worldwide.
Between them, these programmes have accelerated 2,038 companies that have in turn gone on
to raise over $1.5 billion in further investment.
17

In 2010 a number of impact accelerators began extending the model into areas of social and
environmental benet Hub Ventures (now Better Ventures), Greenstart and Rock Health in
California, and Bethnal Green Ventures in the UK. At the time of writing we found over 50 such
programmes worldwide.
Following the criteria set out in The Startup Factories report, impact accelerators share these
dening features:
Open application process; anyone with an idea can apply.
Accelerator invests in companies, typically in exchange for equity, at preseed or seed stage.
Cohorts or classes of startups; not an ondemand resource.
Programme of support for the cohorts, including events and company mentoring.
Focus on teams, and not just individual entrepreneurs.
The business models of accelerator programmes vary. Options range from being:
Entirely grant funded.
Set up as a venture capitallike investment fund with associated management fees.
Supported by corporate sponsorship.
Its still too early to tell whether the investment based business model will deliver actual nancial
returns. Even the most lucrative of commercial accelerators Y Combinator only started to be
protable after ve years of operation.
Examples: IMPACT ACCELERATORS
Impact Engine launched in 2012 in Chicago and now provides a 16week accelerator
programme to support forprot businesses addressing social and environmental challenges.
They provide $25,000 of upfront investment in exchange for 7 per cent equity in companies.
theimpactengine.com
Fledge, based in Seattle, describes itself as a conscious company accelerator, helping
companies bring products and services to consumers conscious of the environment, health
or consumption itself. They invest in 78 new companies twice per year investing $15,000 in
return for 6 per cent equity.
edge.co
PART I Chapter 2
Better Ventures rst opened its doors as Hub Ventures at the Impact Hub in the SoMa
district of San Francisco in 2011. The rst cohort used a Village Capital model where
founders of the selected ventures decided amongst themselves which of the ventures was
most deserving of investment. The programme then went on to run a more straightforward
investment model and become part of the Techstars Global Accelerator Network where it
selected ten ventures each year and provided them with up to $20,000 of investment and a
12week programme in return for a 6 per cent stake in each company. The programme is now
morphing into a seed investment fund with rolling applications.
www.better.vc
Pipa in Rio de Janeiro, Brazil supports cohorts of missiondriven companies with up to
$100,000 of investment in return for a 10 per cent equity stake. The organisation was created
by two Brazilian design rms (Cria and Tatil) with support from a range of technology rms,
investors and public agencies.
pipa.vc/en
Impact accelerators founded each year 20072013
Impact accelerators per continent
1 1
22
14 14
8
3
2013 2012 2011 2010 2009 2007 2008
Europe
9
North America
38
Oceania
1
South America
4
Asia
9
Africa
3
PART I Chapter 2
Most impact accelerators were founded after 2009, with a visible drop in new programmes in
2013. Though there may be more out there that we have not yet uncovered.
These programmes are concentrated in North America (USA 38 programmes), Asia ( India
six programmes) and Europe (UK six programmes).
SOCIAL VENTURE COWORKING SPACES
In 2005, as Paul Graham was setting up Y Combinator in the US, Jonathan Robinson and friends
were solving another problem facing people starting social ventures in London. At the time,
ofce space for freelancers and small companies was expensive and more importantly, inexible.
Companies often had to sign up for a minimum of a year and occupy the whole of the space
subletting was often against the terms of leases so sharing facilities wasnt an option.
Jonathan saw that a lot of interesting social innovators were choosing to work from home or
from coffee shops, in less than ideal working environments. He also recognised the opportunity
loss created by the lack of space for serendipitous meeting and collaboration. So in the loft of a
disused warehouse in a back street in Islington, he and his friends opened a coworking space. It
wasnt ofce space in the conventional sense instead it was more of a membership organisation
which just happened to come with desk space as and when a venture needed it. And it just
happened that all the people who joined the organisation were committed to solving social and
environmental problems.
It soon took off and the Hub Islington began helping other people in other cities open Hubs
of their own. The whole network rebranded in 2013 as Impact Hubs. At the time of writing
there are over 60 around the world (from Cape Town to San Francisco to Melbourne) and plans
to open at least 20 more. Each Impact Hub is an autonomous member of the global network
paying for core services, like websites and advice about the best ways of doing everything from
furniture design through to connecting members with outside resources.
There are many other coworking spaces focusing on supporting social ventures. In San
Francisco, Mission Social hosts forprot and notforprot startups and in Chicago, Panzanzee
does likewise. Models vary and there are also many coworking spaces that while they dont
explicitly focus on social ventures have become home to many.
In general coworking spaces offer:
Flexible desk and meeting space.
Opportunities to meet other ventures or entrepreneurs.
A programme of events or learning to support ventures.
Primarily focused on hosting social or environmental ventures.
Coworking space business models range from:
Charging a monthly membership fee to founders or startups based on level of usage this
could be per desk per month or provide a certain number of hours usage per month.
Charging for use of events spaces or organised events.
Charging for or taking a commission on food and drink or catering.
Grant funding or social investment to fund initial development.
PART I Chapter 2
4
5
4
3
9
6
2014 2013 2012 2011 2010 2009 2008
12
14
7
10
5
Impact Hubs Other Hubs
Examples: SOCIAL VENTURE COWORKING SPACES
Bombay Connect is Mumbais rst coworking space for social ventures. It offers affordable
ofce space, workshops and learning opportunities and connections to potential investors and
experts. It was founded by UnLtd India.
bombay-connect.com
CcHUB brings together a diverse group of stakeholders from technologist to members of
government in and around Lagos to work on new solutions to social problems in Nigeria.
cchubnigeria.com
Panzanzee is Chicagos social venture coworking space and community. The organisation
provides support around business strategy and development through peertopeer support,
events, networking and ofce space, as well as links to nancing.
panzanzee.com
Xindanwei means New Work Unit in Mandarin and is a coworking space based in Shanghai.
They provide desk space, host events and provide access to networking opportunities for
social ventures.
xindanwei.com
Social impact coworking spaces founded per year 20082014
PART I Chapter 2
Oceania Asia Africa South
America
North
America
Europe
30
29
20
13
8 8
6
2
10
7
8
3
All Social Impact Co-Working Spaces Impact Hubs
Social impact coworking space per continent
We found 82 social venture coworking spaces; however, only 17 organisations are behind
these (e.g. The Impact Hub has 62 coworking spaces worldwide). Similar to impact
accelerators, most coworking spaces were funded starting in 2009, and there is a similar
decreasing trend for new programmes started in 2013.
Social venture coworking spaces have a wide geographical presence, with most spread
across Europe and the US.

