Incubators, including accelerators, are business support entities specialised in unlocking the potential of young or developing companies, often with a strong innovative component. Many of the best and most successful startups and scaleups pass through business incubators. When they do, they benefit from a range of supports, often including a physical space to work, coaching and mentoring, technical assistance, networking and peer learning, access to testing facilities, and, in some cases, direct funding in the form of grants, loans or equity investment. Incubators are increasingly also emerging as entrepreneurial ecosystem hubs, plugging their ventures into the surrounding ecosystem and connecting them with investors, coaches, universities, clients and suppliers, and public support programmes.
The number of incubators has grown rapidly internationally in the last two decades, although they vary substantially in terms of their support offer, business models, target companies, and delivery approaches. The growth in incubation is accompanied by other trends including increased specialisation of incubators, greater use of virtual delivery models, greater offerings of internationalisation support, the creation of shorter acceleration programmes, and more emphasis on the formation of partnerships with other ecosystem actors. The extent to which incubators are ahead or behind in these trends depends on the specific incubators and the country-level incubator systems they are part of.
Significant sums of public money are allocated to incubators for boosting startups and scaleups – a task vital for enhancing competitiveness, innovation, productivity and employment. To maximise the effectiveness of these supports, policymakers need to consider several challenging policy questions, including:
Which incubation activities should be promoted more strongly?
How much funding to provide, to which organisations, and under what conditions?
How to monitor performance?
How to incentivise or enable good practices in support delivery?
Should policy support focus on particular types of companies, sectors or regions?
This publication is intended as a guide for policymakers to navigate these types of policy decisions.
Part 1 proposes a working definition for business incubation and sets out what incubation programmes typically involve, the rationale for public involvement, and the major trends that are reshaping incubation. Part 2 examines the main types of services provided by incubators, with dedicated chapters on coaching, internationalisation assistance, financing, entrepreneurship training, and specialised incubation. Part 3 turns to government policy, presenting the results of a comprehensive mapping of policies for incubation in OECD countries and a discussion of policy issues. Part 4 presents eight country incubation policy case studies – Estonia, France, Ireland, Korea, Portugal, Singapore, Sweden, and the United Kingdom – offering information on their incubation systems, major incubation policies and lessons for other countries.
This leads to three key messages for governments:
1. Policy should support incubator evolution towards entrepreneurial ecosystem hubs. In the past, the key role of incubators was often to provide space and services direct to startups. However, many leading incubators today are taking additional roles as hubs in entrepreneurial ecosystems. They not only provide support to the promising startups they onboard but also connect them to a wide array of actors, contacts and resources in the ecosystem as well as providing ecosystem visibility and leadership. The networks and connections of incubators are now a core part of their value proposition for startups and scaleups and they also help other entrepreneurial ecosystem actors to access these firms. Policy can reinforce this new reality by channelling support to incubators that are deeply embedded in their entrepreneurial ecosystems, creating networks for incubators, encouraging strategic partnership formation, and providing quality assurance to help incubators build credibility in their ecosystems.
2. Incubation is more effective when personalised. The defining task for incubators is to provide support that meaningfully addresses their clients’ evolving needs. Entrepreneurs face intense time pressures. Policy supports that do not match their needs deter engagement and can be counterproductive. Personalisation is key. One-to-one coaching, specialised programmes, smaller and more targeted trainings, and bespoke matchmaking are some of the ways incubators are ensuring their startups and scaleups receive an individualised experience that delivers real value. Coaching is an essential aspect of incubation that is often delivered either in too small volumes or at too low a standard. Where this is the case, policy can incentivise and support incubators in upgrading their coaching offer. There is also scope to help the emergence of more specialised incubators, for example by sector or target population, where there are distinct support needs and sufficient take up.
3. Policy can be an important lever for raising incubation standards and keeping pace with trends and best practices. Across the world, leading incubators are constantly adapting, introducing new services and embracing new delivery approaches that provide a blueprint for others to emulate. Policy plays a vital role here. As a trusted player and important funding source, the public sector can help incubators to expand their capacity and improve their approaches to align with emerging best practices. Public funding support has been instrumental in building the base of incubators in recent years, but going forwards, the policy focus needs to pivot towards lifting incubation standards. The most direct policy lever is in setting the selection criteria and funding conditions for incubator support programmes, which should earmark funding for specific activities where there are support gaps, set and potentially adjust funding amounts depending on incubator performance, and design selection processes that channel funding to incubators with the greatest potential to deliver impact. Most countries can also do more to boost incubation standards through non-financial assistance. Creating incubator networks is a powerful way of fostering peer learning, resource sharing and collaboration within the system, while training schemes and guidelines for incubator personnel can also be impactful.