I recently attended the fifth annual conference of the UK Incubator and Accelerator Network in Birmingham.
Established by the influential Centre for Entrepreneurs think tank, this collective connects and represents those ventures that offer physical space to new firms (incubators), organisations that deliver start-up support programmes (accelerators) and co-working spaces that provide flexible, shared offices.
While it was a real honour to be able to contribute to a panel discussing the future of the sector, one of the highlights of the conference was the presentation of the latest study examining the state of the sector and, more importantly, their role in stimulating entrepreneurship across the UK.
This research showed that the sector is thriving with round 750 incubators, accelerators and support programmes now active in the UK, a doubling of the provision since the last examination of this phenomenon back in 2017.
While London has the largest numbers of incubators and accelerators, other parts of the UK have also developed clusters, including South Wales.
In fact, Wales as a whole has eight accelerators identified through the study and 26 incubators. More relevantly, it has the second highest concentration of incubators per 100,000 businesses in the UK after Oxfordshire.
Given the role of accelerators in getting start-ups prepared for entry to market, it is not surprising that the services they offer are focused mainly on mentoring and investment readiness, networking with peers and investors, business model improvement and skills training. While these were also important for incubators, the most common service provided by incubators was office space.
This suggests that policymakers, rather than just providing funding for any business that supports new firms may want to consider how supporting these two different types of support initiatives can help develop the economy.
In terms of impact, it is estimated that across the UK, incubators, accelerators and co-working spaces now support nearly 20,000 businesses every year, which equates to 5% of all new firms created annually.
More importantly, these firms are likely to be focused on growth, having been given tailored support and advice and therefore will end up creating employment in high value or technology-based sectors within their local areas.
While rents and fees from clients are the most important source of income for incubators and corporate sponsorship is the primary source of funding for accelerators, the report shows that the public sector also contributes around one third of the funding of both types of organisation and is also critical in leveraging private funding. In addition, European Structural Funding has also been significant in supporting these initiatives, especially in the case of incubators.
Following the cessation of support after the UK’s departure from Europe, this calls into question the future viability of these initiatives and help for new businesses, especially as many incubators and accelerators were also affected by the pandemic with 81 programmes closing in the past five years. Given the physical nature of this type of support, this is not surprising and those that survived pivoted to offering online and hybrid support for their clients.
Therefore, given that incubators and accelerators are making a significant contribution to the development of new firms and, more importantly, have the potential to make an even larger contribution in the future development of knowledge-based clusters of economic activity, what should
policymakers do to support them and the businesses they develop?
The first issue is that of sustainable funding as there is currently no long-term provision for the development of incubators and accelerators with many dependent on short-term programmes, many of which are coming to an end after Brexit with no replacement in sight.
This is especially the case within the post-industrial or poorer regions of the UK where there is a lack of private sector support for activities that support entrepreneurs.
Certainly, any funding being provided through levelling up should prioritise entrepreneurship support where possible, although it is also important that this does not undermine any private initiatives although, to be fair, these are likely to be more prevalent within the prosperous parts of the UK.
In addition to funding, the most important consideration for local, devolved and national government in supporting accelerators and incubators is to appreciate that while they can help individual start-ups to start and scale, they can also play a critical role in bringing co-ordination and cohesiveness to the local entrepreneurial ecosystem.
Of course, this will depend on other factors such as having a professional services sector that can support high technology firms as well as experienced business angels and availability of venture capital.
It will also need to be contextualised so that areas with low levels of start-ups – such as the South Wales Valleys – need pre-accelerators which are focused on first-time entrepreneurs at a very early stage.
In contrast, more developed ecosystems can afford to have more specialised accelerators such as the Fintech Foundry that has been recently set up in Cardiff or the Alacrity Foundation in Newport.
However, what is important is new businesses need be assisted through vehicles such as incubators and accelerators.
If they are given this support, and there is a coherent strategy to achieve this as part of a thriving local entrepreneurial ecosystem, then those start-ups will help to create wealth and employment in those parts of the UK that truly need it.
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