SOCIAL VENTURE ACADEMIES
The original social venture academy is the School for Social Entrepreneurs (SSE), founded
in 1997 by Michael Young in London. SSE has now spread across the UK and to Australia and
Canada. Its not a school in the conventional sense. As SSE put it,
There are no exams, no qualications and applications are based on attitude, not
academic results. Our programmes are based on action learning, because entrepreneurs
learn best by doing, and they learn best from their peers and practitioners in the eld.
Social venture academies are programmes that help accelerate the learning of social ventures
and entrepreneurs, whether theyre already working on their venture or just in the planning
stages. Programmes can include individual classes or longer courses, sometimes delivered
virtually, but more usually facetoface. They can be part of formal academic institutions but are
more often specialist organisations or programmes set up to meet the needs of social ventures
specically.
PART I Chapter 2
In the tech space the need for more exible and focused education targeted at founders of
startups was pioneered by General Assembly, originally in New York but now in multiple cities.
The Hub in San Francisco is also starting a similar programme called Workbench.
Typically, social venture academies have the following features:
Classes are specically aimed at social entrepreneurs or ventures.
Learning is not part of a wider qualication.
Business models for social venture academies include:
Charging for classes or courses.
Sponsorship of classes or courses.
Offering training or consultancy to corporate clients to subsidise offering to social ventures
and founders.
Examples: SOCIAL VENTURE ACADEMIES
Impact Hub Workbench in Californias Bay Area (a similar programme runs at Impact Hub
Boulder, Colorado) offers classes and courses for social entrepreneurs, founders and activists
in everything from technology to business skills or startup psychology. Classes start at $10 per
session and the aim is:
...learning skills that build immediate organizational and leadership capacity. Were
not just seeking teachers to deliver information; we expect attendees to come away
understanding how to apply these lessons in their organization immediately. Sessions
should be fun, interactive and participatory.
www.impacthubboulder.com/hub-workbench
The School for Social Entrepreneurs is based on a learning by doing approach where
students gain practical business and life skills that they can apply directly to their ventures.
Courses vary from Social Change 101, offering basic support to local entrepreneurs, to the
SSE Accelerator Programme which is a more intensive fourmonth experience. Entrepreneurs
pay for the programme, rather than receiving investment.
www.the-sse.org
The Investment Ready Program in Vienna aims to advance social entrepreneurship through
capacity building and education in Central and Eastern Europe (CEE). Investment Ready was
created by Social Impact International and the Impact Hub Vienna in 2011. The programme
brings investors together to help them source, mentor and support participating ventures.
Investment Ready offers classes, coaching and peertopeer learning for startups and ends
with the CEE Impact Day. When the programme rst started, this was the rst gathering of
impact investors looking at the CEE region.
investment-ready.org
PART I Chapter 2
Social venture academies per continent
We uncovered 25 social venture academies, with the dominant player being the School for
Social Entrepreneurs with programmes in 15 locations in the UK, Australia and Canada.
IMPACT ANGEL NETWORKS
Angel investors are individuals, typically very wealthy, with skills and experience of building
and growing a business. Angels invest their own capital into private businesses usually small
or growing ones. Over the past 20 years, angel investing has grown in the US to become
responsible for $20 billion of new investments each year. While much of this activity is done
individually, its also common for angel investors to create networks, sometimes by pooling their
resources and decision making formally or sometimes informally, to share the risks and rewards
of investing. These angel networks are common in the US and UK at a national and local level.
As impact investing has grown as a category there has also been a growth in the number of
impact angels looking to invest in ventures that have the potential for a nancial and social
return. These often mirror the patterns seen in commercial angel investing with some networks
being national (or even international) and others local. Examples in the US include Toniic
(international) and Investors Circle as well as local groups such as the Impact Angel Group
(Colorado). In general, angel networks get involved in ventures at a later stage than accelerators,
coworking spaces or academies.
South America Asia Europe
13
North America
4
Oceania
4
3
1
Africa
0
PART I Chapter 2
Dening features of impact angel networks include:
A group of high net worth individuals investing in earlystage social ventures.
Sharing the costs and processes of search and due diligence.
Could be a formally constituted or more informal group.
Offering mentoring, support and connections beyond their initial investment.
Impact Angel Networks business models range from:
A (typically annual) membership fee for members to cover the costs of due diligence.
A commission on investment raised (typically 5 per cent).
Paid events, charging either investors, founders or both.
Examples: IMPACT ANGEL NETWORKS
Intellecap Impact Investment Network (I3N) is Indias rst angel network of high net worth
individuals and institutional investors seeking investments in earlystage social enterprises
and ventures.
www.i3n.co.in
Toniic is a global network of impact angel investors which is currently increasing its
operations in Europe. It tends to work through local afliates such as Impact Invest
Scandinavia (http://impactinvest.se/) in Sweden or ClearlySo in London, who help select and
vet dealow for investors.
www.toniic.com
Investors Circle members have invested $172 million plus $4 billion in followon investment
into 271 social ventures over the last 20 years. Most investment takes place in the US with
regular events called Beyond the Pitch in cities across the country.
www.investorscircle.net
Impact angel networks are still relatively few worldwide. Most of the networks we discovered
invest in impact startups from all over the world, rather than a specic country.
Name of Network City Country Year Founded
Investors Circle San Francisco, US 1992
Philadelphia, Durham,
New York
Angels Initiatives Kampala Uganda 2009
ClearlySO Angels London UK 2009
Toniic San Francisco US 2010
Intellecap Impact Investment Network Mumbai India 2011
i2i Angels Lahore Pakistan 2012
Impact Angel Group Boulder US 2012
Impact Invest Scandinavia Stockholm Sweden 2012
Indian Angel Network Impact New Delhi India 2013
PART I Chapter 2
SOCIAL INNOVATION PRIZES AND CHALLENGES
A number of prizes have been created specically to stimulate social innovation and encourage
social ventures to tackle particular problems. Most involve a cash prize to be used by the
ventures to further their business usually in the form of a grant but occasionally as equity
investment. They differ from simple awards in that they offer a great deal of support over and
above recognition and money.
Typical features of a competition include:
Widespread publicity for the prize and its aims.
An online application process.
Shortlisting by the competition organisers.
A pitch or facetoface nal where ventures meet a group of judges.
Followup support and publicity for the winners.
The business model behind most social venture competitions is based on sponsorship either to
raise the prole of the sponsoring organisation or to raise the prole of a particular issue where
the sponsoring organisation wishes to see more innovative solutions.
Examples: SOCIAL INNOVATION PRIZES AND CHALLENGES
The European Social Innovation Competition was launched by the European Commission in
memory of social innovation campaigner Diogo Vasconcelos, the aim of this programme is to
nd the best social innovation solutions to help people move towards work or into new types
of work in Europe. The competition makes three awards of 30,000 and provides mentoring,
connections and prole to the winners. There have been two rounds of the prize to date. It is
run by the Nesta Centre for Challenge Prizes.
socialinnovationcompetition.eu
Nestas Centre for Challenge Prizes runs a number of competitions to stimulate innovative
solutions to some of the big challenges we face. As well as the European Social Innovation
Competition mentioned above, they have run prizes on a wide range of issues, from bike theft,
to waste reduction, open data, to renewable energy in Bosnia and Herzegovina. They have
also developed a guide to running challenge prizes:
www.nesta.org.uk/develop-your-skills/challenge-prizes
The Global Social Venture Competition (GSVC) provides students with mentoring, exposure,
and $50,000 in prizes to turn their ideas into ventures that will have positive real world
impact. In 2013, GSVC received 650 entries from nearly 40 countries. Previous years nalists
include Husk Power, Revolution Foods, and d.light design.
www.gsvc.org
HAE Accelerator is actually a competition for health startups, despite being called an
accelerator, and it is run by a strategic alliance between the biomedical clusters Cambridge
(UK), Leuven (Belgium) and Heidelberg (Germany). After a competition phase, innovative
startup teams in the three regions are put in touch with international VC investors. In 2013 the
competition was funded by the German Federal Ministry of Education and Research (BMBF).
accelerator.health-axis.eu
PART I Chapter 2
The Dell Social Innovation Challenge is sponsored by Dell but coordinated by the University
of Texas at Austin. DSIC offers prizes to student entrepreneur teams from around the world
who develop social innovation solutions. Since launch, more than 15,000 students from 105
countries have proposed more than 4,500 ideas. DSIC has awarded more than $450,000 to
over 50 student teams.
www.dellchallenge.org
The Hult Prize was founded in 2010 as a global competition for studentled social impact
business ideas. Teams compete in regional heats with nalists coming together for a sixweek
programme of intensive training hosted by Hult International Business School. The winning
team receive $1 million in seed capital, as well as mentorship and advice from the international
business community. In 2013 the competition was won by a team from McGill University in
Canada using insect protein as food.
www.hultprize.org
Number of social venture competitions per continent
We uncovered 51 different occurrences of social innovation challenges and prizes worldwide.
Most were concentrated in Asia, Europe and the US.
Europe
14
North America
13
Oceania
1
Asia
18
Africa
5
South America
0
PART I Chapter 3
Chapter 3
METHODS OF SOCIAL VENTURE
INCUBATION
While the model of incubation tells you what support is given by particular programmes or
organisations, it doesnt tell you how that support will be provided whether thats the way
that they select ventures to support, or the way that they offer nance or mentoring.
Some methods are used in a variety of types of incubator. Mentoring, for example, is often part
of accelerator programmes, academies, competitions and angel networks. Colocation is used
in coworking spaces and often in accelerators. In this chapter we take a more granular look
at these methods. The methods we consider here arent an exhaustive list, but were the most
commonly provided services that incubation programmes provided. They are:
Talent spotting and selection.
Mentoring.
Focus on impact.
Access to networks.
Colocation.
Finance.
TALENT SPOTTING AND SELECTION
One of the most important roles of incubation is ltering people and ideas. Laterstage investors
often cited this as their primary reason for engaging with incubation programmes and the
better the ltering, the more interesting the programme is for them. There are different selection
methods used by different types of incubator. They are also often used in combination.
Interestingly, few of the incubators we interviewed used business plans as part of their selection
process. They didnt nd these particularly useful in assessing very young startups, because
when a venture is prerevenue, precustomer and often without a central proposition, any
numbers are at best simply guesses. Incubators preferred to judge ventures on the quality of the
team, rather than imaginary future income.
Method Description Usage
Online Forms are commonly used to lter applications from Probably the most common
forms open calls, assessing them on the quality of their idea starting point for incubation
and their experience and knowledge of the problem. programme selection used
This primary ltering stage can be done by a wide range by accelerators, competitions
of assessors, from mentors to alumni. The people we and angel networks.
spoke to recommended making forms startup friendly
i.e. not asking for veyear projections or complex
Gantt charts.
Online application platforms specically geared towards
incubation include F6S.com, Fundacity, Angel.co and
Gust.
PART I Chapter 3
Getting the right t
San Franciscobased sustainability programme Greenstart has changed the way that they
select startups since their rst intake in 2010. Now, rather than looking at hundreds of
applications and selecting through short interviews, they go one step further, screening down
until theyre ready for a full halfday workshop with teams to check whether theyre the type
of startup they want to work with.
MENTORING
Mentoring has become an important element of many incubation programmes, helping rst
time founders with advice, motivation and connections and enabling them to access otherwise
outofreach opportunities. Mentoring tends to be an on going relationship that can last
beyond the period of incubation, sometimes developing into more formal advisory, investment
or governance roles. Its often informally organised and its usual for the mentor to be more
experienced and qualied than the mentee.
Interviews Interviews are often used to assess the team behind the Often used by impact
idea. They can range from an hour long grilling to a accelerators to narrow down
20 minute informal chat, depending on the information the shortlist of applicants.
being sought. Interviews can be useful for spotting signs
of chemistry between founders do they interrupt each
other? Do they know what each person in the team is
meant to be doing? These can be early warning signs of
potential problems, as laterstage investors will look for
a team that gels.
Pitches Competitions often use pitchbased selection, getting Most commonly used by
teams to pitch against each other in rounds, with one impact angel networks to
nalist getting the prize of money or support. Pitches select investees following
are good for showing how well ventures can articulate screening using an online form.
their ideas and convince others of their importance. They often form part of
However, pitching can be intimidating, so risks narrowing accelerator programmes but
the pool of potential talent. Some incubators see usually at the end of the
pitching as more appropriate for laterstage ventures. programme rather than during
selection.
Speed Mentor speed dating enables teams and mentors to Often seen during the early
dating quickly nd out if there is any chemistry between them. part of accelerator
Incubators using this method tend to bring everyone programmes. Offered by some
together in a room and divide mentors into groups that academies, prizes and
circulate around the different teams. These groups then coworking spaces.
have ten minutes to pitch what they do to each other,
before moving on. While this can sometimes become a
bit chaotic, it also adds levity to the occasionally dull
job of repeatedly pitching and networking.
Ofce hours A large network of mentors with varied skills can be Regularly used by accelerator
difcult for earlystage ventures to navigate. programmes. Coworking
So programmes will often offer open sessions with spaces often offer legal and
mentors, which startups can sign up to as and when accounting surgeries using a
they need. These are sometimes held at the mentors similar format.
place of work and sometimes at the programme venue.
Peer Often the most valuable advice for a startup comes A key part of many impact
mentoring from those who are just a couple of weeks, rather than accelerators which are
ten years, ahead. This is a huge benet of incubating organised in cohorts.
ventures in cohorts since they are going through the
same problems, they can help each other out, on
everything from how to hire their rst employee to
solving complex coding problems.
PART I Chapter 3
Setting expectations
While it wasnt specically designed for impact incubation, Techstars Mentor Manifesto,
18

