The successful university startup incubator

What makes for a successful university startup incubator and how should success be measured?

Following university visits, interviews with incubator leaders and startups, first-hand experience, as well as a basic literature review, this non-scientific research post seeks fresh perspectives.

For reference, my first-hand experience includes starting and growing many businesses and creating a company within a startup incubator. In recent years, through my work as an Entrepreneur in Residence (LSBU & LSE), I’ve also advised hundreds of startups.

Startup incubator value

The majority of businesses fail in the early months and years. Startup life is mentally tough. Entrepreneurs new to the world of relentless uncertainty often talk about feelings of being lost and lonely. Being connected with others helps to generate purpose and positive wellbeing.

The startup incubator is an attractive nest for the lost and lonely. By connecting people, business incubators reduce stress, inject energy, and offer opportunities for like-minds to create and share in the same space.

But the creation of meaningful opportunity is rarely accidental. Unless a business incubator is purely online, buildings must be found and resourced. More significantly, leaders, managers and mentors must coordinate and fulfil their purpose and value through meaningful training and advisory services.

According to research papers, a university business incubator has the potential to increase a startup’s survival chances significantly. However, no two startup incubators are the same and many businesses continue to fail.

So, what improvement ideas might a startup incubator adopt? And how can university incubators position and organise themselves to give their entrepreneurial clients the very best chance of ‘flying the nest’.

Energy transfer within a startup incubator

All startup incubators have their own ‘energy’ eco-system. This section seeks to use energy as a metaphor to define and illustrate how effective incubators might operate.

New startups are like pulses of energy. Imagine them to be single disconnected atoms seeking direction and cohesion.

A startup incubator appeals because it offers safety in numbers, community and purpose. It is also a well of potential entrepreneurial possibility. Like gravity, a startup incubator attracts the lost and lonely atoms. And as atoms are drawn, so the sum ‘mass’ and thus collective energy becomes greater than the individual parts.

For this basic but important reaction to occur, a sponsor core ‘star’ (e.g. a university) must have had the foresight to create an attractive business incubator facility. Without this star, the atoms go their own way under their own steam.

As the star attracts startup atoms, so people working within an incubator (leaders and managers) fulfil their role and transfer ‘skills and information’ (SI) energy. This critical ‘oomph’ is created and provided in the form of training, guidance, signposting to key networks, and access to finance etc.

Crucially, the absolute value of ‘SI’ energy can only be measured by recipients – not the providers. For example, transferred energy has maximum value when recipients have the mental scaffolding in place to understand how learning can be applied. And when applying that learning, startups need to have the energy and confidence to take all appropriate actions.

By contrast, startup incubator programme content that doesn’t resonate with learners, training programmes that are delivered without empathy and contextual appreciation, can have little or no value.

The transfer of energy from the core sponsor, through to the leaders and managers, then to the startups, becomes the survival fuel that ultimately allows entrepreneurs to leave the startup incubator space.

Energy bottlenecks

A startup incubator with the ability to generate and transfer energy efficiently gives businesses the best chance of survival and growth. However, the efficient transfer of energy within any incubator is affected by key behavioural issues:

• Many startups use a business incubator as a safe harbour. Risk averse entrepreneurs (or people who just enjoy the incubator environment) may well take advantage of available resources, but don’t necessarily trade – which is a waste of energy. These people often struggle to develop their business past a plan, presentation or pretty website.
• Over time, startup incubators create an internal culture that reflects the depth and quality of SI energy being provided to clients by leaders, managers and mentors. This invisible ‘cultural brand’ is a highly influential energy source. Strong word of mouth approval attracts and excites people and builds energy. Weak word of mouth generates apathy and saps participation, curiosity and interest.
• Startups are often confident in their own ability but less forthcoming when it comes to identifying business weaknesses and dealing with problems. An incubator with a strong cultural brand makes it much easier for startups to value and seek support. This behaviour saves & generates significant energy.
• Since the pandemic especially, it is easy for leaders and managers within a startup incubator to promote their availability, but not be there in person. Unless personal, trust-based relationships are continuously nurtured and driven by leaders and managers, real startup problems and issues hide or never surface.
• Highly effective training programmes (that lead to the greatest amounts of energy transfer) provide meaningful information and skills in the moment of need. Designing one-size fits all training programmes may be easiest, but personal, flexible approaches are likely to generate the best results. High quality 1:1 mentoring is typically very effective.
• Startups progress from incubators when they establish profitable trading patterns that sustain. Early-stage startups know very few people and often don’t have the sales, confidence and/or communication skills to build sustainable relationships that lead to orders. Operating as trust ladders, startup incubator leaders can create invaluable feedback, testing and trading opportunities by inviting energy-giving potential clients and buyers into the space. Skills and market intelligence develop and stronger networks are also forged.
• University startup incubators can remain a bit of a ‘secret’ because their presence and purpose is not communicated clearly, widely and regularly. Threading enterprise, enterprising activities and access to an incubator into most/all walks of academic life still remains a challenge in many institutions.
• A university (the sponsor star) invests significant energy when launching a new incubator. However, resource take-up (especially in an online world) can be disappointing. Moreover, sustained low use can lead to facility closure (wasted energy). Whilst any incubator investment should always be demand led, management teams must recognise that startups only invest their energy (e.g. travel time and cost) if the value of the output is perceived to be greater than the input. People who don’t use facilities send a clear message.

