Analyzing the impact of accelerators, incubators and startup studios
As we move into 2020, the team at VIDA have had rare a chance to catch a breath - and to catch up on our reading.
And one of the things I’ve had my head in this week seems worth a share as it gives a pretty good summary of the UK startup economy right now, with particular emphasis on the organisations that exist to help business to launch, grow and scale – the accelerators, incubators and, increasingly, startup studios.
The impact of incubators and accelerators in the UK, 2019 has been produced by NESTA for the UK Department for Business, Energy and Industrial Strategy. The report estimates that between £20-30m of public funding is being spent with accelerators and incubators annually, and so it aims to inform policymakers’ decisions to ensure that future investment of public funds supports the businesses in the sector in the most effective way.
But it’s a valuable resource for anyone involved in the startup economy as includes a comprehensive literature review of 18 existing research studies into the efficacy of incubators and accelerators, plus original primary research comparing the experience of those on both sides of the value exchange; the startups and the accelerator/incubators. And it’s this primary research that contains the key insights.
For instance, amongst accelerators and incubators, factors such as business skills development, access / connections for funding, partners etc. are perceived to be the most important benefits they offer to startups. There are predictable differences between the views of both types of organization, but both accelerators and incubators rank direct funding from the programme amongst the least important success factors…
Whereas, startups rank this as the most useful form of support, with access / connections to investors as least useful overall.
So, both place a high value on access to funding, but with a different view on where it comes from.
But just how important is funding, compared to the other factors? To answer this, the report’s authors ran regression analysis on the performance of a sample of startups comparing those just above, and just below the threshold for obtaining a position on a ‘notable corporate accelerator programme’. The assumption is that firms ranking closely to either side of the threshold face similar opportunities. The authors conclude that:
“The results from this analysis provide compelling evidence that the programme in question had a positive impact on survival, employee growth and funds raised. Moreover, since the corporate accelerator provided no funding to participants, the results point specifically to the provision of non-monetary services as a particular pathway to accelerators’ impact, which is consistent with the results in prior academic work (Gonzalez-Uribe and Leatherbee, 2017; Gonzalez-Uribe and Reyes, 2019)”
In short, the empirical evidence in this analysis shows that non-monetary factors in particular can have a significant positive impact on startups success.
Of course, the report cautions against extrapolating this result and applying it to all programmes, as situational and environmental factors may influence outcomes differently.
However in a UK market where there are literally hundreds of accelerators and incubators for startups to work with, multiple sources of funding and routes to market, we believe that it underlines the need for entrepreneurs to undertake due diligence when choosing who to work with to decide which can add most value.
So – we’d recommend that at the very least you ask the following key questions of a potential growth partner, whether Accelerator, Incubator or Start up Studio…
· What’s your focus, your specialism, your area expertise, and how does that fit with my needs?
· What experience is your focus built on?
· What have you achieved that proves you can help me?
VIDA is a specialist startup studio, venture builder and growth accelerator with a focus on next-generation content, media, publishing, and Direct to Consumer brands.