created by David Cohen, is a good example of a popular approach to managing mentor
networks helping to set mentors and mentees expectations in advance.
The Mentor Manifesto
Be Socratic.
Expect nothing in return (youll be delighted with what you do get back).
Be authentic/practice what you preach.
Be direct. Tell the truth, however hard.
Listen too.
The best mentor relationships eventually become twoway.
Be responsive.
Adopt at least one company every single year. Experience counts.
Clearly separate opinion from fact.
Hold information in condence.
Clearly commit to mentor or do not. Either is ne.
Know what you dont know. Say I dont know when you dont know. I dont know is
preferable to bravado.
Guide, dont control. Teams must make their own decisions. Guide but never tell them
what to do. Understand that its their company, not yours.
Accept and communicate with other mentors that get involved.
Be optimistic.
Provide specic actionable advice, dont be vague.
Be challenging/robust but never destructive.
Have empathy. Remember that startups are hard.
FOCUS ON IMPACT
Although it sounds obvious its important not to underestimate the biggest difference between
impact incubation and more general incubation the social or environmental impact that the
ventures aim to have. Impact measurement is still an emerging eld with different schools of
thought about how ventures should measure the outputs and outcomes of their work. There
is added complexity with the earlystage ventures that most incubation programmes support
because their impact is often hypothetical theyre at such an early point in their history that
their impact is, as yet, very small and the way they measure it may change with scale.
Selecting Most impact incubation programmes that we came Almost all programmes.
for impact across ensured that they were working with social
ventures with the potential for social impact through
their selection process. By being clear that the
programme or coworking space is for ventures aiming
for social impact, they could lter accordingly.
This doesnt ensure achieving impact though.
Teaching One of the biggest differences between impact Almost all programmes.
and training incubation programmes and conventional ones is the
focus on teaching founders about different frameworks
for measuring impact. This can be done through training
sessions, workshops or more intensive frameworks.
PART I Chapter 3
ACCESS TO NETWORKS
For any new social venture, nding the right people, customers and resources is critical. So in
order to be effective, incubation programmes need to be linked into the right types of networks.
Access to the right types of networks can help startups through any number of daytoday
challenges, from recruiting the right staff quickly to exploring options for their business model.
Some incubators select ventures in part based on whether they think that they can support them
because they have access to networks that offer the right kind of resources.
Monitoring By telling ventures that they are going to be asked to Most common with
update the programme managers on their impact over programmes where there is a
time, ventures get into the habit of measuring and longterm relationship such
reporting. as those where there is an
equity investment.
Customer One of the most difcult tasks for new ventures, Most common in impact
and user particularly social ventures, is in accessing potential accelerators. For example Rock
networks customers and users of their products. Schools, Health has developed Rock
governments, and healthcare companies tend to be the Health Partners, a network of
most in need of the products and services of these health and pharmaceutical
ventures, but can be difcult to engage with because of companies, medical and
complicated and lengthy budgeting and procurement research hospitals and
cycles. Successful incubation programmes have, or can universities. Imagine K12 has
create, access into key customer networks. an educators network of
schools, teachers and
educational leaders.
Investor The investment landscape for earlystage social ventures Almost all incubation
networks is complicated and ventures often struggle to access the programmes make some
right sort of nance. Incubation programmes often work attempt to connect with
to cultivate strong networks with investors, not simply investors.
as providers of capital, but as the right kinds of investors,
who understand the landscape of investment and who
will participate in their investments in the right way.
Investor While its rare for investors to write cheques at events, Most accelerator programmes.
Demo Days they play an important role in preparing ventures for Some coworking spaces also
investment at a later date. Even if investors dont want offer similar opportunities to
to immediately invest they can often be a really useful their members.
source of advice and connections for the startups
involved.
Investor demo days often use an interactive format, such
as mini board meetings or speed dating, as a way of
getting the startups used to talking to investors, while
enabling the investors themselves to get a better feeling
for the team.
Public Demo days are often large public affairs that focus more Some accelerator programmes.
Demo Days on celebrating ventures achievements and getting the for example Impact Engine
word out than on raising investment. They can be a runs a Community Demo Day
good way to access customer networks and attract as a way to link startups to
media attention. their peers and the ecosystems
that support them.
Prizes often run public events
to help ventures gather
support.
PART I Chapter 3
Beyond the pitch
The Unreasonable Institute was one of a number of programmes that expressed frustration
with the Demo Day format of connecting ventures with investors. For them pitching is only
part of fundraising. In the early days the Institute used a fairly standard Demo Day format,
spending their energy on helping teams develop their pitches to a room full of investors:
We spent so much time preparing our entrepreneurs to pitch in our rst two years, and
very little time helping to build real businesses and to make the most from the oneonone
conversations with investors that might eventually lead to capital. And so in 2012 they
changed the format with short introductions by the teams followed by more indepth Board
meeting style sessions where they would ask for advice from potential investors. It worked
as angel investor Elizabeth Kraus says of the revamped format: I learned more in the three
days I spent there, than Ive learned in the last three months, and I think it was incredibly
valuable for both the entrepreneurs and the investors.
19