Fusion – Creating a top startup incubator

Incubator popularity has increased significantly in recent years. A 2022 study by the Centre for Entrepreneurs showed that UK-based startup incubator and business accelerator numbers have doubled since 2017 to 750.

At its best, a startup incubator provides a generative hub of networked people and valued support. At its best, a startup incubator is able to continually transfer maximum amounts of energy through its system to fragile early stage businesses.

With so many startup incubators being created, what principles lead to the greatest fusion of stakeholder energy and thus ultimately gives startups the best chance of survival and growth?

Recommendations for action

Leadership teams should look to…

1. Create and sustain incubators based on demand and clear need. Trophy incubators, especially those that are then poorly resourced and supported, risk becoming white energy-draining elephants.
2. Assess how energy flows through their incubator (from star to startup). Identify where energy bottlenecks prevent or dilute the transfer of high-quality information, skills and/or financial support to startup businesses.
3. Consider two levels of access to any incubator. People who are less committed to creating a trading business could receive proportional support, so energy is not drained unnecessarily. People who are committed to startup and trading should be eligible for maximum support.
4. Instil a team mindset that endorses and celebrates personal, pro-active support to startups so real and immediate problems surface and are prioritised. Sensitive support and timely, practical help that builds trusting relationships (which people value and promote) should always be encouraged.
5. Provide a train-the-trainer programme so all incubator colleagues are equipped with the ability to provide valued advice to startups in a manner that builds and sustains long-term relationships.
6. Create monitoring systems and feedback loops so all startup training and support interventions are driven by up-to-date startup needs. Accept change is constant and adapt accordingly.
7. Build an expanding network of contacts with outside commercial and public organisations by sector and local geography so guest presenters (potential buyers) are regularly speaking to and with startup incubator clients.
8. Where possible and if necessary, engage and involve entrepreneurs in the Board management of an incubator. Startup life is an emotional experience and experienced entrepreneurs can shed valuable light on behaviour and offer insightful advice.
9. Make clear (through all promotion) how people can access the incubator. Keep communication very simple and easy to understand and navigate.
10. Feedback all incubator progress and successes to the star sponsor and challenge the notion that the ‘business creation’ rate is the most important ‘success’ determinant. Make clear the fact the volume of sustainable businesses leaving any startup incubator has far more meaning and value than the number of businesses created at the outset.

Startup incubator summary thoughts

As part of the research for this project, Marlon Parker who founded RLabs in Cape Town, South Africa, completed a short interview with me.

Established in 2009, RLabs has become an incubator for startup businesses, but it is so much more. According to their website, the organisation has expanded to 23 countries across 5 continents impacting more than 20 million people.

When asked about RLabs’ key underpinning success factor, Marlon immediately stated the absolute importance of focusing on need and working with individuals on a ground-up basis. In other words, understand individuals and put startups first. Then work from there.

When a startup incubator makes its purpose and intentions transparent, people will be drawn. And when a startup incubator continuously fulfils on its purpose with authentic and informed actions that make a clear difference, recipients of support will champion the cause and generate exponential levels of energy.

Acknowledgements

This short article would not have been possible but for the support of many people who kindly offered extensive insights, thoughts and connections to their network.

Thank you…

Jerry Allen for sharing your time and allowing me to interview startups based within the UCL Incubator.

Elizabeth Cameron and Philip Clegg for allowing me to interview startups based within the Oxford Brookes University Incubator.

Marlin Hoffman for introducing me to Marlon Parker and the setup at RLabs.

Rob McWilliam for sharing your insight and wisdom on the subject of online incubators.

Cilla Richards for arranging my visit to CodeBase in Edinburgh.

And to all the team at LSBU and LSE for allowing me to talk and work with startups at all stages of their entrepreneurial journey.