Governments are important funders of incubation, with many incubators reliant upon funding from public entities to finance some or all of their activities. The design of incubation funding programmes can vary widely, with large cross-country differences in selection criteria, eligible expenditures, and funding amounts and time horizons. This chapter reviews the key policy questions that governments face when designing and implementing funding programmes for incubators, including which organisations and incubation activities to fund, how to fund them, and how to monitor their performance and impacts. It also considers how governments can strengthen the performance of incubators beyond the provision of financial assistance, for example through the creation of networks or the provision of training for incubator staff.
Incubation in Entrepreneurial Ecosystems
Abstract
In most OECD countries, governments play an important role in funding incubators. This creates opportunities through the design of funding conditions and criteria to steer incubation systems towards providing more of certain types of incubation activities. The types of incubation activity that governments should encourage and fund depend on a variety of contextual factors, such as:
What are the most acute gaps or weaknesses in incubation support?
What are startups’ emerging development needs and bottlenecks?
Where are there untapped opportunities?
Which types of incubation activities are most impactful?
What are the government’s wider priorities and objectives?
While there is not a one-size fits all approach that can be applied universally to decide which incubation activities are prioritised by public programmes, there are some broad principles that governments can apply when designing programme funding programmes for incubators.
Keeping pace with incubation trends
It is important that policies keep pace with developing trends in incubation – both nationally and international – in order to ensure that the incubation activities funded by governments are aligned with best practices and remain relevant to the ever-evolving needs of startups and scaleups. These include:
Internationalisation assistance: Penetrating global markets is fundamental to the growth of innovative startups, particularly those originating from smaller countries. While some incubators have ramped up support for startup globalisation in recent years, for example through immersive “soft-landing” programmes, such supports tend to be expensive and are only accessible to relatively small numbers of firms at present. Governments can steer incubators towards promoting startup globalisation by incorporating internationalisation support capabilities within the selection criteria for public funding programmes. For example, capacity to support the internationalisation of startups was referenced within three of the five intended outcomes for the New and Existing Incubators funding stream of Australia’s Incubator Support programme (see Box 11.7), which resulted in most incubators citing support for internationalisation in their applications. Similarly, incubators within Norway’s incubator funding programme (see Box 11.5) are assessed partly on their capacity to support their clients in exporting, while allocated funding amounts provided through Sweden’s National Incubator Program (see Box 11.1) depend on the number of startups in the incubators’ portfolios that have a “scalable business model with international potential”. Another approach is for governments to themselves create new incubation programmes with a strong focus on startup internationalisation. Examples of this include the German Accelerator (see Box 6.2), Korea’s K-Startup Centres (see Box 6.1), and Enterprise Singapore’s Global Innovation Alliance initiative (see Chapter 17).
Specialised programming: One of the major trends in incubation internationally has been the shift towards greater specialisation (Schwartz and Hornych, 2012[1]). However, the emergence of specialised incubators has tended to concentrate in more advanced incubation systems. Many incubation systems, particularly those that are less mature, would benefit from more sector-specialised support programmes. Most public funding programmes for incubators tend to be relatively sector agnostic. This does not mean that they do not support specialised incubators, only that without a sectoral steer, the distribution of public funding de facto aligns with the existing sectoral focus of the incubation system. Sector-specialised incubation activities can be promoted more directly through public tenders and support for programmes focused on specific sectors, such is the case with Enterprise Ireland’s Innovators’ Initiative or the Estonian-government backed Health Founders Estonia. Public funding programmes can also introduce eligibility criteria based on the sectoral focus of the funded incubators.
Addressing specific incubation support gaps
Incubation policies should also address specific gaps in incubation support, which, if resolved, can enhance the support provided to startups and scaleups. Again, while different incubation systems face their own issues, there are certain recurrent areas that often come up as gaps in support or challenges for incubation systems that policy can play a role in alleviating:
Coaching: Coaching is often seen as one of the most impactful aspects of incubators’ support offer for startups and scaleups, and the quality of coaching available is a key factor that distinguishes highly performant incubators from less effective ones (see Chapter 5 for further discussion). The provision of minimum standards of coaching to startups should be a condition for funding through public support programmes for business incubators. This is the case, for example, with Sweden’s National Incubator Program, where incubators are required to adopt the coaching framework specified by Vinnova. In settings where incubators might struggle to find high quality coaches and mentors, government programmes can also earmark support specifically for the recruitment of coaches from elsewhere. As an example, Australia’s Incubator Support Programme included a funding stream for incubators to recruit “Experts in Residence” from other countries.
Building investment readiness: Obtaining external investment is a core focus for early-stage ventures. While some incubators excel at developing “investment ready” companies that can credibly seek private investment upon graduating from the programme, many other incubators are falling short in this regard. Policy can be designed to incentivise incubators to establish strong ties with local and international investors and deliver activities such as investor readiness training, demo days, and matchmaking.
Training on entrepreneurship skills: Training is a central component of many incubation programmes. Incubators’ training offers typically focus on business-related topics such as business model development, establishing product-market fit, and developing compelling investor pitches. Less common are training initiatives to build the entrepreneurship skills of the founders themselves, for example in the areas of leadership and management (see Chapter 8 for further discussion). This can be boosted either through the development of in-house training programmes on entrepreneurship skills or, where incubators face knowledge or capacity constraints, through partnerships with formal educational institutions with pre-existing programmes on this topic. The ETH Zürich Pioneer Fellowship Deep-Tech Incubation programme in Switzerland (see Box 8.1) provides an example of how the latter model can be pursued.
Funding incubation, not incubators
Many countries have historically provided extensive public support – both from national and regional government level – for the establishment of new incubation entities to build up their incubation system. Today, however, most public funding programmes for incubators stipulate that funding received must be used to finance an expansion of supports for client firms or the introduction of new supports. These are sometimes referred to as “incremental” activities, meaning activities that would not have been carried out in the absence of the public funding. The eligible expenditures within such programmes are those that contribute directly to the project or activity articulated in the incubator’s funding application. Such costs may include the salaries of employees employed directly in delivering the project, travel expenditures associated with the project, or the costs of contracting third parties to deliver or contribute to aspects of the project. In Sweden’s National Incubator Programme, the incubators’ clients are in fact considered the recipients of the state support, rather than the incubator itself. Accordingly, the incubators can only reimburse costs associated with the delivery of services to their clients, such as business coaching, participation in trade fairs, or accessing laboratories or testing infrastructure. More general operational costs associated with the day-to-day running of the incubator or accelerator are generally not eligible. This reduces the risks that come with funding incubator’s operational costs, such as an overreliance on public funding, reduced efficiency, and excessive time spent by incubator staff in seeking funding (OECD, 2003[2]).
Verifying the eligibility of incubators’ claimed expenditures for funding under a particular programme can, however, be a challenge. For example, stakeholders involved in the Canada Accelerator and Incubator Program found the process of verifying that activities are indeed “incremental” to be very time-consuming. This is a particular challenge when funding smaller incubators that may only have one or two staff members who work on all aspects of the incubators’ operations. In these cases, it is less straightforward to identify an individual as working exclusively on a particular project, which would make their salary an eligible expenditure under a government grant programme.
Once it is established which incubation activities governments would like to support, the next key policy question is which organisations are selected to deliver the activities. The selection of incubators for public funding programmes is typically made by experts or panels, which assess incubators’ applications against a set of pre-defined criteria. While these criteria vary depending on the objectives and context of the programme, they can generally be categorised into:
A base set of binary criteria that articulate which types of organisations are eligible for support under the programme. These criteria often relate to:
The type of organisational entity.
Area of specialisation.
Geographical location.
A set of more open or subjective criteria that are used to determine which of the eligible incubators should be funded. In general, the assessment seeks primarily to determine the applicants’ capacity to support startups and scaleups and deliver an impact. Often, this involves looking at:
The incubator’s level of connectedness with other entrepreneurial ecosystem actors.
The internal capability of the incubator.
The track record of the incubator in supporting startups and scaleups.
The remainder of this section discusses the different criteria that governments apply when selecting incubators for support through public funding programmes, building insights and lessons from international policy experiences and the academic literature.
Organisation type(s)
Many different types of organisations run incubation programmes, including national and regional public entities, universities, corporations, investors, and standalone business support entities. The core objectives, activities and competencies of an incubator are often linked to those of the parent organisation. Thus, when determining which types of organisations are supported by incubator funding programmes, it is important to ensure that the organisations’ objectives and orientation are aligned with those of the policy.
