Closing the gap between graduates’ entrepreneurial ambition and action

University graduates are behind many of today’s most successful and innovative companies. With the knowledge, skills and contacts they acquire at university, graduates are especially likely to found the innovative, disruptive startups that are integral to economic success in the 21st century.

But not enough graduates are becoming founders. While ever greater numbers are attracted to entrepreneurship as a career path, most fail to act on their intentions. Only around 1% are involved in entrepreneurship several years after graduating, and among those that do start up, many quit before fully establishing their businesses. While a certain drop-off between intention and action is to be expected, the size of that gap strongly suggests that young people coming out of university face significant barriers to becoming entrepreneurs.

While this is certainly a missed opportunity for graduates themselves, it is equally detrimental to the UK economy: a substantial body of research suggests that graduate entrepreneurs are more likely to set up high-growth companies than non-graduates. Given the disproportionate contribution of these companies to economic growth, productivity and job creation, should universities be playing a greater role in improving graduate entrepreneurs’ prospects?

The Centre for Entrepreneurs examines precisely this issue in its latest report, Putting the uni in unicorn: The role of universities in supporting high-growth graduate startups, published today. The report explores questions such as: why should universities care about supporting graduate entrepreneurs? What do universities currently offer aspiring graduate entrepreneurs? And what could they offer to better support their entrepreneurial alumni?

With almost 50% of young people now going into higher education – a record number – universities are uniquely positioned to develop the UK’s next generation of entrepreneurs. Recent graduates are at an ideal time in their lives to start a businesses. University exposes them to a diversity of concepts and activities that increase the likelihood of developing innovative business ideas and meeting potential co-founders, and crucially unlike students – many of whom are also entrepreneurial but busy with their degrees – they have the time to commit to a new venture.

Despite a natural relationship with their graduates, many universities do not do as much as they could to help graduates found businesses. While we commend universities for making entrepreneurship and enterprise education an increasingly core component of what they do, much of the support is focused on engaging large numbers of students in “enterprising thinking” and pre-startup activities that are not designed to help them actually start companies. Where practical business startup support exists, it is most often designed for students – offering restricted hot-desking and ad-hoc support to work around their academic commitments.  

Nevertheless, we believe universities are ideally positioned to offer what graduate entrepreneurs need most: full-time, intensive programmes tailored to their requirements, that offer mentoring, monitoring and training as well as practical necessities such as office space, low-cost business services, funding and networking; in other words, incubation.

There is no shortage of reasons why graduate entrepreneurs are particularly suited to receiving incubation from their alma maters. To address the difficulties many graduate entrepreneurs have securing suitable premises, university incubators can offer them free or subsidised office space, often combined with contractual flexibility – useful if the venture doesn’t work out. The money graduate entrepreneurs save can instead be invested in their businesses, improving their growth and survival prospects. Additionally, by basing their companies in the familiar environment of their universities, incubatees are less likely to fall into the loneliness and discouragement that can result from working alone at home.

Graduate incubation also makes sense for universities: by incubating graduate startups, they can contribute to important institutional goals such as improving graduate employment outcomes, boosting local graduate retention and stimulating regional economic growth. Meanwhile, having a high-profile, graduate-focused incubator is likely to facilitate recruitment by attracting students considering starting a company upon graduating.

While many universities already incubate startups, only around a third (37%) offer it to graduates. What’s more, the quality of existing graduate incubation varies widely, ranging from hot-desking and “light-touch” support on the one hand, to permanent office space and an intensive programme on the other. Many programmes focus on incubating spinouts – businesses based on university-owned intellectual property – despite the number of potential graduate startups far exceeding that of potential spin-outs.

Unlocking the potential of the country’s most entrepreneurial generation promises a range of economic and social benefits, from higher employment to more ground-breaking innovation. But at the core of it all, we believe that every young graduate with a promising business idea should get the support they need to put it into practice; and who better to play this role than their very own universities?

Read the full report here