Startup programmes have been around since the early 90’s and there are many success stories which have arisen from these programmes, such as Airbnb and Dropbox. Recently interest in incubators and accelerators has boomed; according to O2’s 2014 report ‘The rise of the UK accelerator and incubator ecosystem’, the number of startup incubators in the UK has increased by 110% from 2011 to 2014.

So, why the sharp increase? Will this have an effect on the future of business? A paper published by Nesta, ‘The Startup Factories, by Paul Miller and Kirsten Bound’, has a detailed review of the phenomenon. Here are some the main points:

Benefits for start-ups

The increase in applicants could be down to the success stories and media attention attracted by the schemes, but the benefits for founders are the main draw. These include:

  • Access to one-on-one advice on how to develop and grow your business
  • Possible investment at the time
  • A strong network

Less obvious benefits range from personal and conceptual validation from the more experienced professionals; motivation from the pressure and discipline of the course, something individuals starting on their own often lack; and peer support from others attending the course.

Benefits for investors

For investors, the benefits are also great. These courses, often spanning several weeks, are a great way to meet and get a deep insight to the team behind the concept, which is vital to the success of a business. This gives them an opportunity to make informed investments, get an insight into future trends within their industry and even pinch new talent! But, more importantly to many, it is a hugely rewarding and enjoyable thing to do.

Drawbacks of the rise of the incubator

Startup founder, Ryan Carson expressed resentment at investors ‘ripping off’ startups by taking large amounts of equity in the company during incubation and acceleration. He also suggested that the quality of mentors is not always good enough to provide adequate guidance. Another concern is in the quality of the startups themselves, do these programmes not attract struggling businesses? Or are they draining established companies of all their best employees?

The Nesta report also highlights that these schemes can produce lots of small companies. These often then get absorbed into larger corporations rather than growing themselves, or if they do plan on going alone, they may saturate their respective sectors, such as technology, bottlenecking when they try to get funding.

In conclusion, these ‘factories’ are hugely beneficial to all parties, provided the quality of both investors and startups are maintained. It is also down to the organisers ensure both parties behave with integrity and responsibility to maintain their positive image. Nevertheless, with great talent and good practices these organisations can encourage and continue to empower entrepreneurs across the globe.