Whether to fund for-profit incubators
A key choice for policymakers is whether to support the activities of for-profit incubators. Approaches vary between countries. Sweden’s National Incubator Program only accepts incubators that are publicly owned or affiliated, while Norway’s programme permits incubators that are privately owned but prohibits the paying out of dividends. Meanwhile, Australia and Canada’s (now discontinued) incubator funding programmes provided grants to both not-for-profit and for-profit initiatives. At the other end of the spectrum, Israel’s Technological Incubators programme seeks to attract consortia of private venture capital funds and large corporations.
The choice surrounding which types of organisations to support through public funding programmes should ultimately be determined by the nature of support different types of entity are likely to provide to their clients, and whether these are aligned with the goals of the policy. Private, for-profit incubators may have a greater incentive and capability to select clients that can pay higher rates or are better able to attract investors at their current stage of development, though this comes at the risk of excluding the “weak but promising ventures” that are often the target of government policy (Tavoletti, 2013[3]). (Peters, Rice and Sundararajan, 2004[4]) note that non-profit incubators may have better access to government and university resources and networks and can take more time to support their clients due to them facing less commercial pressures to lease out space. They may also provide startups with a greater degree of autonomy in developing and testing their ideas, products and services (Nam, 2000[5]). These are particularly important considerations in the context of supporting knowledge-intensive deeptech startups and scaleups. On the other hand, there are some concerns that, where incubators are very heavily reliant upon public support, they may devote excessive resources towards making applications for public funding at the expense of supporting their client companies.
Funding consortia
It is common for incubator funding programmes to invite applications from consortia comprising multiple organisations. For example, the 2023 edition of the United States Small Business Administration’s (SBA) Growth Accelerator Fund Competition adopted a multi-stage structure that brought together ecosystem actors to create Growth Accelerator Partnerships that deliver incubation and acceleration services to high potential startups. In the first stage of the competition, grants of USD 50 000 were awarded to organisations (“catalysts”) to finance ecosystem building activities and the formation of the Growth Accelerator Partnerships. In the second stage, the catalyst organisations established their Growth Accelerator Partnerships and submitted proposals for an accelerator model. A similar approach can be found in the Israel Innovation Authority’s (IIA) Technological Incubators Program, which invites consortia to submit proposals for establishing and operating new incubators in areas specified by the IIA. The successful consortia are awarded a franchise to run the incubator for five years, with the option of extending by an additional three years. The IIA funds 50% of the R&D infrastructure investments needed to establish the incubators, up to a maximum amount of NIS 2 million (approximately EUR 0.6 million). Ireland has also adopted the approach of contracting consortia to deliver incubation and acceleration programmes, with the award of a 5-year, EUR 17 million contract in 2020 to four organisations to operate the National Digital Research Centre.
A notable difference between the programme in Israel and the programmes in Ireland and the US lies in the composition of the consortia that operate the incubators. In the case of Ireland and the US, the consortia are generally formed of research institutions, network organisations, and incubators. In Israel, the consortia comprise more private venture capital funds and large companies. Also, through its involvement in selecting and funding the startups that participate in the incubators, the IIA has a more hands-on role in the operation of the incubators than is the case with the SBA’s programme, for example.
Specialisation
One of the major trends internationally in the incubation field is the increasing sector-specialisation of incubators (Schwartz and Hornych, 2012[1]). A benefit of specialisation is the ability to provide tailored facilities and supports to client firms (Klofsten et al., 2020[6]; Schwartz and Hornych, 2008[7]). Furthermore, staff and management within specialised incubators have a greater opportunity to build up sector-specific expertise over time on how to support firms in a particular sector (Klofsten et al., 2020[6]). Chapter 9 of this publication discusses this trend in more detail. While most national funding programmes for incubators tend to be relatively sector-agnostic, there are some schemes that explicitly target organisations that are active in specific sectors, such as the United Kingdom’s Catapult programme (see Box 9.1 in Chapter 9) or the Israel Innovation Authority’s Deep Tech Incubation Fund, which provides grants of up to NIS 40 million (approximately EUR 9.8 million) for private corporations and investors to operate new technology incubators.
Geographical location
The physical location of an incubator is key to its ability to effectively support startups and scaleups. In order to be good hosts for a technology-oriented incubator, regions must have a sufficiently large population and economy in order to achieve agglomeration effects, as well as a strong university or research institution (Tamásy, 2007[8]; Tavoletti, 2013[3]). Incubators based in peripheral regions may experience challenges relating to the size and geographic location of the region, as well as an outflow of talent or lack of an entrepreneurship tradition (Klofsten et al., 2020[6]). It is important that publicly funded incubators are located in places where they can access the clients, resources, and other entrepreneurial ecosystem actors they need in order to be impactful and effective.
Most national funding programmes do not apply explicit quotas or requirements for the share or number of supported incubators that are based in certain regions, although some programmes do include geographical reach among the criteria for selecting the incubators. There are, however, many local policy initiatives where the geographical location of the incubators is a central criterion for support. This is the case, for example, with incubators that are created or funded by local authorities or municipalities.
Connectedness
Incubators are central players within an entrepreneurial ecosystem (Lamine et al., 2018[9]). One of their core functions is to act as a “bridge” between new businesses and other resources and actors in the entrepreneurial ecosystem (Amezcua et al. 2013). There is good evidence that an incubator’s level of embeddedness within an ecosystem is key to its success in supporting startups and scaleups, especially for incubators targeting highly promising ventures at a later stage of development where networking supports are of particular benefit (Chan and Lau, 2005[10]; Grimaldi and Grandi, 2005[11]). For example, (Hallen, Cohen and Bingham, 2020[12]) show that regular and intense consultation with a broad range of stakeholders outside of an accelerator intensifies the learning experienced by client companies. Linkages between incubators and investors can also help to professionalise client firms (Hellmann and Puri, 2000[13]; Breivik-Meyer, Arntzen-Nordqvist and Alsos, 2020[14]). Meanwhile, close linkages with universities help to promote the flow of intellectual capital between researchers and startups (Mian, 1994[15]). The legitimacy and credibility that well-connected incubators have within an entrepreneurial ecosystem can also deliver reputational benefits for the startups and scaleups within the incubator (Autio and Rannikko, 2016[16]). In addition, greater ecosystem embeddedness can help incubators to attract high quality entrepreneurs, creating a virtuous cycle for the incubator and its clients (Cánovas-Saiz, March-Chordà and Yagüe-Perales, 2020[17]).
These factors mean that connectedness with other ecosystem actors is a key consideration for policy in determining which incubators to support (Hansen et al., 2000[18]; Grimaldi and Grandi, 2005[11]). This is the case, for example, in Norway’s national incubator programme, where incubators are required to be situated in an innovation environment and have national and international partnerships. In other programmes, applications from consortia of multiple organisations are also encouraged or required.
Internal capability
The effectiveness of incubators in supporting their clients links to their internal capabilities. Having high quality management is a critical success factor (Grimaldi and Grandi, 2005[11]; Alpenidze, Pauceanu and Sanyal, 2019[19]; Clarysse and Yusubova, 2014[20]). Incubator managers play an important role in balancing learning approaches to support the future growth of their clients and provide them with a competitive advantage (Patton and Marlow, 2011[21]; Woolley and MacGregor, 2022[22]). Their decisions regarding programme design, mentorship, resource allocation, and performance management shape the effectiveness of incubation programmes. Some important attributes for incubator leaders are having a business background, strong entrepreneurship skills, and being well networked in the entrepreneurial ecosystem (Alpenidze, Pauceanu and Sanyal, 2019[19]). In science-based incubators, (Fukugawa, 2013[23]) find that the technological skills of the incubator managers are also highly relevant. Competent managers with relevant experience and expertise are also key to attracting the best startups (Clarysse and Yusubova, 2014[20]). As well as the personnel, internal capabilities are also shaped by the processes and resources that exist within the incubator. Public funding programmes for incubators often seek to assess the quality an incubator’s processes, services and management when making decisions on where to allocate funding. Funding decisions are based not only on the initial level of internal capabilities demonstrated by an incubator, but also on the extent to which the funding support could facilitate an improvement in service provision.
Track record
Track record is often the clearest and most readily observable signal of an incubator’s ability to support startups and scaleups. Thus, the past performance of an incubator is often a central consideration for policy in deciding which incubators to fund. The Canada Accelerator and Incubator Program initially set out to support both “outstanding” incubators that have already demonstrated success and “high potential” incubators that were less established. Ultimately, however, the 16 selected incubators fell into the former category, which is now considered one of the success factors of the programme. Applicants for New York State’s economic development arm’s Innovation Hot Spots and Certified Incubators Program are also required to show a track record of supporting startup companies. Similarly, many funding programmes for the establishment of new incubation or acceleration entities – for example, the Growth Accelerator Fund in the United States, the Technological Incubators programme in Israel, and Norway’s national incubation programme – take into account applicant organisations’ track record and experience in supporting startups and scaleups. Another approach is to provide different tiers of funding depending on the maturity of the applicant. For example, Sweden’s National Incubator Program provides a base level of funding to incubators that meet Vinnova’s minimum requirements, while Australia’s Incubator Support Programme provided smaller grant volumes to new incubators. This approach offers the benefit of providing some initial funding opportunities to help new incubators to get off the ground while limiting the amounts allocated to new entities for which the risk of failure is inevitably higher.
