First established in the UK thirty years ago, incubators are typically defined as physical spaces that charge rent or membership fees to entrepreneurs and provide additional services such as training for entrepreneurs, access to networks and specialist equipment.
The first accelerator in the UK was only founded in 2007 although the vast majority have been set-up during the last five years. They are different to incubators because they usually offer seed funding to resident businesses, usually in the form of an equity investment. They also put their tenants through a highly selective programme (that can last up to a year) to help them develop a business plan, prepare for pitching to potential investors and undertake initial market testing.
So what is the impact of this type of business support in the UK?
According to the NESTA research, there are currently 205 incubators and 163 accelerators currently active in the UK, supporting around 7,000 new businesses every year. Whilst some incubators cater to all types of entrepreneurs, the majority focus on early-stage ventures that usually stay for around two years before leaving.
Most are partly self-funded through the membership fees or rent they charge their residents (which is £250 per person per month on average) although these fees are often subsidised using public or university funding. In contrast, accelerators are generally less reliant on public funding, often being financed by venture capital or, increasingly, by large businesses that are becoming more interested in entering this space to identify new markets.
It would be expected that many incubators and accelerators would be concentrating on developing a particular sector and yet a large proportion do not have a particular focus, although those that do tend to be based in digital technologies.
Very few are found in the UK’s largest industries such as real estate, construction and retail sectors although this is changing.
For example, the John Lewis Partnership have opened J-LAB, a start-up accelerator which is looking to support new ventures to come up with new ideas and technologies that can be developed in association with two of the UK’s leading retail brands, John Lewis and Waitrose.
More than half of accelerators are currently based in London whilst incubators are spread relatively evenly throughout the UK. This is not unexpected given that is the capital city houses the UK's venture capital industry and is where most of the UK’s large companies are headquartered.
There are fewer incubators and accelerators in the devolved regions of Scotland, Wales and Northern Ireland and they are more reliant on public funding for support. In Wales, all of these are located along the M4 corridor with the exception of the Optic Business Incubation Centre in St Asaph and the Bridge Innovation Centre in Pembrokeshire, both of which were formerly Techniums under the Welsh Government’s much-criticised programme of incubator support.
That is particularly disappointing given the importance of having such facilities around academic institutions such as Bangor and Aberystwyth universities, although the new Menai Science Park on Anglesey should undertake this function in North West Wales once it opens in 2018.
Therefore, the NESTA report has demonstrated the importance of incubators and accelerators across the UK and their role within the entrepreneurial ecosystem. However, more needs to be done to ensure that there is scope for further growth in this type of support outside of the main population areas as it could be an effective tool to help support new and growing firms within local economies in rural Wales.