COLOCATION
The benets of offering a shared space to ventures can be seen in many accelerators and co
working spaces. Ventures based in shared spaces particularly value the peer networks they
create. Space is not usually offered by angel networks or competitions and prizes.
There are two different philosophies about whether incubators should offer ventures they
support free or subsidised ofce space. The rst is that it offers opportunities for collaboration
and serendipity that cant be recreated any other way. The second is that startups should have
a chance to create their own culture, especially at an early stage. Imagine K12 dont house any
of their teams for example they only come in to the ofce twice a week. While the startups
miss out on the immediate benets of the peer support described above, this does take a lot of
workload off the incubators, freeing up their time to focus on helping ventures make connections
with investors and customers. The other benet is that startups are not shielded from the real
world in quite the same way leaving the nurturing environment of an accelerator space can be
quite a shock for startups.
Shared Giving startups a desk to work from means they dont Shared ofce space is offered
ofce have to worry about the practicalities of nding and by most impact accelerators
space maintaining an ofce. It can be hugely valuable for and all coworking spaces.
startups to be in the same room as others going through
the same processes from setting up a payroll to xing
bugs its always useful to have teams that are a couple
of weeks ahead.
Event and Even if programmes cant offer permanent ofce space, Academies, prizes and
training there are opportunities created by bringing ventures impact angel networks often
space together for events or training. bring together the ventures
they are supporting more
intermittently.
PART I Chapter 3
FINANCE
Finance tends to be offered by accelerators, angel networks and competitions while co
working spaces and academies will usually charge for the support they offer. Some incubation
programmes offer a single type of nance while others combine different types. Its not unusual
for ventures to combine nance from another source (such as a grant or their own nances) with
that offered by incubation programmes.
Combining crowdfunding and team selection
When they rst started accepting applications, the Unreasonable Institute team would
shortlist ventures, who would then have to raise money through the Unreasonable
Marketplace crowdfunding platform in order to be accepted onto the programme. However,
the team eventually decided this was unfair as it made it harder for applicants from countries
where it was more difcult to nd sponsors to get into the programme. Now teams use the
platform to raise funds after they have been selected.
Grants Since incubation programmes operate at such an early Some accelerator
stage, it maybe that grants are preferred over investment programmes usually those
by their funders or managers. that are publicly funded.
Equity Equity investing in social ventures has become more All impact angel networks.
investing common in recent years, with the growth of the impact
investing sector more broadly. Most impact accelerator
programmes (including Rock
Health which also offers small
grants) now offer equity
investment or a similar model
of nance.
Peer Village Capital was created by Ross Baird and Bob Village Capital partners with a
selected Pattillo of Gray Ghost Ventures in 2009. The concept large number of organisations
investment was inspired by the village bank idea common in to deliver incubation
micronance, where groups of women in developing programmes worldwide, such
countries would enable small loans through a peer as the Pearson Education
review structure. A unique feature of Village Capital Edupreneurs programme in
programmes is that ventures select which team of their India, and the Growth Africa
peers should receive a precommitted investment programme in Kenya.
(usually a grant of approximately $50,000).
Crowd Crowdfunding has become an increasingly popular Dutch social innovation studio
funding mechanism for nancing earlystage ventures, with over Enviu piloted an equity based
$2.7 billion raised from crowdfunders globally in 2012, crowdfunding site for social
nancing more than one million campaigns.
20
Several ventures in 2013. Of the four
social incubators have started using crowdfunding ventures selected for the pilot,
platforms as a means of raising nance for their ventures. two reached their funding
target. The team is currently
reviewing their strategy before
relaunching in 2014.
Equity crowdfunding platform
Angellist (http://angel.co) gives
accredited investors in the US
the ability to invest in cohorts
from accelerators and
incubators including Rock
Health.
PART I Chapter 3
EXAMPLES OF FINANCE OFFERED BY INCUBATION PROGRAMMES
Programme Location Investment offered US$ Typical terms
Pipa Brasil $100,000 10% equity
Imagine K12 Palo Alto $14,00020,000 67%
$80,000 convertible note
Rock Health San Francisco $1020k grant
$100k convertible note
UnLtd India Mumbai $1,000 grant
$3,000 grant
$30,000 unsecured loan
The incubators view: SOCIAL VENTURE INCUBATION STORIES
Artemisia
Founded: 2004
Location: Sao Paulo and Rio de Janeiro
Type of programme: Artemisia runs a number of different programmes aimed at educating
and supporting social entrepreneurs and social ventures, including their own impact
accelerator.
www.artemisia.org.br
Back in 2008 no one knew what was meant by social ventures in Brazil. If youd asked around
you would have found good understanding of the phrases civil society and corporate social
responsibility but people were suspicious of social enterprise and social investment.
But over the past few years there has been a big change. In 2010 Artemisia mapped the sector
and found they were the only accelerator programme focusing on social ventures. Following
government sponsorship for social enterprises and international investment from players such
as Omidyar Network, there are now six impact investment funds and a far stronger scene for
people who want to start social ventures.
Since 2007 Artemisia has supported 51 social startups that target the base of the pyramid.
Ninety per cent of these still exist and 53 per cent have gone on to secure further capital. The
main areas they target are health, education and housing.
They work with traditional funds, impact investors and philanthropists to raise nance for the
programme. Some investors precommit funding and Artemisia decides how it is invested,
others invest directly into the ventures themselves.
Support offered is focused around peertopeer learning and mentorship focusing on
capacity building, meetings, individual mentoring and investment. They have a structured
training programme which lasts for six months, during which each business is teamed with an
investor (mentor) from Artemesia, that works with them throughout.
The Artemisia programmes funded by Village Capital have $50,000 to offer to two startups as
convertible loans. This is awarded during the course of the programme and the cohort makes
a group decision on who it goes to, the objective is to get them to think like an investor.
Programme director Maure Pessanha said that despite progress there are still huge challenges
for startups in Brazil. Human capital is really hard to source there is a lack of skills, especially
around the process of starting a business. There is also a lack of preseed nance for early
stage social investment in Brazil. And activity is centred around a small number of hubs. In the
future Artemisia would like to grow in other geographic areas outside of Sao Paolo and Rio de
Janeiro.
PART I Chapter 3
Imagine K12
Founded: 2011
Location: Palo Alto, California
Type of programme: Impact accelerator
www.imaginek12.com
Imagine K12 is an accelerator programme for education technology startups founded by Tim
Brady and Geoff Ralston in 2011. Ralston is also a partner at Y Combinator and so Imagine
K12 is possibly the only other accelerator programme in the world that has the blessing of
Paul Graham so much so that he has invested in Imagine K12s Start Fund which offers a
convertible note worth $80,000 to every startup the programme supports. Brady was the rst
employee at Yahoo! after the two founders and was Chief Product Ofcer during what some
would consider the companys heyday from 19952003.
Imagine K12 is unusual among accelerators in that while they offer preseed capital and
advice, they dont offer ofce space. Brady says thats quite deliberate, We think its really
important that startups develop their own culture. Startup success seems to correlate with
those teams that have a strong internal identity and their own way of doing things. Its a
belief that Imagine K12 share with Y Combinator who also only bring the teams together
once a week during their programme. Teams are very welcome to come in and meet with the
partners for ofce hours but theyre generally expected to work from their own ofces or
apartments.
Brady says that one of their explicit goals with Imagine K12 was to galvanise the Silicon
Valley investment community to back technology startups working on solving important
problems. In the case of education, the change has been relatively quick edutech has gone
from a minority interest for venture capitalists to one of the hottest categories in just two
years. Brady doesnt claim to be solely responsible for that, but says that being vertically
focussed has helped them a great deal founders, investors, customers, mentors all know
where to come if they want to get involved in earlystage startups using technology to
improve education.
Code for America
Founded: 2009
Location: Various states across the US. The Fellows programme is based in San Francisco
Type of programme: Academy and accelerator programme
codeforamerica.org
When Jennifer Pahlka rst started talking about technology startups having a role in
improving the way that government services in the US were delivered, she mainly got blank
looks. At the time, government was thinking very differently about technology if it did
purchase IT systems, it would do so from one of the large systems integrator companies
rather than by working with startups. Pahlka didnt give up and instead founded Code for
America as a way of educating city, state and the national government that the kind of
technology developed by civic startups could have a positive effect engaging citizens,
improving services and saving money.
CfAs rst step was to create its Fellows programme, placing highly skilled technologists and
engineers in public agencies across the country to work on projects alongside civil servants
and public ofcials. As case studies and success stories started to emerge, other cities signed
up and alongside their practical programmes CfA were also publicly raising the prole of
technologys role in improving public services. Both Pahlka and adviser Tim OReilly spoke
widely about the potential of their approach and lobbied The White House for support. It was
PART I Chapter 3
only then, once they had developed a network of potential willing customers who could see
the value of working with technology startups, that Code for America launched its Accelerator
programme.
The programme itself is also modelled with customers in mind. Teams on the Accelerator
dont move to San Francisco full time. They remain based near their customers in the home
city or state so they can work with them closely and come to Code for America for one week
every month. The idea is to retain deep connections with customers while also getting the
best advice that the Silicon Valley investment and startup world can offer.
Greenstart
Founded: 2011
Location: San Francisco, California
Type of programme: Greenstart has transitioned from an impact accelerator into a venture
design studio
greenstart.com
On the 11th oor of an art deco ofce 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 ofce where Demo Day is about to begin. The large
highceilinged space is usually home to the four environmental startups in the current cohort
as well as the Greenstart team which has grown rapidly over the previous few months but
today the desks and comfy chairs are cleared away and a large black stage, studio lights and
hundreds of rented chairs have turned the space into a theatre.
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 cant help but enthuse about the awesome, amazing, really cool startups
were about to see. And then a surprise guest, Mayor of San Francisco, Edwin Lee, steps up
to say how important environmental startups are going to be to the city and how hes doing
everything he can to make the city (as opposed to Silicon Valley 30 miles south) the most
startup friendly environment in the world. Hes proposing changing the tax code to make it
easier for startups to afford city rents (two weeks later his proposal is passed) and setting
up a new scheme to offer city properties as test beds for new technologies developed by
cleantech startups.
Greenstart partner Daniel Goldfarb explains that theyve recently shifted away from a classic
accelerator model. He says they nd it easier to work with startups that are slightly more
developed than those you might nd applying to accelerator programmes like Y Combinator
or Techstars. They look for evidence of revenue before investing, but when they do invest they
like to get very involved in the startups they support. The initial equity investment of $20,000
is accompanied by a $100,000 convertible note and then support valued at another $100,000
from the team Greenstart have assembled to work with the startups.
Theyve found that their competitive advantage over other investors is their design
background and skills. The design team is led by David Merkoski, formerly head of Frog
Design in San Francisco and the mentors they introduce to the startups are also often
designers.
They provide each startup with one matched mentor who is likely to be very involved in the
development of the startup during the programme and afterwards. These are typically former
entrepreneurs or investors who are looking to give more time and Greenstart have 2030 of
these on their books. They also help startups meet subject mentors who have more specic
expertise perhaps in particular markets or skills (such as recruiting) that startups might
need. They have 60 of this type of mentor available.
PART I Chapter 3
Shift
Founded: 2012
Location: Stockholm, Sweden
Type of programme: Impact accelerator, now offering courses and coworking space
www.shifts.se
Housed in Stockholms Resilience Centre, the Shift accelerator was founded in 2012 with
the aim of nurturing resilience thinking and social and ecological innovations in the Baltic
Sea area. Its rst batch of startups came from Latvia, Estonia, Lithuania and Sweden
and comprised ideas ranging from vertical wind power and water cleaning for industrial
applications, to tropical weather forecasting and fair trade forestry products.
In 2013, Shift organised Switched on Nature, a halfday seminar leading into a hackathon
aimed at exploring the of value of technologies and innovation for resilient urban systems.
In 2014, Shift is aiming to develop this strand of education to launch several courses for
entrepreneurs on resilience and system change and open a lab within the Stockholm
Resilience Centre where programmers, entrepreneurs, academics, policymakers, business
representatives, designers, writers and artists can discuss and cocreate solutions to urgent
sustainability challenges.
Having gone from an accelerator to a lab with courses on systemic change, Shift represents
a new model of social incubation, ready to adapt to the evolving needs of society and local
entrepreneurs.
Jardin de Innovaion Smart Impact programme
Founded: 2013
Location: Mexico City
Type of programme: Impact accelerator
www.sjardindeinnovacion.org
After working in Europe for several years, Oscar Velazquez returned home to Mexico
determined to help get the social entrepreneurial ecosystem going. His rst step was to set up
the Mexico City branch of the Founder Institute but he found that the generic startup nature
of the franchised programme which is run from California wasnt right for Mexico. Oscar
wanted to do something for impact so in 2013 started the Smart Impact programme as part of
the Jardin de Innovacion.
Before starting out on his own he did his homework and undertook a global benchmarking
exercise researching all the programmes he could nd. His time working at Netherlandsbased
business incubator Utrecht Inc for two years also helped him decide what he thought would
work and what wouldnt. He took inspiration from Envius Wow Lab, Rock Health in California,
Pipa in Brasil and the Nike Accelerator run by Techstars. He didnt want to just compare his idea
to impact programmes but to be among the best tech accelerators in the world.
He also ran a series of workshops with entrepreneurs which helped rene the way the
programme would work he was keen not just to work with social entrepreneurs who had a
mindset that they just wanted philanthropy. He wanted to work with investable high growth
ventures.
After selffunding the development of the project Oscar and his team applied for support
from the Mexican National Ministry for Economics network of accelerators and incubators.
They were selected as one of 15 high impact programmes and were offered a $150,000 initial
grant with the potential for followon support.
PART I Chapter 3
Smart Impact 2014 will be a fourmonth, parttime programme for 20 social ventures.
They will be offered ofce space, mentors, workshops and the ability to draw on staff to
increase their capacity at key moments such as around product launches or investment
opportunities.
Smart Impact will also have a deliberate strategy to support teams to raise money through a
crowdfunding platform for presales and prove they have market validation before going out
to use the accelerators connections to impact investors in the region.
PART I Chapter 4
Chapter 4
LOOKING AHEAD
In this chapter we draw out some trends weve noticed in social incubation worldwide and
the lessons we think are most pressing for programme managers, investors, policymakers and
social venture founders as the impact incubation sector begins to grow.
TRENDS WITHIN SOCIAL VENTURE INCUBATION
Since it is very early days for the social incubation eld there is still a great deal of development
and ux. However, during our research we noticed several distinct trends, both in the way that
established programmes were adapting their offerings and in the methods adopted by new
programmes created more recently.
Vertical specialisation
While the number of programmes for social ventures in general is increasing rapidly, many of
the new programmes focus on a particular sector or social or environmental problem. This is as
much the case in the UK as in other countries. This could be health or education (see Health XL
in Dublin or Imagine K12 in Palo Alto) or an even more specic problem such as the Future of
Fish which works globally helping startups that are trying to improve the sustainability of sh in
our food systems.
Domain specialisation
The other type of specialisation we saw was programmes deepening their expertise into a
particular approach. A good example is Greenstart whose support for ventures is dominated
by the design support they can offer. Another would be VE Transfer (http://vetransfer.org/) or
Revolution Labs (http://revolutionlabs.co/) both managed by the Global Entrepreneurship
Collective in Milwaukee which specialise in the approach to customer development as
popularised by entrepreneur and academic Steve Blank. The team behind the accelerators have
undertaken extensive training in the approach.
Educating customers and investors
It appears that having access to investors isnt enough for social ventures in some locations.
Impact Engine was in fact founded in 2011 in Chicago by a small group of impact investors who
wanted to build an ecosystem of social ventures in the city supporting local startups and
attracting founders from elsewhere to relocate. However, while the investors found that capital
was available from philanthropists and more commercially minded angels, the group of actual
impact angels was small.
A number of programmes told us a similar story about customers. It wasnt just that they needed
to nd customers for the social ventures they supported, but they also needed to educate them
about how to work with startups (see Code for America for example).
Diversication
We often heard that incubation is a very difcult thing to make work nancially from co
working spaces through to angel networks. The response to this is often for programmes to
diversify their offering. For example, Pipa are looking at becoming a seed investor as well as
an accelerator. Coworking spaces such as Impact Hub Bay Area have developed educational
offerings such as Workbench or started accelerator programmes.
PART I Chapter 4
Another type of diversication and expansion is exemplied by the Unreasonable Institute. Over
the past four years, 82 ventures from 37 countries have attended the Unreasonable Institutes
veweek summer programme in Boulder, Colorado. Theyve gone on to raise $30 million of
further capital. While its had a global outlook from the outset, the Unreasonable Institute
has now decided to go to the entrepreneurs rather than expecting them to come to them in
Colorado. The Institute is opening new programmes in Mexico and East Africa in an attempt to
replicate the earlystage ecosystem that exists in Boulder. And Mexico and East Africa are just
the beginning the plan is to expand over the coming years to offer acceleration programmes in
other parts of the world alongside their experiment in taking the ventures around the world in a
boat.
Unreasonable also took 11 ventures on a threemonth global tour that visited Japan, China, India,
South Africa amongst other places through their Unreasonable at Sea programme. The idea
was for the ventures to explore the local economies of the 13 countries, taking their technology
to market and meeting top government ofcials, foundations, venture capitalists, and serial
entrepreneurs. The mentors came too, with 20 worldclass serial entrepreneurs and innovators
joining the social venture founders on the ship.
Opening up better measurement and evaluation
As more and more incubation programmes and platforms open up, there is a push towards
transparency. This comes from a demand from ventures who might be comparing programmes
as well as from existing and potential funders and investors who want to see the track record of
programmes before offering their support. Put bluntly social venture incubation is becoming a
much more competitive eld.
As yet though, there is no agreed framework for measuring the performance or impact of
incubation programmes. Common metrics collected and published so far include:
Number of applications to programmes.
Number of ventures supported.
Followon investment raised by ventures.
Survival rate of ventures.
Number of employees of ventures.
Gender balance of applicants and supported founders.
An example would be the way that Investors Circle publish their track record (http://www.
investorscircle.net/impactmetrics) or the way that the Unreasonable Institute publish theirs, both
by cohort and for their overall portfolio. Although they are now very open about their metrics,
they admit that it wasnt a priority in the early days and took them a while to settle on the right
things to measure. What we really care about when it comes to measuring impact is the number
of lives that our entrepreneurs have meaningfully changed and how the planet is better off thanks
to their efforts. That data is a lot harder for us to obtain and measure effectively.
PART I Chapter 4
This data on the impact of the ventures themselves is both difcult to obtain and to attribute.
While schemes such as IRIS from the Global Impact Investing Network (GIIN) and Social Return
on Investment (SROI) attempt to do this, it can be a struggle for earlystage ventures to nd the
time or money to develop sophisticated measurement tools. Its also unlikely that all the ventures
backed by a particular programme will measure the same social outputs or outcomes, which leaves
incubation programmes with an eclectic and not always easy to understand mix of indicators.
A more fundamental question being asked by some researchers is do accelerators or incubation
programmes work at all? The ANDE network for example has begun work on a longitudinal study
following social ventures that do and dont accept support from social incubation programmes.
21