Incubator funding programmes that select based on track record are indirectly conditioning receipt of funding on the age of the incubation entity. The evidence is mixed when it comes to the relationship between the age of an incubator and its effectiveness. In a study of 149 graduate firms from five technology-oriented business incubators in Germany, (Schwartz, 2012[24]) finds a negative relationship between the age of an incubator and its clients’ survival prospects. Potential factors driving this result include a declining share of incubator managers’ time being devoted to the coaching of clients or an ever diminishing pool of high-quality client firms that incubators in a particular area or sector can tap into over time (Schwartz, 2012[24]). On the other hand, (Link and Scott, 2017[25]) find that the age of science parks in the United States is positively linked to patenting activity and the attraction of leading academics. Similarly, (Allen and Mccluskey, 1991[26]) find that the age of incubator facilities is positively correlated with the number of jobs created.
At the national level, there are two main ways in which governments finance incubators:
National funding programmes that award small to medium amounts of funding to a select number of incubators or accelerators through an application process that is generally open to all organisations that meet certain eligibility criteria. Applicants are typically required to submit a proposal for a particular project or initiative that they would use the programme funding to deliver.
The issuance of tenders where applicants can apply to be the operator of a particular incubation programme that is defined in the tender.
Generally speaking, national funding programmes have the core objective of building the overall capacity of the incubation system in the relevant country. The issuance of tenders is more geared towards addressing specific gaps, weaknesses, needs or opportunities in the entrepreneurial ecosystem.
Funding amounts
The amount of funding awarded to individual incubators via national funding programmes varies widely between programmes. In the countries examined in this report, the amount of funding provided to each incubator within national funding programmes ranges from less than EUR 100 000 per year to more than EUR 400 000 per year.1 The amounts awarded through tenders to deliver defined programmes can be substantially larger. For example, a publicly-funded consortium of four private incubators was awarded a EUR 17.5 million contract by the Irish government in 2020 to operate the National Digital Research Centre (NDRC) – Ireland’s national accelerator programme – for a period of five years. Similarly, in 2024, the Israel Innovation Authority issued tenders that would award grants of up to NIS 40 million (approximately EUR 11.8 million) for the establishment of three new incubators in three deep tech fields.
Countries also take different approaches with respect to the uniformity of grant sizes within programmes. In some programmes, differentiated grants sizes are applied, with incubators receiving an amount dependent on certain criteria, characteristics or performance. The incubation programme of the Industrial Development Corporation of Norway, for example, enables grant sizes to be adjusted over time (or phased out altogether) depending on the performance of the incubators against the objectives specified in their funding agreement. This helps to ensure that funds are allocated to the programme operators that are most effective in creating value. In Sweden, funding volumes under the National Incubator Program are tied to the number of qualifying startups that are housed within the incubator. The objectives, structure and lessons from this Swedish programme are set out in more detail in Box 11.1 below.
Objectives and rationale
Sweden’s National Incubator Programme (NIP) co-ordinates and develops Sweden’s incubation system, building structural capital in the form of infrastructure that increases the country's ability to support and develop early-stage companies. Additionally, the programme acts as a co-ordinating node for collaboration between incubators and contributes to national and international networking.
The NIP began as a pilot operation at Vinnova – Sweden’s innovation agency – in 2003. The current iteration builds on the government assignment that Vinnova received in 2014, in which the objectives were to i). increase the number of new and knowledge-intensive growth companies in Sweden and ii). to direct efforts towards incubators that demonstrate high quality and performance in their ability to successfully support the development of business ideas with unique knowledge advantages and potential to grow on international markets. To achieve these objectives, Vinnova has designed the NIP according to the following two basic principles:
Promoting company development through incubators.
Developing national incubation capacity by supporting peer-learning between incubators, as well as support for the development of new tools and methods for incubation.
Vinnova’s rationale for supporting startups’ development via quality-assured incubators is that it is more cost-effective to ensure the quality of several incubators with national coverage than it is to quality-assure the operations of every company that needs incubation support.
Description
For the 2021-2024 iteration of the programme, the NIP provides financial support to selected incubators of up to SEK 5 million (approximately EUR 430 000) annually for the four-year period. The total budget for the programme during this period is SEK 350 million (approximately EUR 30.3 million). The programme will also be extended for a new four-year period between 2025 and 2029. The NIP requires that participating incubators have a public mandate for incubation and refrain from distributing profits to their owners, effectively discouraging private incubators from seeking participation. Most of the incubators are co-owned by the local university and municipality.
From 2020, the size of each incubator's funding has been determined in two stages:
1. Incubators’ processes are evaluated to verify that they meet Vinnova's quality requirements. The incubators meeting these requirements are awarded a basic amount to deliver incubation services.
2. Incubators then submit the profiles of 15 startup firms from their portfolio. The amount of funding awarded is determined based on the number of “strong” startups in the portfolio. To obtain full funding, incubators must demonstrate sound operational practices in step one and a portfolio of at least 15 scalable companies.
This evaluation model has the advantage of ensuring that incubators are not competing against each other, since it is the number of approved target group companies in the company portfolio that determines the amount of funding.
In addition to receiving funding, the incubators supported by the NIP receive an array of non-financial supports in addition to the grants issued under the programme. These are principally delivered by Swedish Incubators and Science Parks (SISP), which is Sweden’s non-profit industry association for incubators and science parks and co-ordinates the NIP. SISP runs three activities for the incubators on behalf of Vinnova:
Peer reviews, which are transparent and comprehensive reviews with peers taking place every three years.
Shared learning activities, involving incubator personnel and clients. There are two physical meetings yearly and 12 online meetings. As part of the shared learning, international travels and a yearly conference is organised. The activities of the shared learning aim to foster trust, community, openness, and willingness to co-operate.
Joint development projects, which are funded by Vinnova. To be supported, at least three incubators must develop a collaboration together.
Success factors
A characteristic feature of the support system for incubators and accelerators in Sweden is the systemic approach and long-term perspective that is applied by Vinnova and other actors in the innovation system. Over time, through sustained commitment and support, Vinnova has established a high degree of credibility within and around the incubation and acceleration system. The perceived competence and credibility of the NIP’s central organisation (Vinnova) is a key driver of the programme’s success.
Another success factor is the close networking between the various actors in the innovation ecosystem regionally and nationally. This is facilitated and promoted by the peer learning and shared learning experiences of the NIP. The NIP’s emphasis on collaboration and networking applies domestically and internationally, enhances connectivity and knowledge sharing among the incubators. Also key is the provision of relatively long-term funding to the incubators, which enhances the sustainability and prospects of both the incubators and their startups and scaleups.
Challenges
The NIP lacks an explicit regional dimension, which has resulted in most of the supported incubators being located in larger cities with good research universities. There are thus some concerns of neglecting the need for incubation support in more peripheral regions, which is of the challenges that Vinnova is aiming to address in the future development of the NIP. In terms of the design and implementation of the NIP, some stakeholders have also noted that the time and resources needed to develop the application and comply with the reporting requirements are too high, particularly for smaller incubators with a very lean administration. Stakeholders have also expressed that it would be beneficial for the NIP in its peer learning and training initiatives to place a greater emphasis on more practical topics such as determining the viability of startups.
Conclusions and takeaways
The scope of the NIP extends beyond that of a straightforward funding programme. In addition to providing relatively long-term funding, the NIP places a notable emphasis on strengthening collaborations and partnerships. More broadly, Sweden’s approach illustrates the importance of seeing new business creation in the context of an entrepreneurial ecosystem. Through Vinnova’s role as the co-ordinator of all entrepreneurship and innovation policy in the country, Sweden has been able to exploit synergy effects and ensure that incubators and accelerators are aligned with other ecosystem actors. This role has also helped Vinnova to establish the credibility among relevant actors which has proven key in unlocking the reputational benefits that NIP-incubators derive.
Often, incubators have the option to apply for a certain size of grant. This is the case, for example with Australia’s Incubator Support Programme or Portugal’s (EU-funded) Vouchers for Incubators and Accelerators scheme. However, what is often seen in practice – particularly where the maximum grant size is relatively low as is the case with Australia and Portugal’s programmes – is a clustering of grant sizes around the value of the programme cap. In the first iteration of Portugal’s Vouchers for Incubators and Accelerators scheme, 63 applicants were awarded a total of EUR 9.1 million, implying that the vast majority of awardees received amounts equal to or very close to the programme limit of EUR 150 000. Similarly, in Australia’s Incubator Support programme, the modal amount awarded was AUD 500 000 during the initial years of the programme, which corresponded to the programme limit. When this limit was reduced to AUD 250 000, the modal amount shifted to this lower level, as shown in Figure 11.1.
