Incubating the future: the role of university incubators in supporting student and graduate entrepreneurs

By Maximilian Yoshioka and Michael Patrikalakis

Highly educated, young (for the most part) and unburdened by families, mortgages and the opportunity costs of quitting an established career, university students and recent graduates are an ideal demographic when it comes to entrepreneurship. Yet beyond the commercialisation of university intellectual property – something few students and graduates have access to – little attention has been devoted to university incubators, a crucial component in this picture.

In its upcoming report, the Centre for Entrepreneurs will aim to bridge this gap by placing accessible university incubation in focus. What role does it or should it play in supporting student and graduate entrepreneurship? Are universities delivering the right support and promoting it effectively? How do approaches to business incubation differ across universities? And finally, are students and graduates aware of the support available, do they value it, and does it lead them to start new businesses?

Existing research into university entrepreneurship has tended to concentrate on the curriculum. But when it comes to stimulating concrete venture creation, extracurricular support is arguably a more direct and efficient pathway into business. Whereas curricular education tends to emphasise “enterprising” behaviour and thinking (in ways applicable across one’s life and career), extra-curricular support (especially incubation) is primarily focused on the act of starting a business, or what is usually called “entrepreneurship”.

Unlike curricular training, which is (mostly) only open to students taking particular degrees – though the number of programmes offering an enterprise component is steadily growing – extra-curricular support is open to students of all backgrounds, and frequently available to recent graduates as well.

University-sponsored incubators and accelerators that provide subsidised or free space and structured training are a key component of extra-curricular support, although not all universities offer them. There is reason to believe university entrepreneurs, accustomed as they are to the structured and supportive educational environment, are more likely to find incubation beneficial than those who start their businesses many years after graduation (or those who never attend university at all).

Our research

CFE has begun reaching out to previous university incubatees, all of whom have highlighted the accountability and incentive structures they found crucial to structuring their activity and streamlining their business plans. Similarly, discussions with university incubator managers will provide a clearer picture of prevailing practices and trends.

We will shed light on issues such as the type of support and funding provided in incubators, the level of demand for services, the number of ventures supported, the methods used in assessing impact, and the types of students and graduates that participate. A review of existing literature on incubation and university entrepreneurship will summarise and draw from cutting-edge academic research in this area, providing an overview of how thinking on university incubation has evolved over the years.

Alongside profiling individual universities, our report will also seek to advance understanding at the national level of how university (student and graduate) entrepreneurship is measured, how it is performing and the factors that determines its success. By drawing on data from the Higher Education Business and Community Interaction Survey (HE-BCIS) the Destination of Leavers from Higher Education survey (DLHE) and the Labour Force Survey (LFS), we will identify trends as well as gaps in the data and answer important questions that will help determine both government and higher education sector policy.

For example: how many startups do universities support each year, and how is this affected by region, university ranking and size, academic specialisation and funding? Why do current data collection methods seem to produce implausible results, with inconsistencies between data sets and some well known universities (such as Cambridge, the LSE and York) reporting zero start-ups supported?

More generally, to what extent does going to university make people more entrepreneurial? How many years into or after university education do people start businesses, and do they primarily become business owners or freelancers? The implications of these questions extend far beyond university campuses, and concern the future prosperity and dynamism of the UK economy.

Policy implications

What are some of these implications? For starters, maximising universities’ potential as launch-pads for startups could help address uneven regional development/graduate retention. Though London is the undisputed epicentre of the UK’s economy, other major towns and cities (think Manchester, Liverpool, Birmingham, Nottingham and Edinburgh) bring in scores of talented young people every year through their universities. Getting them to stay and contribute to the local economy by incubating their businesses is a logical step when it comes to retaining talent and fostering growth, jobs and productivity.

Beyond the capital, securing support and/or funding for new ventures is often a struggle. Locally-based university incubation could benefit young entrepreneurs looking for less saturated markets with cheaper running costs and simultaneously boost regional economic activity by introducing new startups and businesses. Given the mobile nature of tech and digital businesses – a sector that grew 32 percent faster than the rest of the economy between 2011 and 2014 – university incubators could be the ideal means of boosting regional entrepreneurship, even if those start-ups later expand domestically or even internationally.

If university incubators are to stake their claim as hubs of regional entrepreneurship and economic growth, they will first have to navigate some difficult challenges on the horizon. Extracurricular business support at universities is funded in a variety of ways, including university core funding, HEIF (Higher Education Innovation Funding, allocated by the central government), EU funds, corporate sponsorship, plus a variety of local private and public initiatives. Although programmes receiving core university funding can feel relatively safe, Brexit will almost certainly lead to the loss of EU income, while squeezed government finances and an unpredictable funding schedule make HEIF a precarious source of sustainable finance.

At present, a number of universities (such as Wolverhampton, Aston and East Anglia) secure a sizeable portion of their entrepreneurship funding (amounting up to £9.4 million) through the ERDF. As the UK loses access to this source of income, and given the aforementioned difficulties involved in securing central government funding, it is as important as ever for university incubators (as well as other programmes) to be equipped with the arguments and hard data needed to ensure their long-term futures.

Additionally, if the UK strikes a deal with the EU that does not preserve freedom of movement, university entrepreneurship departments will gain an increased role in recruiting international talent through the Graduate Entrepreneurship Visa, in which incubators could have a significant role to play. Indeed some universities – such as UCL – already require international graduates on the visa to be based in their incubator for monitoring purposes. And so, beyond being a best practice guide for university incubation, the Centre’s research will draw attention and offer solutions to a host of pressing policy issues located at the cutting edge of the higher education and economic agendas.

Universities are central to both the economy and wider society, and yet their potential as physical hubs of venture creation – beyond the narrow avenue of university IP “spin-outs” – remains significantly unexplored. Over the past decade or two, experimentation with university-based incubators and accelerators has increased, with some notable successes to date. Yet although most universities offer some sort of extra-curricular support to aspiring student and graduate entrepreneurs, many have yet to establish formal incubation programmes that we see as crucial to successful venture creation. Our report will celebrate what works, explore what doesn’t, and lay out a series of recommendations that we hope will help the sector go from strength to strength.

If you would like to get in touch about this research, please email CFE Lead Researcher Maximilian Yoshioka via maximilian@centreforentrepreneurs.org