Today our guest blogger is Paul Moran Senior Lecturer for Strategy and Enterprise at GSM London.
‘Incubators and Accelerators’? Sounds like something from the realms of Medicine or Nuclear Power?? Maybe originally, but these two terms have been adopted for use in the field of entrepreneurship and business support.
Incubator (as in Health / Medicine) refers to a facility which aims to keep alive fledgling entities (in this case start-up enterprises) until they are ready to survive by themselves. Accelerator aims to speed up their growth so that they become bigger (and stronger) faster.
Incubators for enterprises can now be found all over the world and there are many in UK including a growing number of University-based incubators. What are their main features?
Usually an incubator involves having a ‘serviced space’ where entrepreneurs can locate their businesses and gain access to various support services which might include:
- Mentoring support from experienced business people
- Office services (including access to printing / copying)
- Specialist advice and information
- Skills-based training and professional development
- Marketing and networking opportunities
These facilities may be offered on a drop-in or hot-desking basis, as a ‘virtual’ base for the business (essentially a business address), or on a tenancy or rental basis under which the entrepreneur leases space (with or without additional services) for a period of time with more-or-less flexible exit arrangements. The incubator is mainly intended for short-term use and as a ‘step-up’ into more permanent / commercial premises. However, sometimes incubators have what are called ‘strategic clients’ who are able to remain in the incubator relatively permanently in return for providing services to other clients (eg mentoring).
According to an evaluation study conducted by the European Union, Incubators in the EU have an average capital investment cost of €3.7 million, require average operating costs of around €500,000, get roughly 37% of their funding from public sources and have on average 27 tenants in 3,000 square meters of space. Obviously incubators can be larger or smaller depending on space available and may be more or less commercial in terms of how they operate (ie public subsidy may be smaller or not needed). The more commercial incubators may, however, charge higher rents or fees in order to be viable.
From the same study, average occupancy rates are around 85% and average length of tenancy is around 3 years (this is close to the expected time period for a business to achieve survival following start-up). Interestingly, the average survival rate of incubator businesses is around 85% which is higher than the expected survival rate among non-incubated businesses, indicating that Incubators play a vital role in enabling new businesses to navigate the difficult terrain of start-up and early stage survival. This is reinforced further when we see that average jobs created per incubator business is 6.2 showing that they contribute substantially to local employment creation.
A number of Universities and HE Institutes now have incubators or accelerators which to a greater or lesser extent are aimed both at spinning-off student enterprises and quickly accelerating them to a growth platform (eg investor-ready or even IPO), as well as providing services to non-University entrepreneurs within their immediate catchment area who need good quality premises and will benefit from linkages with the University (eg access to intellectual property, technical expertise etc.). Some of the best examples are at Universities in the South East of England such as South Bank, Surrey, Southampton, Kent, Essex, Sussex. Indeed the Set Squared network of HE incubators (including Southampton and Surrey) has recently been rated as Europe’s No. 1 Incubator.
It is GSM’s intention to ‘join the club’ of Higher Education incubator and accelerator providers when it launches its ‘Enterprise Hub’ this summer at its Greenford campus. This will include incubation facilities for start-up enterprises developed by students, alumni, and perhaps external entrepreneurs from the local community as well. Serviced deskspace will be available together with mentoring and advisory services, networking opportunities, short courses and workshops etc. Currently a survey is being conducted among GSM students to find out which services they would particularly like to see provided. GSM’s Enterprise Week will also include a one-day workshop on business start-up on March 17th in the space designated at Greenford for the incubator space. It is hoped that this workshop will prompt more students to consider the option of starting their own business and to make use of the proposed GSM facilities and services in developing their ideas.
Incubators and Accelerators are now an important feature of the small business ‘landscape’ and are increasingly finding their way into the education sector since it is likely that significant numbers of future entrepreneurs will emerge from this sector (this is evident at GSM where there are a number of students already running their own businesses and many others with an interest in doing so after graduation). To be effective, incubators and accelerators need to provide a well-managed and supportive base where new and growing enterprises can develop themselves to commercial viability. They also have a strong role to play in in bringing about more entrepreneurial educational institutions and curricula.