Innovation, Incubation and Acceleration: The national picture. Chris Haley Head of New Technology & Startup Research Nesta

Transcription

1 Innovation, Incubation and Acceleration: The national picture Chris Haley Head of New Technology & Startup Research Nesta

2 About Us 1 Policy & Research 2 Tools & Skills 3 Investments 4 Practical Programmes Mission to help bring great ideas to life

3 Nesta s work on startups UK Accelerator & Incubator Directory AccelerateUK Capacity Building in Colombia

4 Job Creation Net Employment growth rates by surviving firms, Source; Criscuolo, C., P. N. Gal and C. Menon (2014), "The Dynamics of Employment Growth: New Evidence from 18 Countries", OECD Science, Technology and Industry Policy Papers, No. 14, OECD Publishing, Paris. DOI:

5 Job Creation 100% of Net New Jobs created in Europe in the past 5 years were from companies less than 5 years old OECD (2014) Young SMEs, growth and job creation

6 But huge attrition! (What if more survived & scaled?) Firms started in ,731 (100%) 83,165 (37.5%) All business started with at least 1 employee Businesses that survived 10 years 8,649 (3.9%) Businesses that survived 10 years with 10+ employees 5, % Survivors with at least one year of high growth

7 Incubation Incubation Accelerators Incubators Active Seed Funds Coworking spaces Competitions Courses Startup weekends Startup studios? Adapted from Dee, Gill, Weinberg & McTavish (Nesta 2015)

8 Emergence of Accelerator Model Founded March 2005 by Paul Graham, UK programmer in US who made software to help entrepreneurs open online stores (Viaweb) $50m exit; gave seed money to hackers Premise: open-source software + falling hardware prices digital start-ups becoming cheap to finance It's like Rob De Niro wants to start an acting school : >200 applicants for 8 places Now give $120k in return for 7% equity Funded >900 startups (inc. Airbnb, Dropbox) Quickly repeated & replicated start.html

9 5 years later Numbers = firms accelerated as of Source: Nesta 2011

10 10 years Source: Nesta 2014 using data from Seed-DB

11 Total number of incubators and accelerators in 10 survey countries Sources: Telefonica Global Affairs & New Ventures 2013; Barrow 2001; Nesta 2011; ANDE 2015

12 Global (& National) Accelerator Trends 1. Growth: explosion of numbers variation in services & quality (a few appear quite predatory) 2. Diversification: along several dimensions, including Mission, Specialism (e.g. digital social, health, education, pharma, building, gaming, fintech, IoT, eye-care!) 3. Funding Structure: More corporates & zero-equity models downwards pressure on rest of industry. Also publicly-funded & hybrids. 4. Experimental Models: Virtual accelerators, Highly compressed courses, pre-accelerators, startup weekends, etc.

13 UK Accelerator & Incubator Database What: Comprehensive database of accelerators & incubators in the UK. Funded by BEIS Why: (i) Help signpost entrepreneurs towards existing support (ii) Identify gaps in the landscape that might warrant additional support (public or private) What not: Evaluation of their effectiveness

14 UK Accelerator & Incubator Database How: (i) Desk research with existing databases (including Nesta s own + UKSPA) (ii) Open call / crowd-sourced data (iii) Artificial intelligence based web-searching (trained on descriptions of accelerators & incubators, from Synoptica) Outputs: (i) Public directory (available for reuse) + user guide (ii) Summary Report + launch event

15 UK Accelerator & Incubator Database: Data gathered 1. Name of programme and/or facility 2. Type of programme i.e. incubator, etc 3. Physical location 4. Public Contact details 5. Geographical coverage 6. Programme funding sources 7. Sectoral focus 8. Stage of startup accepted 9. Additional entrance requirements 10. Cohort size 11. Number of businesses served per annum 12. Programme duration 13. Services offered 14. Funding offered 15. % Equity taken 16. Other fee/cost to startups 17. Year founded

16 UK Accelerator & Incubator Database: Definitions INCUBATORS ACCELERATORS Local in nature Technical facilities Physical space Mentoring Business support Seed-funding? Many national in nature Fixed term Cohort-based Culmination in Demo-day Source: Adapted from Dempwolf et al. (2014)

17 UK Accelerator & Incubator Database: Definitions Incubators Open-ended duration (exit usually based on the stage of the company, rather than a specific time) Typically rent/fee-based Focus on physical space over services Admissions on ad-hoc basis (not cohortbased) Provision of services inc. mentorship, entrepreneurial training Selective (but typically less so than accelerators) Accelerators Fixed duration programme (usually between three and twelve months) Typically growth-based (payment via equity rather than fees) Focus on services over physical space Admission in cohorts Provision of services inc. mentorship, entrepreneurial training Highly selective