Matching funding requirements
Another point of distinction between incubator funding programmes are the requirements surrounding matching funding. In some national funding programmes, the awarded grants would only cover a proportion of the cost of the applicants’ projects. The remaining funds can come from other public or private sources. An advantage of requiring matching funding is that it creates an incentive for organisations to form strategic partnerships with other entrepreneurial ecosystem actors in order to deliver their programmes, which in turn can enhance their effectiveness and impact. It is important to note, however, that matching funding requirements can create a bias towards certain types of organisations, such as large corporations, venture capital funds, or organisations based in major urban centres. Australia’s Incubator Support Programme addressed this issue by lowering the matching funding requirement for regional incubators, which is a good example of how greater flexibility or nuance can be introduced to selection criteria to ensure programmes are accessible to different types of incubators.
Funding period
The standard practice for large public tenders to deliver a particular incubation programme is to provide multi-annual contracts to the chosen operators. Examples of this include the 4-year contract awarded to the Start2Group by the German Federal Ministry for Economic Affairs and Climate Action to deliver the German Accelerator programme, the 5-year contract awarded by the Irish government to operate the National Digital Research Centre (NDRC), and the 8-year franchise periods offered to the selected incubators within the Israel Innovation Authority’s Technological Innovation Incubators Programme. There is a more mixed picture when it comes to national funding programmes for incubators, with funding periods ranging from less than two years for some programmes to five years in the case of the (now discontinued) Canada Accelerator and Incubator Programme and the incubation programme of the Industrial Development Corporation of Norway.2
The provision of multi-annual funding for incubators is beneficial for several reasons. Firstly, it provides a greater degree of funding security to the incubators, enabling them to adopt a more long-term and strategic approach. Secondly, it affords them the time to build relationships and become established in the entrepreneurial ecosystem. This is key to enabling incubators to perform their core “bridging” function of connecting their clients to other actors and resources in the entrepreneurial ecosystem. Thirdly, multi-annual contracts reduce the amounts of time that incubator personnel spend on funding applications, allowing more time to be spent supporting their clients.
Integrating non-financial assistance
Training and capacity building
The provision of training and capacity building activities to staff working in incubators can enhance the ability of these organisations to support startups and scaleups. Such training can be embedded within funding programmes for incubators. For example, in Norway’s national incubation programme (see Box 11.5), incubator personnel benefit from a range of competence building activities, including webinars, seminars, subject gatherings, development conversations with programme operators, best practice dissemination, tools and templates, and a digital sharing platform. In addition, the incubators in the programme receive regular feedback through an annual customer satisfaction survey, differentiation analyses every two years, and annual quality assurance and assessments of their performance and activities.
Quality stamps
The development of quality stamps, standards or certifications can help incubators to improve their practices and establish the credibility needed to attract startups, investors and other partners. This signalling can also deliver knock-on reputational benefits for incubators’ clients. Establishing credibility within the entrepreneurial ecosystem can represent a significant challenge in a context where there are not widely adopted performance metrics for incubators. Providing ways for incubators to signal their credibility or quality can therefore help to negate the “winner takes all” dynamics that can emerge in an incubation system where activities and resources are persistently concentrated within a small number of the most established programmes due to strong and sticky reputation effects. Quality stamps can be either implicit or explicit, but either way are underpinned by the credibility of the issuing entity.
Quality certifications and labels can be incorporated within public funding schemes for incubators. As an example, the incubators participating in Sweden’s National Incubator Program benefit from a quality assurance stamp issued by Vinnova. This helps them to obtain funding from other sources (OECD, 2022[27]). The credibility of the programme and that of the government entity operating it is key to ensuring that the “quality stamp” delivers a tangible benefit. Korea has also established clear criteria for qualifying as a registered accelerator, which are set out in the Act on the Promotion of Venture Investment. Similarly, the European Commissions’ Business Innovation Centres (BICs) are accredited based on meeting certain minimum qualifying criteria. In Portugal, incubators must satisfy a clear set of criteria in order to become certified incubators within the national incubator network. These criteria cover a range of factors, from the services offered to the events they host or the resources they have access to. The plan in Portugal is to incrementally tighten the eligibility criteria over time to gradually raise the performance and standardisation of the certified incubators in the national network.
Performance monitoring
Performance monitoring is an important aspect of implementing an incubation support programme. Across countries, it is common to find incubators that are un-professionalised with relatively low capacity to effectively stimulate startup and scaleup development. Where incubators are reliant on public funding, as is the case in most countries at least to some extent, performance monitoring can be used to inform funding choices and incentivise incubators to improve their practices and/or align their activities with the government’s strategic priorities (Asiaei et al., 2022[28]). For example, in Norway’s and Sweden’s incubator funding programmes, funding volumes are tied to the performance of the incubators along pre-defined metrics. Transparent and comparable metrics also enable entrepreneurs to make more informed decisions on where they should seek support and make it easier for incubators themselves to identify their strengths, weaknesses and areas for improvement. Furthermore, the use of clear performance metrics can help newer incubators to become more established within the ecosystem, which in turn can help them to attract, for example, better mentors and founders.
Performance monitoring systems require a co-ordinated approach where incubators report on consistent metrics (Azadnia et al., 2022[29]). Setting appropriate performance metrics is also key. Incubator performance is multi-dimensional and metrics should accordingly cover different dimensions of enterprise development, such as the time taken to develop products or services or the management practices of the supported enterprises (OECD, 2003[2]). When designing performance metrics, it is also important to distinguish between incubation outputs (e.g. the facilities or services provided) and outcomes (e.g. the performance of the supported businesses). Another important consideration is that some incubation effects only become visible after the firm has graduated from the programme. For example, employment growth often takes place some time after a firm has left an incubation programme, which implies that it is not always appropriate to assess incubators’ performance based solely on the job creation of businesses during the incubation period (OECD, 2003[2]). A more suitable metric may be job creation after graduation, although there are challenges with collecting data on businesses post-incubation. An alternative is to consider indicators that capture factors that can be observed over a shorter time horizon, such as product development times, fundraising outcomes, or the technological readiness levels of client companies.
(Messeghem et al., 2017[30]) emphasise the value of considering all relevant stakeholders in designing performance metrics, adopting a so-called “balanced scorecard” approach. In the case of incubation systems, the key stakeholders are the client companies, the incubators, and the government entities supporting them. Based on this, (Messeghem et al., 2017[30]) propose a performance measurement framework for incubators that includes metrics on economic and social development, entrepreneurs’ perceptions and performance, the business support process, and learning.
Box 11.2 presents three examples of performance monitoring systems for incubators and that have been developed by Innovation, Science and Economic Development Canada, Vinnova (Sweden’s innovation agency), and the European Commission.
Canada
Canada has put the “balanced scorecard” approach into practice with the launch of a new performance measurement framework for business incubators and accelerators, which was created by Innovation, Science and Economic Development (ISED) Canada in consultation with business incubators. The framework comprises an annual survey that is voluntarily completed by incubators. The aims are threefold:
To enable business incubators and accelerators to benchmark their performance.
To help companies to choose their best options for support, and.
To assist governments in increasing the effectiveness of their public investments.
The survey is divided into two components. The first component is completed by the incubator or accelerator, with questions on programme structure, the types of support provided, the target group, and delivery models. The second component is completed by the client companies, covering indicators such as job creation, revenue, capital raised and use of government services.
The data gathered from the first four years of the performance measurement framework, alongside merged tax filings data from Statistics Canada, has been leveraged by ISED to conduct an impact evaluation on the effect of business incubators on their clients’ performance (ISED, 2024[31]). This illustrates how performance monitoring systems can be used to strengthen the evidence base on business incubation.
The European Commission
Meanwhile, in its 2002 benchmarking of business incubators, the European Commission proposed that the performance of incubators should be judged principally in terms of the results achieved i.e. the impact they have on businesses and on wider economic development and other priorities (European Commission, 2002[32]). The performance measurement should also focus on long term measures of performance such as the employment growth of graduate companies rather than short term metrics such as incubator occupancy rates or failure rates. The chosen indicators were spread across three categories (i). setting up and operating incubators, ii). incubator functions, management and promotion, and iii). evaluation of services and impact), with data collected through surveys to incubators and clients as well as through a schedule of interviews.
