In a recent post I looked at some of the talent issues surrounding startup success.  Human capital is vital, and with many startups consisting of the founding team, and the founding team alone, the need to tap into external resources is vital.  This could be academics to help validate your product, customers to co-create with you, or government agencies to help you navigate regulatory hurdles.  The article highlighted how networking to find these people was especially important for Swiss firms who live outside of the country’s main cities, and so the resources are not literally on their doorstep.

This is similar for founders from poorer backgrounds, as research has shown that founders from wealthy backgrounds have an instant social network to tap into, whereas poorer founders have to work that little bit harder.  Ordinarily, incubators, accelerators and other startup support services should provide such networking opportunities, but recent research from Harvard Business School suggests they may be selling entrepreneurs short.

Spreading the net

The value of networks comes when you are able to tap into expertise and experiences outside of your own, but the study suggests that many of the entrepreneurs participating in incubators and accelerators are already pretty familiar with their peers in the program.

The research reveals that entrepreneurs have a clear tendency to gravitate towards programs that contain people they already know, and once on those programs, to stick with this cluster of familiar faces rather than expanding their network.  This reluctance to step outside of the familiar significantly undermines their attempts to learn and improve their business.

This can be especially damaging for early stage startups, as they are in desperate need of the right kind of human capital both to develop their value proposition, and to bring it to market.

Back in 1977, Thomas Allen proposed the Allen Curve to explain the importance of proximity to collaboration.  It suggests that collaboration diminishes as a function of distance. Indeed, even simple conversations are significantly less likely to occur when people are over 10 meters apart.

MIT research from a few years ago found that the Allen Curve still pervades today, even as digital tools have emerged to break it down.  The study examined over 40,000 published papers and 2,350 patents from MIT researchers over a 10 year period, and mapped out a network of collaborators across the university, before then examining the locations of each collaboration, particularly in relation to the departmental and institutional membership of each researcher.

“Intuitively, there is a connection between space and collaboration,” the researchers say. “That is, you have better chance of meeting someone, connecting, and working together if you are close by spatially.

Spreading wings

The implications of this were illustrated by the Harvard study, which followed 112 entrepreneurs who participated in a startup bootcamp in India.  Each participant was asked to identify the people they already knew from the roster of attendees prior to the event starting, before each was then randomly assigned to teams and workstations in the open office space of the facility.  The teams were tasked with creating a mobile app, and their interactions were tracked via their email conversations and social media postings on the program’s platform.

The results suggested a slight deviation from the Allen Curve, in that physical proximity was much less influential than the prior relationships between attendees.  It transpired that people were much more likely to interact with people they already knew prior to the program.

The kicker is however, that the apps that were rated most highly, both by the participants and by external judges, were created by those where the team members didn’t know each other prior to the program.  The more familiar people were with their peers already, the lower the quality of their work during the program.

“The whole premise of these things is that you’re going to learn from other people and make new connections,” the researchers explain.

Supporting or strangling growth?

It would be dangerous to think this might just be an Indian thing, or even a software engineering thing.  For instance, one study of incubators and accelerators Britain, Germany and the United States found that the environments were not helpful at all for startups, and almost did more harm than good for their growth prospects.

It found that the sponsors of such programs often fell into the trap of thinking that simply having a program was job done, and therefore didn’t feel the need to provide much support to the startups themselves.  Worryingly however, the same was also true for the entrepreneurs, who often felt that acceptance into the incubator meant they had succeeded.  It was rare for this to be seen as the beginning of a journey rather than the end.

Incubators, accelerators and other programs to support startups are cropping up throughout the world as cities, universities and companies are striving to innovate more effectively.  The evidence unfortunately seems to suggest that many of these schemes are not only failing in their core task, but they are doing more harm than good.

“Startups need professional support for successful international growth. The nature of this support, however, is what makes the difference. Good incubators and accelerators drag founders out of their comfort zone and make them ready to expand their network and explore new opportunities. This is exactly what we are doing at EIT Digital, all the way from pre-incubation to scale up acceleration, with support from our Innovation Activities, our business creation activities, and our EIT Digital Accelerator,” EIT Digital’s CEO Willem Jonker says.

Whilst there is no easy solution to this problem, a good start would be to ensure that participants are relatively new to one another, and that they are encouraged to both work and network outside of their normal social circle as often as possible.  Some incubators do a great job of doing this, but the time is nigh for all to follow suit so that startups get the support they desperately need to scale up.