18 Fields & Preliminary Results Rough numbers: ~800 candidates, but ~80 closed & ~350 other (coworking spaces, active seed funds, consultancies ) Leaving: 186 Incubators 164 Accelerators (~1/3 corporate-sponsored) 11 Pre-accelerators 7 Virtual accelerators 4 Virtual Incubators

19 Preliminary Results Distribution of Accelerators Highly concentrated in London (48%) Each other region (<7%) Around 1/3 corporate sponsored Many national (or international) in principle; unclear in practice

20 Preliminary Results Distribution of Incubators More evenly distributed (& often more local in focus) London (14%); Scotland (13%); West Midlands (10%); South East (9%) etc.

21 Next steps Analysis by sector, by geography (LEP, region ) Please tell us what analysis would be useful for you! Please contribute your data, if not already done so (& please check your data, if you have!) Dataset will be public welcome to undertake own analysis (or suggest interesting questions to us) Workshop at BEIS, London, 27 th February Publication & launch event (at Nesta, London), 19 th April Session after coffee break Longer term: evidence of what works!

22 @cdh1001 uk.linkedin.com/in/cdhaley

23 Do accelerators work? (Answer 1/4 - adding value) If the accelerator provided no funding to your company at all, how much equity would you give them just to go through the program? Survey answer: 21% of startups would allocate no equity; 55% of startups would allocate 1-6% equity, even without funding. Most valued components: Mentorship / Coaching / Feedback (>80% ) Network / Alumni / Prestige (>80%) Investment & Financial benefits (>30%) Connections to investors (>30%) Source: Jed Christiansen for Accelerator Assembly, based on suggestion from Ian Hogarth

24 Growth Do accelerators work? (Answer 2/4 improving growth) accelerated ventures grew revenues at a rate (+36.4%) that was roughly three times faster than the ventures that applied but were not accepted... Employee growth was also roughly 3x larger. Source: ANDE/ Emory - Entrepreneurship Acceleration Research Initiative (2015) Long-term value added Temporary value Life support Original growth path Time Nesta 2011

25 Do accelerators work? (Answer 3/4 - improving exits) First, the rate that companies get acquired after completing top tier US programmes is higher than the average rate of US VC backed companies. Second, companies from top tier accelerators are likely to see earlier exits than the average VC backed company. Acquisition rate Source: Michael Birdsall, Clare Jones, Craig Lee, Charles Somerset and Sarah Takaki, University of Cambridge, 2013

26 Do accelerators work? (Answer 4/4 improving survival) Average Survival Rate of Startups Source: Michael Birdsall, Clare Jones, Craig Lee, Charles Somerset and Sarah Takaki, University of Cambridge, 2013 But do they create success or just select for it (or both)? If former, how much is due to signalling effect?

27 What activities do we know make a difference? 1. Building social capital: building connections, credibility [Gonzalez- Uribe & Leatherbee] 2. Peer learning: collaboration and competition with cohort. [Cohen] 3. Time to work alone: putting learnings into practice [GALI] 4. Structured Accountability : holding founders to their own plans [Gonzalez-Uribe & Leatherbee] 5. Mentor & Director expertise: Not all programmes are equal! [Cohen]

28 Do accelerators work? Nesta Standards of Evidence Source: Puttick, R. and Ludlow, J. (2012) Standards of Evidence for Impact Investing. London: Nesta GALI

29 Further Reading re Accelerators Yael Hochberg, "Accelerators and the Regional Supply of Venture Capital Investment Jonathan Ortmans, "A Hard Look at Accelerators" Brad Bernthal, University of Colorado at Boulder "Investment Accelerators" Susan Cohen, University of Richmond "Do Accelerators Accelerate? The Role of Indirect Learning in New Venture Development" Gonzalez-Uribe, Juanita and Leatherbee, Michael, Business Accelerators and New-Venture Performance: Evidence from Start-Up Chile (August 26, 2015). Available at SSRN: Ian Hathaway (February 2016) Accelerating growth: Startup accelerator programs in the United States; Brookings: Global Accelerator Learning Initiative (GALI): What s Working in Startup Acceleration: Insights from Fifteen Village Capital Programs (March 2016):

30 @cdh1001 uk.linkedin.com/in/cdhaley