Sweden
The National Incubator Programme of Sweden provides a more recent good practice example of managing a performance monitoring system for incubators and accelerators. Since 2007, comparable data have been collected on a range of variables relating to the performance of incubators and the businesses they support. This has provided the programme managers with a time series database to monitor trends, identify best practice approaches, and inform decisions surrounding the allocation of funding support.
A key challenge in managing performance monitoring systems is ensuring that enough incubators provide the necessary data. In some countries, performance reporting is a criterion for public funding. However, excessively demanding reporting requirements can deter incubators from engaging in the programmes altogether. This is particularly the case for smaller incubators with less internal capacity to manage the data collection and reporting process. Client businesses may also be reluctant to disclose certain data on their activities or performance, which can be a barrier to implementing performance monitoring systems. Box 11.3 presents the case of the Canada Accelerator and Incubator Program, an incubator funding programme that also provides useful lessons on implementing performance measurement frameworks and adapting these to ensure they meet the needs of different stakeholders.
Objectives and rationale
The Canada Accelerator and Incubator Programme (CAIP) was an initiative of the Government of Canada’s Venture Capital Action Plan and was conceptualised and designed by Finance Canada. Running from 2014 to 2019, the CAIP supported selected incubators and accelerators with the objective of establishing a critical mass of outstanding incubators and accelerators that can develop innovative, high-growth Canadian SMEs. The four expected outcomes set out by the government were i). Incubators and accelerators should expand their range of programme and services, ii). Early-stage firms will become investment ready, iii). Early-stage firms benefit from innovation support resources such as expertise and networks, and iv). Wealth creation in Canada.
Description
The CAIP had a budget of CAD 100 million (approximately EUR 67 million) to be distributed over five years. The recipients were selected through a one-time Request For Proposals (RFP) that was launched on 23 September 2013 with a proposal submission deadline of 30 October 2013. According to the RFP, recipients were to be market-driven, led by the private sector, and contributing to a sustainable venture capital system. Approximately 100 proposals were received, which were first assessed based on the defined eligibility and selection criteria. Applications were judged on how the funding would contribute to the four expected outcomes for the CAIP. The proposals that met the programme criteria were then presented to the independent Canadian Venture Capital Expert Panel (a five-member panel selected by Finance Canada with experience in the venture capital asset class and the business and finance sectors). In total, 16 incubators and accelerators were selected to receive funding. The allocation of funding ranged from less than CAD 1 million (approximately EUR 668 000) to over CAD 11 million (approximately EUR 7.4 million) over the five-year programme period. All recipients had to demonstrate matching contributions on at least a 1:1 basis during the funding period.
The reporting of key performance data was among the obligations included within the selected incubators and accelerators’ contribution agreements. The government established 11 indicators to assess the performance of the supported incubators and accelerators:
1. Incremental programmes and services offered by the incubators and accelerators
2. Number of incremental expertise providers (mentors)
3. Number of early-stage firms which receive investment
4. Average investment received by early-stage firms
5. Number of early-stage firms supported
6. Number of staff at early-stage firms
7. Percentage of early-stage firms satisfied with program and services
8. Average satisfaction rating on benefits to firms from innovation networks
9. Number of incremental jobs created
10. Percentage of early-stage firms which generate or increase their revenue
11. Early-stage firm survival rate
Success factors
The CAIP was successful in fostering the development and economic contribution of startups in Canada, with the CAIP-supported incubators expanding their portfolios of client companies considerably between 2014 and 2017 and the majority of client firms with available data experiencing growth over at least one year (National Research Council Canada, 2018[33]). A key success factor was the rigorous upfront selection of the incubators and accelerators, with only those with established track records and strong ecosystem embeddedness eventually selected. Indeed, a notable feature of the CAIP incubators and accelerators is also their strong connections with universities and the private sector. Also important to the success of the initiative was the CAIP’s non-intrusive approach, which afforded the incubators the flexibility to adapt their activities and business model to their unique regional and industrial context.
Challenges
The introduction of a standardised national performance measurement framework facilitated more consistent and reliable data collection, improving the assessment of economic impact and programme effectiveness. However, the implementation of this framework was not without challenges. A mid-term evaluation of the CAIP identified concerns relating to the administrative burden on the incubators and their clients, as well as to concerns surrounding data privacy and security. The programme operator (National Research Council of Canada Industrial Research Assistance Program) effectively addressed these challenges by aligning reporting requirements across funding partners and implementing a more efficient data entry system. In addition, clearer guidelines and support tools were developed to reassure client firms about the confidentiality and secure handling of their data. This was facilitated by extensive consultation with the CAIP incubators and other stakeholders. Changes were also made to ensure that the performance measurement framework was adaptable to various regional and sectoral contexts.
The substantial contribution amounts made the CAIP’s due diligence and negotiation processes particularly lengthy, requiring a considerable time and effort investment from the incubators. The programme operator encountered further complications surrounding the handling of contracts involving multiple parties – a byproduct of the partnerships encouraged by the CAIP. Limiting the CAIP’s support to activities that are incremental also brought verification challenges.
Conclusions and takeaways
The CAIP was a complex programme to execute, but evaluations revealed that it had several positive outcomes. The CAIP highlights how a robust performance measurement framework can be used to benchmark performance, drive improvement and verify cost-effectiveness. However, the programme experience also illustrates the need to clearly define reporting requirements within funding agreements and to allocate sufficient time for the detailed planning and development of administrative processes before the launch of new programmes. Another lesson is that, for programmes like the CAIP, where beneficiaries engage through intermediaries, it is crucial to collaborate with other innovation and capacity support programmes to create a unified approach to collecting performance data.
The CAIP encouraged and sometimes required co-operation between different incubators and accelerators. Moreover, the matching funding requirement motivated the incubators and accelerators to establish strategic partnerships with other ecosystem actors. These factors meant that the CAIP’s funding spread throughout the incubation and acceleration system to smaller entities, usually through partnerships with a large incubator or accelerator that was receiving funding from the CAIP. There was also close collaboration among the funded incubators and accelerators. Indeed, after the CAIP’s launch, the participants formed an ad hoc working group, illustrating how an incubator funding programme can be a catalyst for increased cohesion and peer learning with an incubation and acceleration system.
The collection of consistent and reliable data on incubators’ performance, as well as that of their client businesses, also creates an opportunity to improve monitoring and evaluation practices. This can help to address the persistent knowledge gaps that currently exist regarding the types of incubation activities that are most effective in promoting startups and scaleups. It is important to have measures of impact that can be compared against other policy measures. The OECD Framework for the Evaluation of SME and Entrepreneurship Policies and Programmes 2023 recommends that all evaluations cover the core metrics of employment growth, sales growth and survival, in part to facilitate these cross-policy comparisons of effectiveness and cost-effectiveness (OECD, 2023[34]).
Across countries, the size and diversity of the incubator population has increased significantly over the past 10-15 years. Despite wide differences in objectives, areas of specialisation, funding sources and support delivery models, individual incubators are highly interdependent and affected by common factors such as the quality of the pipeline of entrepreneurs that can go on to become clients, the availability of key resources such as mentors or testing facilities, and the conduciveness of the financing landscape for startups and scaleups. Given these interdependencies, it is important to view incubators as forming part of a system. Strengthening linkages between incubators can significantly increase the system’s overall capacity to support startups and scaleups, for example through greater opportunities for peer-learning or resource sharing among incubators. Well-organised incubation systems are also easier to navigate for startups and scaleups, enabling them to identify the most appropriate programmes.
This section reviews some of the main actions that governments can pursue in order to strengthen linkages between incubators and create more cohesive incubation systems with high amounts of collaboration, synergies and mutual learning.
Supporting networks
Governments in a small number of countries have taken the important step of establishing a national network of incubators as a means of creating a more organised and cohesive incubation system. It is also not uncommon for incubators to take the initiative of creating their own small networks or groups, often with other incubators that operate in a similar sector or region. For example, in Sweden, incubators supported by Vinnova’s National Incubator Program often grant startups housed in other incubators access to their own facilities.
Members of incubator networks are often provided with free or subsidised access to bespoke training courses for incubator managers and staff to help them to build their internal capabilities. In addition, incubators within a network can play a signposting role by referring entrepreneurs to other organisations in the network. Perhaps most importantly, networking initiatives that strengthen linkages between incubators create rich opportunities for peer learning, which can be an effective vessel for raising the overall competencies within the system by shining a light on best practices and identifying solutions to common challenges. Peer learning can be facilitated formally through dedicated events and programmes, as well as through informal interactions between members of the network.