This is one of many academic studies into the efcacy of social venture incubation none of
which have yet had enough time or volume of ventures to track and collect meaningful data.
THE RISKS OF SOCIAL VENTURE INCUBATION
In the heat of the dotcom boom of the turn of the century, incubators were all the rage. But
as the bubble popped they soon went out of fashion, with some of them even being labelled
incinerators of startups. We need to be cautious of overpromising what incubation can offer
both to individual social ventures and to the impact investment ecosystem as a whole. In this
next section we touch on some of the pitfalls and criticisms of social venture incubation.
Its all a waste of public money
There is an argument that some forms of incubation merely act as life support, keeping
aoat ventures that are not sustainable in the long run and would benet more from failing
fast. It could also be argued that some of the ventures that do succeed would be likely to be
successful in the long term anyway (albeit at a much slower pace) through bootstrapping and
revenue growth. With this in mind, public funding for incubation programmes should always be
discerning about which incubation programmes it supports and measure their performance over
time.
Mind the gap
Weve previously acknowledged the funding gap for earlystage innovators. This means a lot
of ventures coming out of incubation programmes will still need a lot of nurturing in order to
become a viable proposition for laterstage impact investors. Supply and demand in matching
social ventures to social investment is uneven at present.
Wheres the longevity?
Incubation models are yet to be proven nancially sustainable in the long term. Programmes that
rely heavily on grants or sponsorship can be at the mercy of funding cycles in the public sector,
and there is a risk that cash will run out before they become selfsustaining. Prizes, which are
predominantly funded by sponsorship, tend to be short term and the value of winning a prize in
the long term has also been understudied to date.
How do you ensure a focus on social impact?
Some programmes do not ask for evidence of social impact before offering support and
investing, so theres no way of ensuring the ventures stay true to their social mission in the long
term. There is also an argument that equity investment can distract a venture from its social or
environmental mission, depending on the balance of social versus nancial return expected from
the investor.
PART I Chapter 4
Disconnection from nal beneciaries
The social ventures supported by incubation programmes tackle a wide range of issues, such as
nancial and social exclusion, education, health and wellbeing, but some programmes can be
seen as disconnected from the nal beneciaries of these initiatives. There is an argument that
some incubation processes (such as selection and competition) only serve to reinforce this gap.
Startup burnout
Social entrepreneurs come in all shapes and sizes, and not everyone is suited to being in a high
growth social venture. The process of social venture incubation is aimed at helping ventures with
the potential to rapidly achieve scale, and entrepreneurs with more modest ambitions might not
benet from this environment.
Mentor whiplash (and burnout)
Many programmes claim to be mentorled. However, with a wide variety of mentors available
to teams they often nd themselves getting conicting advice and are confused about which
direction to take. The Unreasonable Institute has noted this and is now:
Helping entrepreneurs and mentors to date before committing to working together.
Helping entrepreneurs build Mentor Teams rather than getting advice from lots of
individuals.
Training entrepreneurs how to better engage with mentors.
Start training mentors as well.
Another criticism is that mentors can nd themselves asked to mentor by too many programmes
too often, and start to disengage as they nd the time taken up by helping programmes is too
much of a drain.
RECOMMENDATIONS DEVELOPING AN ECOSYSTEM
Social incubation is beginning to play an important role in the emerging ecosystem of impact
investment. Even taking into account some of the risks above, we believe it is helping to reduce
the risks for laterstage investors by helping ventures improve their teams, products and
business models as well as signposting opportunities for funding and customers.
While the eld of social venture incubation is still in its infancy and a lot of best practice remains
unproven, we have uncovered a number of clear lessons for UK programme managers, investors
and policymakers involved in developing the impact investment ecosystem.
Remember that some social ventures and enterprises are different
Social ventures with highgrowth potential need very different support and incubation from
those which might have more modest ambitions for scale. Its important to design policy and
programmes for each type of organisation differently. When looking at successful programmes
around the world, it was clear that the best often focused on one or the other but didnt attempt
to do both.
PART I Chapter 4
Better understanding of business models for social incubation
As the sector develops it will become more important to understand the longterm business
models of incubation. While some types of incubation seem relatively straightforward (co
working spaces or academies for example) others are much longer term. Equitybased
accelerator or angel network business models have yet to be proven, and it will be some time
before we have the longitudinal data needed to demonstrate their viability. Better research
is needed on this to help government and other organisations supporting the incubation
ecosystem answer the question does incubation require grant funding in the long term? and
does it represent good value for the taxpayer.
Help incubators standardise their impact metrics
Measuring the impact of incubation is difcult but, as it becomes a more common approach,
all the more important. Those organisations and individuals funding programmes need to be
able to know how their funding is having an effect, and those applying for and taking part in
programmes need to know which type of programmes are most suitable or effective.
Create better ways to help founders choose the right programme
As the choice of types of incubation grows in the UK, so might the confusion of founders about
which programme is right for them. We need new ways of helping founders recognise the stage
theyre at and their needs as well as ways to signpost ventures to relevant opportunities.
Help close the postincubation gap
In the UK, there is a notable gap for social ventures with highgrowth potential between many
of the incubation programmes available and the laterstage social investment that has been
stimulated by the creation of Big Society Capital. This is typically for investment of 50,000
150,000 which still has a very high tolerance of risk and doesnt require a long track record
or security. We think this is a gap that should be addressed by government and laterstage
investors working together to develop both nancial and nonnancial support.
CONCLUSION

