At some point, most professionals dream of starting a business. It’s certainly a tantalizing proposition. On paper, you’re free to do whatever you want – and do it the way you want. Like all pioneers, you can savor the creation of something that grows and makes a difference.
Alas, entrepreneurship comes with serious caveats. The odds are daunting, with eight of 10 new businesses failing in the first 18 months. During that time, you’ll slog through 80-hour weeks, burning through cash as you’re beaten down from constant rejection. You may launch a business intending to innovate. During those early months, your real goal is to survive.
In America alone, small businesses have accounted for 65% of job growth over the past twenty years. And that includes companies like Google, a 1995 startup that now employs more than 52,000 people and generates over $50 billion in annual revenue. And that begs a question: How can the private and public sectors partner to reduce risk and better grow promising startups?
INCUBATORS FOSTER GROWTH
Universities have attempted to take the lead, with many forming business incubators for would-be entrepreneurs. Here, schools provide systematic operational and financial support to startups and early stage companies to help accelerate their growth and create jobs in communities and industries. Aside from receiving low cost space and a WI-FI connection, entrepreneurs enjoy mentoring and support in areas like marketing and legal services. Even more, they can tap into their sponsor’s business partnerships and alumni network, opening doors to potential funding sources. By being surrounded by like-minded entrepreneurs in incubators, fledgling companies can draw best practices and inspiration from each other.
For some, incubators are competitors to business schools. But you’ll also find business schools such as the University of Virginia’s Darden School of Business and Columbia Business School managing their own incubators. Like MBA programs, entrepreneurs apply for admission to incubators, with selection determined by the business plans they submit along with team members’ expertise and track records. And incubators are quite selective, with the top 300 university incubators – as measured by UBI Index – accepting roughly one in five of the 18,000 companies that applied for spots.
That said, incubators aren’t social welfare for talkers and dreamers. Hosts heavily scrutinize company performance, operating off a deliver-or-depart line. Generally, companies remain in incubators for two-to-three years, exiting when they have the finances and infrastructure to stand on their own (or be acquired).
Business incubators have also emerged as big business. For example, Y-Combinator, a private incubator and accelerator founded in 2005, has produced companies worth a collective $7.78 billion dollars according to Forbes, with alumni including Reddit, Dropbox, and Scribd. Among the top 300 university-managed and university-affiliated incubators, startups racked up over $24 billion in sales over the past five years. And they created over 100,000 jobs over that same period according to UBI Index.
HOW DO YOU MEASURE INCUBATORS?
But not all incubators are created equal. Some excel at delivering services. Others sustain stronger networks. Of course, most differ on the economic impact their graduate companies deliver over time. To identify the top incubators – and evaluate their performance over time – UBI Index was formed. Based in Stockholm, Sweden, UBI Index consists of a renowned international research team that assesses and ranks over 300 incubators in 67 countries. The UBI Index team is also supported by a panel of international incubation experts, including Jonathan Bradford (Director, Techstars London), Paolo Borella (Director Microsoft Nokia AppCampus) and Kjell Hakan Narfelt (Chief Strategist, Vinnova, Swedish Innovation Agency).