Its horses for courses is the message in Nesta’s recent report about Incubators and Accelerators and their success.
Nesta’s just published report on Incubators and Accelerators was primarily about their economic value and therefore the merits of government support. The answer is very positive as regards the startups themselves, but also in their effects on the local eco-systems of which they are part.
They have various objectives, says the report, including the strategic support of their parent, in helping local authorities in their developments, in supporting innovation within industries, and in generating initial returns to owners and investors.
The research reports that they perceive that their impact was vital or significant in over 60% of cases to the enterprise’s chances of success. Accelerator participation was strongly associated with startup survival, with employee growth and with funds raised.
A striking finding was that the launch of an Accelerator increases the amount of investment going to that region (especially with hi-tech ventures), though Local Authority Partnerships are more interested in [incubators] of public bodies (such as universities) and feel without influence on private incubators and accelerators.
After all the sophisticated analysis in the report, the ultimate conclusion is about adaptation to different situations: if your Accelerator provides support appropriate to the evolving needs of individual startups (and there are lots of different support regimes), you have the greatest chance of having a positive impact on their outcomes.
To take the findings in order of ‘perceived usefulness to startups’:
Many if not most Accelerators provide joiners with some funding [from £5k to $50k]. Where the members of a startup dedicate themselves full time for their throw of the dice, clearly financial support is vital. As is funding where the concept requires R&D for the further development of a marketable product.
‘Office or Lab space’ and ‘Access or connections to peers’
Almost all Accelerators and all Incubators offer space – Accelerators to around a dozen teams (Incubators for more); but the importance of access to peers is often undervalued. Fellow startups are an important source of support, enabled best by hugga mugga spaces, café and recreational spaces, eating/drinking together, discussion meetings – places where new encounters provide opportunities for conversations. Access to peers outside the Incubator or Accelerator is as important but is of course mediated by the mentors.
‘Coaching and personal development’ and ‘Testing and refining the business model’
Mentoring is one of the most distinctive elements of Accelerator regimes, but also one of the least specific, and perhaps one with the least predictable outcomes.
The report identifies the testing and refining of the business model as one of the more influential factors in terms of successful outcomes.
Two notable attempts to make mentoring more rigorous are those of Steve Blank of I-Corps, who identifies five different aspects of development where mentors with specific backgrounds and experience are needed, often in succession to one another, namely: conceptualisation, strategy, product development, marketing and funding.
Imperial’s new initiative is based on MIT’s Venture Mentoring Service. It has entailed a wide-ranging knowledge of experienced business people from whom to attract good candidates. It is based on pairs of mentors attached to each startup (making for more balanced and more moderated contributions) and regular reporting to a Head of Mentoring (enabling regular reviews of the contribution to the startup). ‘Entrepreneurs need training in mentoring’ added Tim Barnes in the discussion at the Report’s presentation.
‘Business skills development’
Some startups will come with no previous experience of business, and those more mature team members (who are often regarded as making more valuable contributions to innovation) may already have well honed business skills.
‘Access and connections to potential partners and customers’
Given that a high proportion of startup failures are due to there being ‘no real need for the product’ (CBInsights), this might be seen as one of the most essential of contributions to the outcome of the startup (and one of the most valuable contributions of mentors), though there are of course innovations that are so novel that customers/markets for them do not yet exist.
‘Access and connections to potential investors/ funders’
This is of course the very essence of the Accelerator; and funding the future of their startups the test of their success.
‘Team formation’ though more significant in Incubators than Accelerators (where teams often arrive ready-made) may be a field that deserves more attention in Accelerators (EntrepreneurFirst’s successes are significant).
The biggest barrier to running Accelerators in particular is the cost of financing them. Shortage of quality ventures and of suitable premises are also mentioned.
John Whatmore, October 2019