Social ventures have the potential to tackle some of the major social and environmental
challenges facing us both today and in the future. Social impact investment has emerged as the
most promising route to nancing and supporting ventures, once they have shown that they can
be successful both nancially and in terms of their impact.
However, as weve shown, theres a gap between earlystage social ventures and the later
stage investment that is increasingly available. Before ventures can access social investment,
there are a number of things they need to demonstrate. Incubation has grown as a eld to help
ventures to prove an idea, develop a team and accelerate their progress before accessing more
substantial nance. This is still a relatively new and emerging eld, and while in this report we
have described one framework for the type of models and methods being used, we recognise
this is constantly changing as programmes learn and develop.
This report has been an attempt to cover some of the lessons learned by programmes around
the world and share those with the growing UK social incubation sector. We recognise that this
report is just a start and theres a need to develop insights based on robust evidence of what
works, and to create opportunities for programmes to come together and share. We hope that
there will be a willingness to develop this over the coming years.
TYPES OF EARLYSTAGE SOCIAL
VENTURE
During the course of delivering an impact accelerator over the past two years, the team at
Bethnal Green Ventures have developed a set of archetypes of earlystage ventures that help
them and the ventures themselves decide what kind of support they might benet from most.
Traditionally, organisations that support early stage social ventures categorise them according to
a few easy to measure metrics:
Age of the venture.
Number of employees.
Number of customers.
Level of revenue.
Scale of impact to date.
Previous investment raised.
While these are useful, they dont really tell us much about what kind of support a venture might
need. There are some important characteristics of the status of teams that better dene the kind
of support that they require.
The ve archetypes we use are:
PART II Appendix
TEAM FORMERS
PROPOSITION SEEKERS
CUSTOMER HUNTERS
MODEL CLARIFIERS
SCALERS
PART II Appendix Types of earlystage social venture
TEAM FORMERS

Description
This is often a highlymotivated individual who has identied a problem and potential solution
but has not yet found a team to work with, or it could be a small group of people who have
knowledge of the problem but have not yet found a technical cofounder to help them build
a solution, or likewise a technical team who need help with design or strategy. They are most
relevant to coworking spaces and preincubation programmes such as hack weekends, or
they may apply to incubation programmes but be turned down.
Typical incubation journey
There isnt necessarily a typical incubation journey for Team Formers as they vary widely in
their needs and tend to be one stage too early for most incubation programmes. However,
one common path is a founder taking an idea to a hack day or weekend, meeting other
people who are interested in developing the idea with them, building a prototype and then
applying it to an accelerator programme.
Pitfalls
Building a product or service too soon without proper information about what potential
customers or users want.
Team issues a lack of trust or clarity about who is going to do what.
Confusion around basics of company formation and legal issues.
Misunderstanding the needs of investors.
Incubation needs
Opportunities to meet cofounders and to get to know them over time.
Access to space for meetings.
Introductions to the legal and administration basics.

