I was pleased – but not surprised – to read that London is now home to nearly 40 (pdf) startup incubators and accelerators. The very existence of these programmes underscores the capital’s position as one of the strongest and most vibrant startup ecosystems in Europe, and provides us with some projections about how much “economic activity” the cluster of digital businesses in east London known as Tech City will be creating over the next decade (current estimates are £12bn).
Accelerators and incubators are variations on a theme – organisations designed primarily to help young businesses form, and then grow, as quickly as possible. Most focus on businesses with high growth potential (read “technology”) and in return for the support they provide, such as mentoring and access to networks they take equity in the new businesses.
Accelerators tend to run for a fixed period of time, at the end of which the businesses pitch for investment. Incubators are generally less rigid and usually home to more developed businesses. Both often focus on a particular sector such as healthcare or education.
However, the same report that praises London’s flourishing incubator and accelerator scene reveals other statistics that are more concerning. Namely, that of the UK’s 60 accelerators and incubators two-thirds are in London, leaving the rest of the UK badly under-served.
These figures emphasise the negative impact of London-centricity on the UK’s startup scene. The 24 remaining accelerators and incubators in the UK are distributed across growing tech hubs such as Cambridge, Edinburgh and Birmingham, with the north and south-west of England and Northern Ireland almost entirely unrepresented.
The absence of accelerators and incubators in parts of the UK is detrimental to the growth of a UK-wide startup scene. These programmes are critical components of the startup ecosystem: they provide workspaces, mentoring and finance (whether through investment or access to investor networks) to startups and small businesses.
In the US, the National Business Incubation Association (NIBA) estimates that in 2011 alone incubators assisted about 49,000 startup companies. These businesses provided full-time employment for nearly 200,000 workers and generated annual revenue of almost $15bn.
Research shows that participation in an incubator or accelerator programme significantly improves a startup’s chances of survival after two years. NIBA members have reported that 87% of all businesses that have participated in their incubator programmes are still in business.
It is sometimes argued that we shouldn’t try to engineer a startup cluster – it will just spring up when the conditions are right. There is some truth in this, but it is a little defeatist. There are entrepreneurs and ideas all over the UK, not just in London and other major cities. We should be working to enable these entrepreneurs wherever they are located, and this means growing and exporting London’s accelerator and incubator infrastructure.
We wax lyrical about the economic, social and technological output of Tech City, but we should also wax lyrical about its potential for the rest of the country. Tech City is a successful model of a burgeoning startup ecosystem and we should either emulate it across the rest of the UK or ensure that entrepreneurs in the regions can access that ecosystem as easily as possible. This will allow us to encourage and support all entrepreneurs, not just those who are geographically well -placed. Then we can spread the positive impact Tech City is having on employment, innovation and culture.
Eddie Holmes is the founder and chief executive of Launch22
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