How incubator programmes can help new businesses achieve rapid growth
09 April 2018
The great thing about starting a business is that by going it alone, you can make decisions about your company and forge your own path.
But that doesn’t mean you should rule out help entirely, and it’s worth considering essential resources and support available, such as incubators and accelerators.
It’s estimated that there are more than 200 incubators and 160 accelerators in the UK. Combined, they help more than 7,000 new businesses across the country every year, according to research by Nesta.
These programmes provide support and mentorship to startup and scaleup businesses, significantly improving their survival rate through training, and helping to avoid any potentially costly mistakes.
Business accelerators offer short-term programmes to help early-stage businesses achieve rapid growth.
Programmes typically last from three months to a year and focus on developing a business idea into marketable product or prototype, while providing advice and guidance from professionals. This approach favours entrepreneurs who want to reduce time to market.
Meanwhile, incubators offer an alternative experience for startups.
By renting physical space to new entrepreneurs, incubators are able to foster a community of new business leaders, while allowing startups to collaborate and share their knowledge.
As well as training and mentorship, incubators may have specialist equipment on hand, or accountants who can provide financial services.
The incubator can support small businesses which may not scale quite as quickly. Paying rent is likely to be preferable for some startups, rather than selling equity in their business, or paying for more expensive commercial premises.
The terms of renting in the incubator are usually flexible and startups tend to leave after they’ve reached a certain size.
Andy Davis, managing director of business finance provider White Oak UK, says:
“Starting out is tough, and many enter into new entrepreneurship with limited insight.”
He points out that the guidance and support offered to businesses through both incubator and accelerator programmes can therefore be an invaluable tool for emerging businesses, giving them a much greater chance of long-term success.
One example of a company that has benefited from such programmes is the international money transfer company Transferwise, which became a so-called unicorn last year after it was valued at more than $1bn.
The London-based fintech firm would not have reached this stage without help from Seedcamp, which invests in tech companies across Europe. Not only does Seedcamp provide new firms with capital, it also connects them with a global network of mentors and advisers, as well as training and office space.
While many business incubators and accelerators focus on specific market sectors (a common focus is on digital and fintech startups), this is not a universal rule.
Incubators are relatively well spread across the UK and are often funded by public institutions and universities.
However, accelerators – which tend to be funded by corporations – are usually London-focused, driven by the capital’s rapidly growing digital sector. Yet this is changing, as more accelerators appear in cities like Bristol, Manchester and Birmingham.
Many incubators and accelerators also help connect firms to a network of investors. This avenue can be preferable to venture capital (VC) funding, as VC investors often want significant equity in a business in return for their financial backing.
Andy Davis adds:
“Finance availability remains a challenge for many startups, and so it’s encouraging to see more investment at a grass roots level.
“For new businesses with a sound plan, experience in running a business, and equity to invest, the options are plentiful, and these are often areas that can be positively developed through the incubation and acceleration process.”