PROPOSITION SEEKERS

Description
These are teams that have spotted an opportunity to create value and have an initial idea or
technology that they think can do that, but have not yet turned this into a full proposition.
The difference between a proposition and an idea is that a proposition details:
A dened target group.
The specic aspect of the problem being solved.
Those benets that are of greatest interest to the target group.
The core functions of the product/service that deliver those benets.
Proposition Seekers may have a good understanding of one aspect of the context, but need to
learn more to pin down their proposition. For example they may have good understanding of:
The problem they set out to solve, but not who would use/buy a solution and why.
The users/customers but not what specic issue motivates them.
The technology, but not how it will create value when applied to the issue.
The needs of the different stakeholders but not what role their venture should play in
that ecosystem.
Many technologydriven ventures start out as Proposition Seekers if they have a technological
innovation in search of a purpose and need to identify which users or customers will nd
value in it.
Proposition Seekers may have their potential customer on board already as a development
partner a local council, a hospital, a school and are looking for the right t between what
they can offer to the end user and what the partner wants to achieve.
A typical incubation journey
Proposition Seekers tend to go through cycles of iteration until they hit the right proposition,
and then develop their product ready to become a Customer Hunter. The main risk for
Proposition Seekers is too much time spent unable to see the wood for the trees or
differentiating between promising leads and dead ends. Their path to a good proposition
can be sped up by helping them undertake better user needs research and learning how to
undertake a structured design process.
Ideally during this stage Proposition Seekers get to know their users through informal
interviews and observations with a range of potential user types, best done in the context
in which people will experience the product or service. Insight from this is turned into use
cases, scenarios and more detailed propositions, which can then be tested in focus groups
or in simple online tests. Teams can use this insight to determine which user groups are most
important to target, and which are likely to be their early adopters.
If their proposition resonates, teams can move onto building rapid prototypes that allow
them to test key underlying hypotheses, either through paper mockups of sites, staging
offline activities supported by offtheshelf technology or through simple technology builds.
Alternatively, teams may build a product with very basic functionality that can be given to
users for a period of time to allow them to determine themselves what use they put it to. This
latter approach is particularly effective with emergent technologies.
As the proposition and therefore the design of the product or service evolves, the nature
of user engagement moves from being about gathering insight to validating choices and
improving the user journey through more structured user experience testing.
The expectation is not that Proposition Seekers should hit on the right proposition
immediately the space to devise and reject ideas is a necessary part of good creative
process but the aim is to structure the process so that the learning is rapid and rigorous and
failures happen early.
During this time the target group or target market may change. For example, a product
to support stroke victims may change from being aimed at the stroke sufferer themselves to
their carer. It may switch from a domestic market (home consumers) to a professional market
(rehabilitation units). The primary function or benet of the product/service may then change
accordingly, for example from being about tracking progress, to training physical movement.
What is being provided by the venture team may also change, for example from product to
service, or from system to consultancy.
Pitfalls
Getting stuck on the original idea some teams hang onto their original concept when
the response from users or customers is pointing elsewhere. This often happens with (but
is not by any means restricted to) lone or highly charismatic founders who lack challenge
from team members, or founders who have deep personal experience of the problem and
have designed a solution that ts their needs but not necessarily those of others.
Not getting their hands dirty teams especially those with a technology background
can lack condence in approaching and working with the people who will use their
product. They may rely instead on a more arms length means of gaining information,
such as market research data and online surveys. However, these approaches are
largely redundant early on as teams do not yet have the insight needed to ask the right
questions, nor a detailed enough proposition to gain any meaningful validation.
Building too much too soon teams with strong execution capability can sink too much
development time in areas that turn out not to be relevant to their end users. This higher
investment means it is harder to change tack and represents a double pitfall as end users
are less likely to give honest feedback on a product that feels too nished.
False assumptions and overcondence some teams may initially overestimate their
understanding of their target groups, and therefore underestimate the work and time
needed to get the insight required for a good proposition. A good team is a learning team
but some teams may need to experience a failure of some sort before becoming open
to learning. The question is how to accelerate this process during incubation.
Masking a weak proposition where teams have good sales skills and good knowledge of
a sector can mask underlying weaknesses in the proposition they may have got further
than they should have without the right challenge.
Incubation needs
Design support help with techniques to understand customer need, proposition testing,
rapid prototyping.
Contact with end users encouragement to get out there early and talk to real users and
customers. Relationships with organisations that can act as a safe testing ground and/or
validate problem denitions.
Structure a good structure within which to progress the idea and learn from feedback,
with clear denition points, and an expectation of early prototyping. Constructive
challenge from the core team and mentors on their approach.
Other team members pairing team members with missing skills or roles that can open
up their perspective.

CUSTOMER HUNTERS

Description
Customer Hunters are teams that have a working product or service albeit with limited
features or at an early stage and are looking for their rst paying customers. They can be
recognised in the following situations:
Teams have an obvious rst customer but havent engaged that rst customer yet, either
through a lack of networks or skills.
Teams have both businesstobusiness and consumer facing propositions for their
product and need more feedback from potential customers to decide which to prioritise.
Teams have a feasible solution that either depends on landing a big partnership to
get started, for example breaking into a heavily regulated or dominated market, or a
respected partner to create proof of concept or validate the approach (e.g. medical
services).
During the incubation period, Customer Hunters ideally identify and engage their rst
customers, and further develop their product. The main risk is the length of time to making
the rst sale, which can be reduced by good networks and sales skills, and learning from
structured marketing experiments.
The journey for Customer Hunters is about testing and rening their sales approach. In
contrast to Proposition Seekers, in this iterative process it is not the core proposition that
changes but the approach to selling it. For teams with businesstobusiness propositions,
this happens through meetings with potential customers and for those with consumerfacing
propositions by running controlled experiments on marketing and pricing. Both can be
accelerated with the right tools, skills and contacts.
Customer Hunters with a businesstobusiness proposition need to learn how their market
operates: is there a particular business cycle they have to t into, who is the best contact
inside the purchasing organisation, which budget is it coming from, what else will they need
to have in place to be considered? By talking to people who know that market well, and to
other startups in the same space, they learn how best to shape their approach. If their rst
approaches are successful, they can return to further developing the product/service. If not,
they continue to iterate the sales approach, learning from feedback what will make it easier
for purchasers to say yes. For some ventures external validation helps the sales process. For
these ventures landing a validation partner can be as important as their rst paying customer.
Ventures with consumerfacing propositions need to learn the most effective ways of
reaching individual customers, what makes them buy and the right price point. In contrast to
earlier proposition tests, where online sign ups can validate interest, the key at this stage is a
commitment of payment. Ventures may choose to offer presales as a safe way of testing the
market, or they may offer different payment options to prospective groups to compare takeup.
For ventures with multisided platforms this process is more complex. A multisided platform
has to create value for different groups of customers with different motivations and buying
patterns. Teams have to learn about all of these at the same time. However, this understanding
and a proposition with many stakeholders signed up also makes it a more defensible
business.
Some Customer Hunters have propositions that are potentially highly disruptive in their
market, are entering markets heavily dominated by a few major players or even have to
create new markets. Alongside the approaches above, these teams need to invest in creating
alliances, campaigning or movement building, educating the market, brokering major
partnerships and collaborating on the development of new standards.
Pitfalls
Not getting out of the ofce fast enough even when the rst customer is obvious and easily
accessible, teams can delay meeting with them and getting to know their needs, through a
desire to polish the product.
Sales cycles long sales cycles can mean the pace of customer development is slower
than the incubation period. Many social and public sector markets fall into this category.
This then creates a tension between sales and product development: does the team have
the capacity to do both in parallel?
Conversely when the solution has to be tailored to the context there may be little
advantage to developing it further in isolation of the rst sale, rendering some team
members redundant.
Critical mass marketplaces face a specic crunch point at this stage when sales on one
side are dependent on seeing demand/provision on the other side: does the team have
capacity to continue to develop both sides at once? Some startups get around this issue
by seeding initial use themselves to stimulate exchanges to ow.
Credibility potential customers may want the product but be wary of the startups
ability to deliver it especially if used to buying from established suppliers. Getting to a
yes in public markets such as health and education can be a slow process as having the
product or service validated, or having evidence of its effectiveness is a common means
of reducing risk. Here, the sales cycle is mainly about building credibility.
Finally, teams may receive feedback from the market that means they have to rethink
their proposition, effectively becoming a Proposition Seeker. The danger comes if this is
not recognised early enough, with wasted effort going into building relationships with a
weak or undened proposition.

Incubation needs
Making contacts introductions to people who know the market, and help to get
those crucial customer meetings to happen quickly. The brand value of the incubation
programme can be an asset here, alongside the strength of their networks. Contact with
other startups who have broken into the same market is valuable. Existing relationships
with willing academic or validation partners can put ventures at a signicant advantage.
Sales skills help with techniques that will allow team members to progress a sales
conversation and close deals. Some incubators have a core team with these skills that
ventures can access.
Preparing for the meetings ventures need practice to get their pitch right, and help to
understand the expected form or meeting and negotiations.
Customer education attending customer meetings alongside the venture teams to
provide credibility and reassurance to wary customers.
Payment planning discussions about pricing and differential pricing.
Marketing help with strategies to reach individual consumers and access to tools that
can help with marketing activity early on: growth hacking techniques, product testing,
collecting user feedback. Connections to other drive sales is mutually benecial.

MODEL CLARIFIERS

Description
Model Clariers are ventures that have done something successful in a limited context but
have yet to work out their model for growth. They need the right technology platform,
partnership model or operational model to get to the next stage. They remain risky prospects
for institutional investors as their route to scale is still hypothetical.
Have a successful service in operation with one customer, location or a small user base.
They need to work out the best way of adapting their solution for multiple contexts, and
the best model for doing it for example licensing or franchising.
Be a primarily facetoface service or have launched with ofine components supported
by offthepeg technology solutions. Although their offline service may be running in
several locations they need to develop the right technology platform and operational
model to support both on and offline activities at scale.
Have one partner acting as their main distribution partner or gatekeeper to their end user
base. They need to work out whether to grow with that partner or build new relationships.
Be successfully selling direct to end consumers but have partnerships in mind that would
expand their reach.
Have the option to become a platform business by enabling other players to create
content, applications or services using their technology or infrastructure.
Model Clariers are at a stage where they need to nd and demonstrate a viable route
to scale. They need to build and test components that will help them get there, be that
technology platforms, new roles, marketing approaches, partnerships or operational
processes and they may need investment to help demonstrate that approach.
Their rst step is often to analyse current activity to nd out what is actually happening,
rather than what is just due to force of willpower from the team. This involves collecting
objective data about use of their service.
With this information teams can begin to model and understand what will happen at scale: what
is actually cost effective, what is the underlying pattern and how does that change at different
sizes, locations, settings? Determining the right model for growth then comes into play.
Teams may consider licensing or franchising, white labelling, diversifying into other parts of
the value chain, signicant partnerships and collaborations or new applications of the same
product/process. Teams may also consider different international markets, although at this
early stage it can create false hope for a more receptive promised land.
The business proposition may also change at this stage as the real value is uncovered: the
venture may become a platform business, move from offering a product to a product
consultancy hybrid, or realise additional propositions such as nding that their service
generates valuable data.
Social businesses must design ways to evaluate impact into their operational model. Teams
need to look at what meaningful data can be collected without overburdening the operations.
For some Model Clariers this journey is also one of establishing a new identity suddenly
seeing themselves differently and their role in the ecosystem in a new way as the right model
emerges. A name or brand change can often mark this transition.
Pitfalls
Maintaining a live service while developing a new approach teams must overcome the
tensions of combining strategy and research with an operational mindset. Retreating
to familiar ground is a danger ventures that already have a working ofine service for
example, may nd themselves further developing that in preference to new technology
components which they are less familiar with.
Competition at the early stage, Model Clariers can become distracted by similar
services which look like they might be doing better and question the route they have
chosen.
Ambition founders can become overwhelmed by the reality of scaling up or the
challenges that lie ahead.
Social mission versus revenue this stage is the rst at which the tension between
what creates greatest social impact and what creates greatest revenue comes into play.
Funders start to ask questions about impact metrics and how the business will remain
loyal to its social mission. Teams must walk a difcult line in designing the next stage of
growth.
Incubation needs
Strategic business model advice the right tightknit group of advisors can signicantly
speed things up with their own experience of taking businesses to scale. This could be
experienced executives who can give thats not going to work advice quickly.
Education around different approaches to IP and licensing or franchising options
especially combined with examples of which models other startups chose to employ and
why.
People who have experience of sales or business development partnerships become
useful for ventures in this situation.
Financing advice by taking a look at the state of play, teams can make smarter decisions
about what type of investors to approach and when.
Working capital in the form of a followon fund the initial incubation period derisks
startup ventures for private investment but for institutional investors demonstrating the
potential for scale is most important.
SCALERS