An important policy question for governments when forming national incubator networks is which types of entities should be included and which should be excluded. As discussed in Chapter 2, there is not a fixed definition of incubation that is applied internationally, meaning that a range of different organisations may refer to themselves as incubators, even where their activities do not align with those that governments intend to support through incubation programmes and initiatives. The increasing provision of public funding for incubators can create an incentive for organisations to label themselves as incubators where, perhaps, this label is not appropriate. Equally, some organisations whose activities align with a government’s understanding of incubation may themselves not self-identify as an incubator. Ultimately, the decision on where to draw the line should reflect the priorities and aims of the particular incubator network.
Box 11.4 describes the approach of Portugal’s National Network of Incubators, which is operated by Startup Portugal and is one of the few examples of a comprehensive national network of incubators.
Objectives and rationale
Portugal’s National Network of Incubators (RNI) is operated by Startup Portugal – a non-profit organisation that was formed in order to support the government in the creation and implementation of the National Strategy for Entrepreneurship, monitor the design and implementation of public policies to support entrepreneurship, promote entrepreneurship and Portuguese startups in Portugal and abroad, and administer European funds designed to boost entrepreneurship. Portugal’s incubation and acceleration system is less mature than in some other countries, having mostly developed over the past 10-15 years. The RNI seeks to support the professionalisation and continued development of the incubation and acceleration system.
Description
As of January 2024, there were 138 certified incubators within the RNI, which were supporting a total of 4 983 businesses. The population of certified incubators is concentrated in the North, Lisbon and Centre regions, specifically in the cities of Lisboa, Porto, Aveiro, Braga and Coimbra where the most developed entrepreneurial ecosystems are located. The RNI has introduced a range of activities to facilitate networking and build capacity within the Portuguese incubation and acceleration system. For example, it has partnered with the Founder Institute to offer a training course specifically developed to assist incubator and accelerator managers in the design and implementation of startup support programmes. Peer learning is also fostered through an annual networking event for incubators and accelerators in the RNI, as well as through a monthly blog series that profiles the practices and experiences of different incubators and accelerators.
Success factors
The long-term vision of the RNI is to strengthen the national incubation and acceleration system by encouraging and incentivising Portuguese incubators and accelerators to become more professionalised and adept in supporting startups and scaleups. To achieve this, the criteria for participation in the RNI will be gradually tightened, creating an incentive for the members to professionalise and boost their competencies. In addition, RNI membership must be renewed on an annual basis to ensure that members remain up to standard. Key to the success of the initiative will be ensuring that the RNI continues to provide its members with the training and peer learning opportunities needed to become more professionalised and impactful in supporting startups and scaleups.
Challenges
A key challenge for the RNI is to raise the capacity and internal competencies of incubators and accelerators from across the network, particularly those in low-density or rural areas that currently have a limited capacity to support high impact startups and scaleups. Capacity building and training activities are being implemented by the network in order to address this challenge. There is scope to introduce further capacity building activities for the incubators and accelerators within the RNI. For example, formal peer learning programmes would provide opportunities for less professionalised incubators in low density regions to learn from and build relationships with more developed incubators and acceleration in the country.
Conclusions and takeaways
The National Network of Incubators in Portugal is a leading example of a public initiative to raise the standards and competencies of incubators and accelerators throughout the national system. The approach of providing both an incentive (through tightening criteria for membership) and the means (through the offer of training programmes) to professionalise is an innovative one with useful lessons for other countries.
Enabling resource sharing
In order to be effective in stimulating the creation and growth of impactful new companies, incubators need to be situated in a context where there is a sufficient quantity and quality of relevant entrepreneurs, mentors, investors, facilities and research outputs. For incubators in remote regions, or those that are less established or are highly specialised, accessing these key resources can represent a sizeable challenge. Creating opportunities for incubators to share and pool their resources is one way in which access to resources can be made feasible even for smaller incubators that could not attract or afford these resources on their own. Public funding programmes for incubators often connect the funded incubators through networking events or access to shared resources. An example of this approach can be found in Norway, where, at any one time, startups and scaleups can access the resources and supports of multiple incubators within the national incubation programme. Box 11.5 describes this programme in further detail.
Objectives and rationale
The national incubation programme of the Industrial Development Corporation of Norway (SIVA) seeks to contribute to the transition of the Norwegian economy away from natural resource extraction and towards high technology sectors. It does so by supporting the development of a national infrastructure of “innovation companies” that can help new and existing businesses with the ability and inclination to grow. The programme is therefore an indirect policy tool that targets both innovation environments and innovative ideas and companies with high growth potential. As of the 1 April 2026, the responsibility of the incubation programme was moved from SIVA to Innovation Norway.
Description
For the 10-year programme period from 2023-2032, the total budget for the incubation programme is estimated at NOK 2.69 billion (approximately USD 290 million). The actual budget available is decided annually through Norway’s national budget. Participating incubators receive the following supports:
1. Financial support through the provision of grants, which vary in size.
2. Competence building activities, including seminars, subject gatherings, peer learning, best practice dissemination, advice, tools and templates, and a digital sharing platform. In addition, the incubators in the programme receive regular feedback through the annual customer satisfaction survey, differentiation analyses every two years, and annual quality assurance and assessments of their performance and activities.
3. Networking supports, including participation in a national network comprising other incubators, industry parks and catapult centres, an annual partner gathering, an annual trade meeting, study visits, networking activities with other actors in the entrepreneurial ecosystem, and various co-operation agreements.
In order to be admitted or retained on the programme, the incubators must be located in the context of an innovation environment and satisfy the following criteria:
Be organised as a limited liability company.
Not pay out dividends.
Have core competence in business development.
Work with companies with high potential for scaling and internationalisation.
Have broad and relevant ownership, private/public.
Have good regional roots, and clear drivers.
Have a clear role in regional and national ecosystems.
Have national and international partnerships and networks.
Have expertise and a focus on sustainability.
Incubators that meet these basic criteria are then assessed based on a range of factors including their ability to support their clients in the green and digital transitions, their support for scaling and exporting, and their connections with other relevant actors and resources, in particular those in research and development environments.
Successful applicants are initially granted a programme period of five years, which can possibly be extended by another five years depending on performance. Grant sizes incubators are determined through a differentiated grant model based on achieved results and potential. In the event of non-delivery of agreed deliverables, the incubator may receive a lower grant level or be removed from the programme, which can take place within the initial five-year period.
Success factors
A hallmark of the incubation programme is the emphasis on collaboration between the incubators and accelerators in the system. The programme ethos is that the incubated companies must receive the best specialist expertise, regardless of who can offer this and where they are located geographically. This means that startups can be supported by several incubators at the same time, provided that the different incubators offer support in distinct areas. This approach requires effective interaction and co-operation between the different incubators in the incubation programme, which is a prioritised national objective in Norway. Indeed, it is expected that incubators within the incubation programme establish close relationships and facilitate the flow of companies to ensure that the startups have access to the most relevant supports. Collaboration between incubators in Norway also takes the form of sharing best practices, methodologies and tools, which is aided by the range of networking events that form part of the incubation programme.
In addition, the competitive nature of the national incubation programme and the application of the differentiated grant model has helped to strengthen the incubators with the greatest untapped potential while adjusted down or ending support for incubators that are less performant. Another success factor is that, through the design of the programme’s admission criteria, the supported incubators have strong regional roots and work with the business community in their region.
Challenges
A challenge in Norway is that some regional business environments are small and poorly connected to larger regions, meaning that promising young companies might lack the resources, networks and credibility needed to fulfil their potential and grow. The government is addressing this challenge through the promotion of a cohesive and collaborative incubation and acceleration system in which incubated companies can receive innovation support from several incubators simultaneously from across the country. Key challenges and priorities for the incubation programme going forwards are ensuring that the incubators can provide relevant supports and expertise to their clients in the areas of digitalisation and internationalisation.
Conclusions and takeaways
Policy actors in Norway have recognised that incubation is a dynamic and evolutionary process. Through its national incubation programme, Norway has been able to achieve economies of scale in its efforts to address system or co-ordination failures that result in sub-optimal innovative activity in certain areas. These economies of scale stem from the implementation expertise of the programme managers, the joint systems for measuring results, agreed routines for registering companies, joint learning, and transfer of experience. Strong national programmes can also reduce political risks at the local level that are associated with a decentralised system such as Norway’s, which, for example, could see less emphasis placed on support for incubation and acceleration.
Two distinguishing features of Norway’s incubation programme are i). the collaborative ethos between the incubators and ii). the dynamic nature of the support provided. Indeed, the portfolio of incubators is not fixed, with the possibility of removing incubators or admitting others based on results and potential. To achieve such a system, application procedures and assessment criteria must be clear and transparent.
