Incubating graduates could unleash a wave of high-growth startups, claims CFE report

A report released today by the Centre for Entrepreneurs (CFE) claims that by improving the business support available to recent graduates, universities could unleash a wave of high-growth entrepreneurship across the UK.

The Centre for Entrepreneurs (CFE) – the leading entrepreneurship think tank – has today released a report suggesting universities can boost local graduate retention, job creation and economic growth in the regions by providing business incubation to graduate entrepreneurs.

While increasing numbers of graduates are interested in starting a business, 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. This a problem, as research indicates graduates are more likely than non-graduates to found the innovative, high-growth companies that are key to the future strength of the UK economy.

According to CFE, universities have a major role to play in boosting the graduate startup rate and improving the growth prospects and sustainability of graduate startups. Universities’ existing relationships with their graduates make them ideally placed to provide effective business support. But while most universities already offer curricular and extracurricular entrepreneurship training, this is overwhelmingly targeted at students at the “pre-startup” phase rather than graduates actually starting companies. CFE believes that more universities should be offering aspiring graduate entrepreneurs specialised support, ideally in the form of dedicated incubation programmes.

Building on previous research in this area, the CFE report reviews the current state of graduate entrepreneurship and university business support, and includes original analysis of the Labour Force Survey (LFS), the Destination of Leavers from Higher Education survey (DLHE) and the Higher Education Business and Community Interaction survey (HE-BCI). The report also features in-depth interviews with incubator managers and recent graduate incubatees from 14 leading British universities. A set of recommendations suggests how universities and government could promote graduate entrepreneurship, and proposes changes to existing metrics to facilitate this.

“By giving graduates the support they need to start and sustain successful companies, universities could greatly increase their contributions to local economic growth” says Matt Smith, director of the Centre for Entrepreneurs. “While universities are doing well to support current students at the “pre-startup” phase, they aren’t doing enough to help entrepreneurial graduates. Levels of graduate entrepreneurship are nowhere near what aspirations would suggest. To remedy this, we believe universities should be offering specialised incubation programmes to their graduates.”

The report finds that while the concept of incubation is not new to universities – with 80% running incubators of some sort – only around half of existing programmes (a third of all universities) actively target graduates. Among these, the quality of support offered varies widely, ranging from rationed hot-desking and light-touch support in some instances, to dedicated office space and full-time intensive training in others. Graduates are rarely set apart from students in terms of the support available, despite their different needs. The remaining half of university incubators focus on non-university affiliated SMEs and spin-out companies based on university intellectual property (IP).

CFE argues that more universities should run graduate-focused incubators to capitalise on the potential of graduate entrepreneurship. They should do this by setting up entirely new programmes, converting existing incubators, or working with other universities, local authorities and the private sector to establish joint programmes. It also calls for the creation of an umbrella group of university incubators to encourage collaboration, best-practice sharing and benchmarking, and urges government to pay just as much attention to graduate startups as it does to university spin-outs.

“Successful businesses come from all manner of sectors, not just technology” says Luke Johnson, chairman of the Centre for Entrepreneurs. “Sadly, universities’ unproductive fixation on academic spin-outs overlooks this fact. Instead, universities should be offering high-quality incubation support to all promising graduate startups. The cost of not doing so could be significant; who knows how many potential unicorns we’ve already missed out on?”