Description
Scalers are ventures with a working service whose basic business model is sound and unlikely
to change drastically as they grow. Their challenge is how to operate at scale rather than
rethink the model. Scalers are facing the practical realities of implementing growth strategies.
Scalers usually:
Have a working product or service with good processes and a strong initial user base but
need to grow that user base fast to demonstrate the right rate of growth for investors.
Have a strong idea but need to scale immediately for it to work and realise its full value.
This is often the case with marketplaces or services that are dependent on having many
different types of user.
Be in a position to make a sudden jump to scale, e.g. number of units shipped, number of
sites managed, that requires signicant changes in infrastructure and management.
A clue that a venture is a Scaler is exponential rather than linear weekly or monthly
growth.
Scalers need to put in place the operations needed to deliver at scale and nd the team and
nance to enable it to happen at the right pace.
In practical terms this means building the technology and human capacity to handle larger
volumes of relationships, transactions and products. The venture may grow from three to 15
people at this stage, with the user base growing tenfold. Typical things Scalers need to put in
place are customer support functions, server capacity, manuals for key processes, accounting,
marketing automation, training, regulatory compliance, management and impact reporting.
Teams are looking for technical and management advice to prepare the capacity they need.
Scalers are often hiring at this stage, and putting together a Board that can help them to
create the organisation that can handle this growth. They may be raising investment to enable
scaling to happen more rapidly.
Ventures that depend on a critical mass of users marketplaces, multisided platforms
are typical Scalers, as a large user base is necessary for the business to have real value. The
investment case is different for these ventures because they must demonstrate fast and
exponential growth to gain rst mover advantage, as in general the pattern is of one player
owning the marketplace.
Pitfalls
Scalers are arguably in a more precarious position they have more invested in relationships
and more customers to potentially let down. They may face the following challenges:
Sudden growth hikes teams can be caught out by unexpected surges in takeup or use
if their service suddenly takes off virally, or a lucky piece of publicity brings them a huge
number of new users. If unprepared this can cause human and technology systems to fail
dramatically.
Culture clash as they grow, teams may experience a clash between the entrepreneurial,
fastlearning culture of startups where there is a high tolerance for uncertainty, and
the desire for certainty experienced by team members employed to deliver repeated
processes and improve quality.
Strained team relationships unused to sharing the stresses and strains, founders may
nd this more difcult as they take on employees.
Lack of advisory support particularly for teams that have not yet set up appropriate
governance arrangements such as a Board.

Incubation needs
Help with investor relationships incubation programmes can act as valuable mediators
between startups and laterstage investors. As it is in the interests of investors to
maintain good relationships with incubators, they are in a good position to defend the
interests of the startup and make it a positive transition. They can also help startups by
offering comparisons with the kinds of deals other startups theyve worked with have
received.
Legal support whilst all earlystage ventures require legal support it is signicant for
Scalers as they tackle new areas such as investment agreements, tax planning and human
resources.
Flexible ofce space an uncertain growth rate can make work space needs difcult to
manage efciently.
Optimisation access to expertise in applying analytical techniques to increase impact.
Recruitment advice as teams need to grow to meet demand.
ENDNOTES
ENDNOTES
1. HM Government (2011) Growing the Social Investment Market: A vision and strategy. London: Cabinet Ofce. Available at: https://www.
gov.uk/government/uploads/system/uploads/attachment_data/le/61185/404970_SocialInvestmentMarket_acc.pdf
2. HM Government (2013) Growing the Social Investment Market - progress update. London: Cabinet Ofce. Available at: https://www.gov.
uk/government/uploads/system/uploads/attachment_data/le/205295/Social_Investment_Strategy_Update_2013.pdf
3. For example, see: Nesta Impact Investments. Available at: http://www.nesta.org.uk/project/nesta-impact-investments
4. For example, see: Allen & Overy (2013) Corporate Responsibility. Available at: http://www.allenovery.com/corporate-responsibility/
Pages/default.aspx
5. Big Society Capital is a wholesale bank that invests in social investment nance intermediaries organisations that provide nance to
social ventures. See: http://www.bigsocietycapital.com/about-us
6. European Investment Fund (2013) The Social Impact Accelerator. Available at: http://www.eif.org/what_we_do/equity/sia/index.htm
7. Global Impact Investing Network (2013) Perspectives on Progress: The Impact Investor Survey. Luxembourg: Global Impact Investing
Network. Available at: http://www.thegiin.org/cgi-bin/iowa/resources/research/489.html
8. Ibid.
9. Bannick, M. and Goldman, P. (2012) Priming the Pump: The Case for a Sector Based Approach to Impact Investing. Redwood City: CA.
Available at: http://www.omidyar.com/pdf/Priming_the_Pump_Sept_2012.pdf
10. Big Lottery Fund (2013) Social Incubator Fund. London: Big Lottery Fund. Available at: http://www.biglotteryfund.org.uk/
socialincubatorfund
11. Milway, K.S. and Goulay, C.D. (2013) The Rise of Social Entrepreneurship in B-Schools in Three Charts. Harvard Business Review. 28
February 2013. Available at: http://blogs.hbr.org/2013/02/the-rise-of-social-entrepreneu/
12. Ash Sakula, L. (2013) What we learnt from Call for Ideas. London: Bethnal Green Ventures. Available at: http://bethnalgreenventures.
com/what-we-learnt-from-call-for-ideas/
13. UnLtd Research (2013) Wayra UnLtd: Analysis of applications - Key Findings. Available at: http://uk.wayra.org/sites/default/les/
noticias/attachements/wayra_unltd_applications_overview_04_10_13.pdf
14. Hackett, S. M. and Dilts, D.M. (2004) A Systematic Review of Business Incubation Research. Journal of Technology Transfer. 29, pp. 55-
82. Available at: http://link.springer.com/article/10.1023%2FB%3AJOTT.0000011181.11952.0f
15. Dee, N.J., Livesey, F., Gill, D. and Minshall, T. (2011) Incubation for Growth. London: NESTA. Available at: http://www.nesta.org.uk/sites/
default/les/incubation_for_growth.pdf
16. Miller, P. and Bound, K. (2011) The Startup Factories. London: NESTA. Available at: http://www.nesta.org.uk/sites/default/les/the_
startup_factories_0.pdf
17. Seed-DB (2014) Accelerator Data. Sourced February 2014 from: http://www.seed-db.com/
18. http://www.davidgcohen.com/2011/08/28/the-mentor-manifesto/
19. Kraus, E. (2012) How to make a Demo Day successful. Available at: http://impactangelgroup.com/2012/07/25/how-to-make-a-demo-
day-successful-lessons-from-the-unreasonable-institute/
20. Massolution (2013) 2013CF: The Crowdfunding Industry Report. Available at: http://www.crowdsourcing.org/editorial/2013cf-
the-crowdfunding-industry-report/25107?utm_source=website&utm_medium=text&utm_content=LP+bottom&utm_
campaign=2013CF+Launch
21. Baird, R., Bowles, L. and Lall, S. (2013) Bridging the Pioneer Gap: The Role of Accelerators in Launching High-Impact Enterprises.
Queenstown MD: The Aspen Institute. Available at: http://www.aspeninstitute.org/sites/default/les/content/docs/ande/Bridging%20
the%20Pioneer%20Gap%20The%20Role%20of%20Accelerators%20in%20Launching%20High%20Impact%20Enterprises%20.pdf
Nesta
1 Plough Place
London EC4A 1DE
research@nesta.org.uk
www.twitter.com/nesta_uk
www.facebook.com/nesta.uk
www.nesta.org.uk
April 2014
Nesta is a registered charity in England and Wales with company number 7706036 and charity number 1144091.
Registered as a charity in Scotland number SCO42833. Registered ofce: 1 Plough Place, London, EC4A 1DE.
9 781848 751514
ISBN 978-1-84875-151-4

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