Fostering peer learning
Peer learning is another powerful mechanism that governments can tap into. In Sweden, peer reviews of incubators take place every three-years. These reviews, which are co-ordinated by Swedish Incubators and Science Parks (SISP) on behalf of Vinnova, include the management, team, and board of the incubators, and are tailored to the work of the incubator based on the European Quality Management Framework. The outcome is an analysis of the aggregated strengths and weaknesses of the reviewed incubators. The SISP also organises shared learning activities for incubators via two physical meetings and 12 online meetings each year. These activities are based on input from the peer reviews and on SISP members’ initiatives, with the aim of fostering trust, community, openness, and willingness to co-operate.
A core function of an incubator is to connect its clients with other actors and resources in the entrepreneurial ecosystem, such as investors, mentors, researchers, large corporations and other startups. There are several measures that governments can take to strengthen the linkages between incubators and these other entrepreneurial ecosystem actors.
Creating entrepreneurial ecosystem hubs
Entrepreneurial ecosystem hubs bring together various actors in the entrepreneurial ecosystem. By helping to achieve a critical mass of startups, incubators, investors, mentors, researchers, public entities and other actors in close proximity, they unlock networking and agglomeration effects that strengthen the ability of incubators to support their clients, for example through facilitation of more and better connections, peer learning and knowledge exchange.
Entrepreneurial ecosystem hubs can take different forms, their defining characteristic being their ability to attract and accommodate high numbers of startups, mentors, investors, corporates, public agencies, and support programmes. Some prominent examples from OECD countries include:
Station F, France. Station F is housed in the 34 000 square metre hall of a former railway station in Paris. It was launched in 2017 and now houses more than 1 000 startups. Station F is a collection of more than 30 incubators based in a single location, mainly run by universities, large companies, or consortia. Station F also has its own incubation programmes. Much of Station F’s success stems from its success in attracting the active engagement of players and services from across the entrepreneurial ecosystem. Companies such as Apple, AWS, Qonto and Google have dedicated teams in offices on the Station F campus, which answer questions and meet with entrepreneurs. Station F has also created an investor community of more than 300 funds. Some venture capital funds have offices at Station F, and others visit regularly in spaces reserved for them. In addition, Station F hosts public services linked to the French Tech Central programme, through which experts from 40 public services are available directly on campus to meet entrepreneurs and help them solve administrative problems. Although Station F is a private initiative, the Paris City Council has consistently supported the initiative, notably through its early and public endorsement and through using its right of pre-emption to purchase the Station F site and sell it to the private developer.
MaRS Discovery District, Canada. MaRS is North America’s largest urban innovation hub, with nearly 140 000 square metres of office, lab, meeting and event space across four buildings in downtown Toronto. It is a non-profit organisation funded mainly through a combination of rent, service fees, public support, and corporate and philanthropic donations. MaRS currently houses more than 120 startups and established companies. In addition to delivering numerous incubation programmes, MaRS is a convener of the innovation ecosystem. It has partnerships with a large number of corporate, academic, venture capital, public, and philanthropic institutions. MaRS’ location is central to its support offer to startups, with its proximity to federal offices, universities and financial institutions considered a key asset. This asset is exploited through the organisation of around 2 000 events each year, which facilitates interactions between different entrepreneurial ecosystem actors. Another success factor is its network of more than 100 volunteer experts with specialised and niche expertise.
Unicorn Factory Lisboa, Portugal. Unicorn Factor was launched by Startup Lisboa – a non-profit incubator founded in 2012 with support from the city council – in 2022. The site is the “Beato Creative Hub” building that opened in 2017. This is one of the largest spaces for entrepreneurship and innovation in Europe, with around 50 000 square meters of space distributed over 18 buildings and a capacity to host more than 3 000 people. It serves as a hub and meeting point for the entrepreneurial ecosystem, with a wide range of catering, leisure and cultural services and facilities available.
The entrepreneurial ecosystem hubs described above are each centred around a large, physical startup campus, often with a national pull. Governments can also create networking or co-ordinating entities that coalesce ecosystem actors at the local level. France has embraced this decentralised model through the creation of more than 100 “French Tech Communities”, which bring together the key players in their respective local entrepreneurial ecosystems (see Box 11.6 for more information on the French Tech programme). Similarly, New York State’s economic development agency has established an innovation hotspot in each of the state’s 10 economic development regions through the Innovation Hotspots & Certified Incubators programme.
Another approach is to establish entities that work to co-ordinate ecosystems at the sectoral level. For example, Denmark has established cluster organisations for its 13 “sector strongholds”. These cluster organisations are involved in organising the incubation support system within their sector. In addition to this, they put incubators into closer and more regular contact with other sectoral actors, such as large corporations, investors, or startups.
Objectives and rationale
French Tech was created in 2013 by the French government to bring together all the players in the France’s entrepreneurial ecosystem under a single name and logo. The stated aims are fourfold:
To improve the visibility and international influence of the French startup ecosystem and thus increase its ability to attract investment and talent to France.
To develop a local dynamic around startups by drawing on the initiatives of the players on the French entrepreneurial scene themselves to highlight what already exists and create a snowball effect.
To encourage the emergence of world technology leaders in France by supporting them through various programmes.
To strengthen the coherence of public actions in support of startups.
The overarching goal is to give French startups and the actors in the ecosystem a strong common identity and to encourage exchanges within it.
Description
The French Tech programme is run by a small team of 30 people (the “French Tech Mission”), which is attached to the Ministry of Economy and Finance. One of the main activities of the French Tech Mission is the labelling and co-ordination of the French Tech Capitals and Communities. The French Tech Capitals and Communities are typically private associations of players who are active in their local entrepreneurial ecosystem in their area and work to promote entrepreneurship and innovation. These associations may include local incubators as well as groups of local entrepreneurs. They gain the French Tech label by demonstrating their willingness and ability to contribute to the objectives of the French Tech Mission. In addition to benefitting from the French Tech label, the Capitals and Communities can also apply for project funding from the French Tech Mission. Other sources of funding for the Capitals and Communities are membership fees, private sponsorship, and local authorities.
There are 116 French Tech Capitals and Communities across France, which bring together approximately 1 400 volunteers (around 70% of whom are entrepreneurs) and 6 000 startups. Members of the French Tech Capital and Communities often act as mentors for entrepreneurs in their area, helping them to develop their skills, recruit workers, and identify funding opportunities, as well as directing them to local incubators and accelerators.
Among the French Tech Communities are 67 international communities, spread across 52 countries. These are groups of French or Francophile entrepreneurs who support the actions of the French Tech Mission abroad and help to support the development of French startups in their geographical area. These Communities are supported by diplomatic posts and the economic departments of French embassies and consulates, by Business France, by French Chambers of Commerce and Industry abroad and by French Foreign Trade Advisors (who are volunteers, often belonging to large companies). The Communities abroad receive financial support from the International Community Fund of the French Tech Mission, although they must often find additional funding, which can take the form of sponsorship from a major company or support from Chambers of Commerce or Embassies.
Success factors
The French Tech initiative has adopted an effectual approach that leverages existing resources, players and initiatives within France’s local entrepreneurial ecosystems. Key to the success of the initiative is the mobilisation of a multitude of local players. This collective mobilisation began with the labelling process for the French Tech Capitals and Communities, which required the applicants to map their local entrepreneurial ecosystems and take stock of existing initiatives and actors. By involving the individuals and organisations running the French Tech Capitals and Communities in the design of new initiatives for their local ecosystems, the French Tech Mission was also able to secure the active engagement and commitment of a range of players.
The strength of the French Tech initiative is also linked to a marketing choice – the decision to create a brand (French Tech) and a logo (the red origami rooster). This logo has since spread to communities in every region of the world, supported by French delegations and stands at international trade fairs. Forming the French Tech brand thus resulted in a banner behind which entrepreneurs and other ecosystem actors can rally.
Challenges
One of the main challenges of the French Tech initiative has been to move from France’s historic top-down approach of supporting entrepreneurship through subsidies and public aid to an approach based on the self-construction of an ecosystem. To achieve this, the French Tech Mission needed to involve the private sector and local authorities, both as local ecosystem actors and as sources of financial or operational support for the activities of their respective French Tech Capitals and Communities.
To succeed in building a broad movement to mobilise French startups, it was also necessary to reach out beyond Paris and offer a balanced representation of the very varied ecosystems across France. This required a great deal of work on the ground in the regions, including meetings with local entrepreneurs, incubators, and investors. To succeed, the French Tech Mission has found entrepreneurs in the cities and regions who are committed to mobilising local players in the ecosystems and encouraging them to work together. French Tech’s success is due in large part to the voluntary involvement of these local anchors.
Conclusions and takeaways
The French Tech programme is an innovative policy initiative that has been successful in creating more cohesive and dynamic entrepreneurial ecosystems at a local level. In order for a city or community to obtain the French Tech Label, the promoters must mobilise a multitude of local players and demonstrate that these players are working collaboratively to foster the entrepreneurial ecosystem. Thus, the French Tech programme illustrates how policies that compel and encourage ecosystem actors to act in collaboration and co-ordination with one another can help to ensure that the activities of all actors – including incubators and accelerators – are well aligned.
