Have Start-Up Programmes Fuelled London’s Entrepreneurial Boom?

16/12/2015

Lizzy Chesters, Corporate

Have Start-Up Programmes Fuelled London’s Entrepreneurial Boom?

There are over 60 incubators, accelerators and innovation centres in the UK, which have enjoyed hefty praise from our government. These programmes are on the rise and their success rate is considerable.

Whilst it may seem that these programmes are all but infallible, it is worth asking whether they are as brilliant an opportunity as they seem on paper and to what extent their success is tied to that of London’s thriving community of entrepreneurs.

Start-up programmes on the rise

The number of start-up programmes has increased by over 110% in the last three years, having grown alongside the UK’s burgeoning start-up sector.

These include incubator and accelerator programmes being run by a variety of organisations. Big corporates, seeing the value in investing in innovation, are even creating their own, including Barclays (Techstars) and Visa Europe (Collab).

Businesses that go through accelerators have a 92% success rate (20% higher than businesses that go it alone) and they are more likely to survive long-term.

However, one could argue that if a new business idea is good enough, it shouldn’t need the backing from an incubator or accelerator because the company should be able to achieve growth on its own (or purchased by/integrated into another company).

The key to a successful start-up is often the team behind it. Without a dedicated and talented group of employees it will be an uphill struggle to develop a business idea into a reality.

The team needs to be immensely motivated if they are to endure repeated rejection from investors, living on a shoestring for an indefinite period, and working all hours of the day to drive forward the business.

The advantages of incubator/accelerator programmes…

There are obvious benefits to joining an incubator or accelerator:

  • Visibility and the PR/marketing that comes with it.
  • Mentoring, particularly if this is the entrepreneur’s first venture.
  • Access to potential investors.

Advantages are not isolated to start-ups. These programmes help single out the most promising up and coming companies which saves time for investors and means the most exciting technology is being utilised and improved first.

Of course, the quality of these programmes can vary dramatically, and many are tailored to specific sectors, most famously Level 39 for fintech.

There is also an ongoing discussion surrounding corporate programmes concerning whether they are better or worse than their independent counterparts and whether they are truly dedicated to their start-ups compared to stand alone programmes?

…And the drawbacks

Clear drawbacks can be easily identified:

  • Corporates behind these programmes are likely to take a greater amount of equity.
  • Whilst negotiating terms, corporates may use complicated jargon that takes away a start-up’s rights.
  • Less flexibility in product development as it will probably have to be in line with the corporate’s business goals.
  • Corporate schemes may try and keep the technology for them for too long – great for differentiating themselves from competitors but may not be in the best interests of the start-up.
  • Small companies cannot compete with corporate legal teams if things go pear-shaped.
  • Start-ups must negotiate away from restricting contract terms which takes valuable time and effort.

Furthermore, it is questionable as to what happens to the start-ups once the programme is complete: Do these schemes have a responsibility to keep the initial momentum going?

Aside from their interest as investors, there is nothing that ties them to these freshly pressure-cooked start-ups.

It is also possible that the motivation behind the programmes is not entirely pure. By supporting small businesses and helping them flourish, corporates boost their reputation and appear ‘innovative’ to onlookers.

The reality is that if one of the start-ups enrolled in their incubator programme fails, there is very little fiscal impact on their business.

In contrast, an individual or group of smaller investors will feel the failure of their venture far more acutely – this knowledge would encourage them to take a personal and continuous interest in the health and success of their start-up investment.

In conclusion

Ultimately, it is up to the entrepreneur to make the decision as to whether an incubator or accelerator is right for them, and there are a variety out there to choose from.

All things considered, incubators and accelerators definitely bolster the growth and development of UK start-ups. They help to support a flourishing sector by feeding it with fresh talent, primed for success. They give opportunities to those businesses that, though innovative, may not have the funds or business nous to get their idea off the ground.  

London has become a booming entrepreneurial hub.

The existence of start-up incubator and accelerator programmes are not solely, or even primarily, responsible for the capital’s success. However, the UK would not be such a global challenger without the help of these programmes.


 

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