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UK Study: Do Incubated Startups Out-Survive Those Who Go It Alone?

24/12/2014 04:36 GMT | Updated 22/02/2015 10:59 GMT

It turns out the average survival rate for startups backed by an accelerator is 92%. And this is nearly 20% more than those who choose to do it independently, reveals a new study.

I'm a firm believer in context, so three caveats up front: 1) Of those programmes able to quantify the number of startups still operating, the survival rate reaches almost 92%, compared to a two-year survival rate of 75.6% for all small businesses. 2) While the ever-evolving nature of the UK entrepreneurs scene means no study can claim to be definitive, I see this report as simply a snapshot of the ecosystem in 2014. 3) There is some distinction between an accelerator and incubator as eloquently laid out in the report, but as both are startup programmes, for the purpose of this blog I've used them interchangeably.

I'm also very interested in a particular aspect of the startups world - Can big businesses realistically run with a Lean Startup methodology? I decided to take this on for a recent Digital Futures episode, for which I pinned down the founder of the globally-known School for Startups (a former BBC Dragon for those of you familiar with the TV show!) Doug Richard, CEO of Box Aaron Levie and two others to debate this very question (video below).

One of the many take-aways from bantering with these folks was that corporates running an in-house incubator programme stand to benefit heavily from investing in startups.

They have an invaluable chance to not only foster potential talent, but to absorb first-hand the iterative, agile, responsive behaviours of a small business, learn from this; and finally become customers (and re-sellers) of those products and services that prove their credibility upon 'graduating' from the incubation process.

Going back to the study, just how much of an impact does involvement in a formalised "programme" have for the startups? What's prompting this apparent survival rate disparity?

I'm inclined to attribute this 'edge' mainly to three aspects of these startup programmes: high-quality mentoring support, extremely valuable networks, contacts and industry exposure and... financial muscle.

The report itself flags up that approximately 59 of the accelerator programmes supported more than 1,100 startups in 2014 alone. That's sizeable.

It also found that incubated startups in the UK likely secure more financial investment upon graduating from the programme (putting this figure at £68,000 higher on average). I'm told the Wayra UK Academy has raised more than $28.6 million for its companies.

Another observation - within the UK there remains a persistent regional divide. Nearly 61% of accelerator-supported startups are based in the capital -that's ten times more than the number outside it. We're seeing a shift here though - Birmingham and Edinburgh are steadily becoming accelerator hubs, with the number of programmes operating in the past two years nearly doubling. Worth noting that Northern Ireland and Wales are seeing the emergence of new co-working spaces too (but the number of accelerators remains modest).

The UK incubator system has officially reached dizzying levels of activity, now ahead of all its European counterparts when it comes to the number of programmes available for startups.

Who's driving this surge? The study shows:

- Over 40% are currently privately run.

- A third of these are backed by public sector organisations.

- A further 12% are owned by large corporates.

- 25% are affiliated to universities or business schools.

I'll end with expressing a small concern. So the number of startup programmes in the UK has surged by more than 110% in just three years. This is truly heartening.

While I unequivocally applaud this growth, I feel it's critical that we ensure the long-term sustainability of this ecosystem. We don't want this to be a mere accelerator bubble that will soon burst. And with every third multinational now getting in on the incubator/accelerator offering, I hope their motivation isn't simply to be seen by the media as "fostering innovation" (that phrase has really been done to death!). This isn't some nice-to-have, 'fund a startup' opportunity to generate feel-good publicity for the brand!

These talented entrepreneurs deserve to be championed in a sustainable way. They need a very carefully thought out, optimal support focused, mentor-led setup. The Government and corporates alike must help maintain this precious momentum - or risk losing real, next-gen talent.