Incubators and accelerators have become highly pervasive around the world, as countries seek to cultivate the kind of innovations that drive economic growth.  Alas, for all of their popularity, their track record remains extremely mixed.

For instance, one study, from Baylor University, suggests that these incubators often do more harm than good, and actually reduce the quality of innovations emerging from our universities.

The research examined 56,000 patents granted between 1969 and 2012 from American universities with incubator programs.  Such programs typically offer budding start-ups coaching, networking, facilities and even finance to help them on their way.

The paper found a direct correlation between the establishment of an incubator and a significant worsening of the quality of patents produced by that university.

A second study of incubators and accelerators across Britain, Germany and the United States also found extremely mixed results.  It found that the environments were not helpful at all for startups, and almost did more harm than good for their growth prospects.

The study revealed that the sponsors of such programs often fell into the trap of thinking that simply having an accelerator 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.

Making connections

New research from the London School of Economics highlights the crucial role connections play in the success of any startup, and the key role accelerators should be playing in forging those connections.  The study highlights that while accelerators and incubators do often try and provide this, it is often via pre-ordained methods, such as access to a network of mentors.

This, the researchers suggest, can lock entrepreneurs into their particular idea and prevent them from pivoting to anything more suitable.  Couple this with a degree of shielding them from the market, and the startup becomes less competitive than they need to be to scale.

The researchers found that the best incubators fostered what they refer to as ‘cultivated serendipity’, with the incubator adopting a social structure that helps them, and their startups, embrace the unexpected, while building the connections to give them access to the resources they need.

Networks for success

A recent paper from INSEAD and Harvard explores how founders gain access to the capital (in all its forms) they need to thrive.  The paper analyzed around 150 previously published works to try and find clearly defined patterns, and a 3-step process emerged.

1. Search for resources – Whilst this is commonly regarded as financial capital, the analysis found that human capital was much more important.  This often meant co-founders or employees, but it also means partners, customers and other stakeholders who can help to grow the startup. Given the complexity of the task, this can often overwhelm entrepreneurs, many of whom may have exceptional technical skills, but lack the network or competencies to even know where to begin.  This can often result in entrepreneurs remaining stuck in the world they know rather than venturing outside their comfort zone.Entrepreneurs from privileged backgrounds tend to have a wider social network to tap into, and therefore can easily thrive as a result.  If you’re not so lucky, then you have to become an active networker to broaden your social network and gain access to the human resources required to grow.
2. Persuade those with the resources to join you – The next step, once you’ve identified both your weaknesses and the resources available to plug those gaps, is to persuade the relevant resources to join you on your adventure.  Whilst there is considerable research on how startups can secure financial resources, much less is available on attracting human capital. This is crucial however, as you will need the right employees, the right alliance partners, the right regulators and government supporters, and various other stakeholder groups that will be vital to the growth of your startup. This can sometimes be made easier by gaining a high-profile backer, be that a VC fund, an accelerator, a corporate partner or government agency.  Your board of directors can be a crucial way into such channels, so it’s important to choose your board wisely.
3. Put the acquired resources to use – The final step is to then deploy the resources you’ve accumulated.  This sounds like the easy finale after the hard work has been done, but it’s not always as straightforward as we would like.Indeed, the very nature of startups creates a power imbalance that is typically in favor of the resource holder rather than the entrepreneur.  This can create an inherent sense of vulnerability, especially if the resource holder is from a similar sector, as we’ve seen with the tech giants taking an intense interest in any startup operating within their gravitational field.

Some entrepreneurs have the connections to access these resources automatically, but others, especially founders from poorer backgrounds, have to work that bit harder to secure the resources they need.  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.

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.