Another key lesson from the French Tech programme is that, by empowering local entrepreneurs and ecosystem actors to become the creators and drivers – as opposed to merely the recipients – of new initiatives, policymakers can secure the active engagement of these different players. This in turn can the overall pool of resources available within local entrepreneurial ecosystems. For example, 1 400 volunteers within the French Tech Communities and Capitals, often provide mentorship to startups and entrepreneurs in their area.
Strengthening investor linkages
A core objective for many incubators is to help their clients in securing private investment, with incubation programmes often culminating in demo days and investor pitches. It is critical for the investor community to be aware of and actively engaged with startups and scaleups within the incubation system. The public sector is often involved in supporting the financial institutions that invest in startups and scaleups, which provides opportunities to anchor these institutions more closely within the incubation system. Public investment funds can also create platforms for regular engagement with incubators. As an example, Portugal Ventures’ Ignition Partners Network includes more than 50 incubators, providing incubated startups with opportunities for regular exposure to investors.
Integration with research and innovation systems
A critical resource for many early-stage startups, particularly those in deeptech sectors, is access to testing facilities. The cost of setting up and operating these facilities is generally prohibitively high for individual incubators. Incubators must therefore instead tap into existing research infrastructures, which are often attached to universities. Ensuring a close proximity between the university system and the incubation system can help to strengthen the pipeline of innovative startups and scaleups. The public sector generally plays a significant role in funding and supporting universities, which provides greater leverage to integrate these institutions more closely within the incubation system. For example, research commercialisation and technology transfer (so-called “third mission activities”) can be integrated into researchers’ and universities’ performance assessment criteria. This increases interest in incubation within the university sector, encouraging universities to create their own incubators or engage in partnerships with external incubators.
Embedding incubation support policies within broader strategies
The entrepreneurial ecosystems within which incubators operate are dynamic, interactive and complex entities. Government policies targeting particular aspects of an entrepreneurial ecosystem will have ripple effects throughout the ecosystem and thus cannot be viewed in insolation. There are benefits to ensuring that all policies which aim to support the creation and growth of new companies and strengthen entrepreneurial ecosystems are aligned and complementary to one another.
Choices on the design of incubator support policies should be informed by other government policies and strategies regarding the promotion of startups and scaleups, which might provide a steer on, for example the regions or sectors that should be prioritised or the types of startups that should be targeted. Similarly, entrepreneurship initiatives not relating directly to incubation should take into account the direction, objectives and priorities of incubator support policies. This approach helps to ensure that incubator support policies are in harmony with the overall government agenda on startup and scaleup promotion. Incubation policies that are designed in a silo bear the risk of “pushing on a string”, whereby supported incubators cannot meet their objectives due to an absence of the necessary resources in the surrounding entrepreneurial ecosystem. For example, establishing a publicly funded incubator in a sector or technology area that is not prioritised in the national innovation and research system is unlikely to have a strong impact due to a shortage of relevant ideas, expertise and facilities for the incubator to tap into.
In some countries, flagship incubator support policies explicitly form part of a wider innovation or entrepreneurship policy or strategy. For example, Australia’s Incubator Support Programme (ISP) (see Box 11.7 for further information) was one of 24 policies introduced as part of the 2015 National Innovation and Science Agenda (NISA). Systems thinking was at the heart of the NISA, reflecting the need for a co-ordinated policy approach to effectively manage the interconnected elements of the “grand challenges” or “wicked problems” that the NISA sought to address (Mazzucato, 2018[35]). Prior to launch, the NISA underwent numerous revisions, based on proactive consultation through hackathons, a discussion paper, research and global benchmarking, roadshows, and direct feedback from ministers and key ecosystems stakeholders. This process revealed the complexity of policies affecting innovation and enabled the government to develop a co-ordinated and systems-based approach. Within the NISA were many policies that were complementary to the ISP, such as the formation of “landing pads” in key overseas markets. Even beyond the NISA, there were a range of other complementary policy actions implemented around the same time as the ISP, such as an allocation of AUD 20 million (approximately EUR 12.1 million) for the national science and research institute’s (CSIRO) science-based accelerator as well as many state-level initiatives.
There are similar lessons to be drawn from the German Accelerator (see Box 6.1 for further information), which was established in 2012 as just one component of the Ministry for Economic Affairs and Climate Action’s (BMWK) broader innovation policy, which comprised four key pillars:
1. “Business startups”
2. “Competence”
3. “Precompetitive”
4. “Closeness to the market”
The German Accelerator programme falls within the “Competence” pillar but there are nonetheless strong synergies with programmes in other pillars. For example, the German Accelerator is integrated within the same BMWK department (“Guarantee Banks, KfW Subsidiaries, Innovative Startups, Commercial Credit Insurance”) as the EXIST programme, which forms part of the “Business startups” pillar. This enables the German Accelerator programme to tap into the large network of university graduates, students and scientists that the EXIST programme works with. The department also has expertise in startup financing, which have been leveraged to support the delivery of the German Accelerator programme.
Objectives and rationale
Australia’s Incubator Support Programme (ISP) was one of the 24 policies within the National Innovation and Science Agenda (NISA). Launched in September 2016, the objective of the ISP was to increase the quality and quantity of support services for startups by expanding incubators into regions or industry sectors where none or few existed, and expanding the services offered by existing incubators. The programme included two streams:
1. The New and Existing incubators (NEI) stream, with the objectives to i). deliver high quality services to startups to improve their chances of commercial success in international markets, ii). partner with first-generation migrant and refugee support organisations to assist migrant and refugee founders to establish their business both nationally and internationally, and iii). Assist startups with a regional focus to expand and scale their business.
2. The Expert-in-Residence (EIR) stream, with the objective to increase incubators’ capabilities and improve the chance of commercial success for startups in international markets by organising and providing access to top quality research, managerial and technical talent through incoming and outgoing secondments of national or international experts.
Description
For the first four years, the ISP had AUD 23 million (approximately EUR 13.9 million) in funding available. The ISP was then extended for a further four years, with a reduced budget of AUD 5 million (approximately EUR 3.0 million) and an emphasis on first-generation migrant and refugee founders. The ISP provided funding support to incubators through two streams: New and Existing Incubators (NEI) and Experts-in-Residence (EIR). At the time of the programme’s launch in 2016, the NEI stream provided up to AUD 500 000 (approximately EUR 302 000) over a two year period. In 2020, this was revised down to a maximum of AUD 250 000 (approximately EUR 151 000), also over a two year period. The EIR stream provided funding of up to AUD 25 000 (approximately EUR 15 000) when the programme was launched, which increased to AUD 100 000 (approximately EUR 60 000) in 2017. This stream was designed to give startups in incubators access to top-quality research, as well as technical and managerial expertise through secondments of national and international experts, helping them to address internal capacity constraints. Both the NEI and EIR funding streams required matched funding from applicants, with the ISP covering up to 65% of eligible project expenditures in regional areas or up to 50% in major cities.
Applications for grants under the NEI stream were evaluated against three core criteria:
1. Management and business capability: This required the incubators to demonstrate their ability to assist Australian startups to develop the capabilities required to succeed in international markets, taking into account their personnel, track record, linkages with others in the innovation ecosystem, and services provided.
2. Benefit to the incubator, startups and ecosystem: This required the incubators to set out their distinct value proposition and outline the gap in the market they will address and how they will do this.
3. Impact of the grant funding: This takes into account the likelihood the project would not proceed without the grant, the positive impact the grant will have on the size, scale or timing of the project, and the total additional investment the grant will leverage.
In 2020, a fourth criterion was introduced on how the project would support first-generation migrant and refugee founders to expand internationally. The first criterion relates to the incubator’s current experience and capabilities while the second refers to the potential to boost its capabilities through grant support. If an incubator needed a capability uplift, it could separately apply for an EIR grant.
Grant applicants received advice as part of a two-stage process of applying for ISP funding. Incubators first submitted an expression of interest, which was reviewed by a Regional Incubator Facilitator (RIF). For eligible applications, the RIF then worked with the applicant to develop a full application, thereby helping to increase the quality of proposals and sharing lessons learned across applications. Additionally, the RIFs provided feedback on draft applications and to unsuccessful applicants. Among the appointed RIFs were individuals with experience in launching startups, consulting, the corporate sector, and designing various startup support programmes.
Success factors
A key success factor in the ISP’s approach was the early and comprehensive engagement with the startup sector leading into the launch of the NISA. An independent review of the global evidence about incubators and accelerators was also commissioned, which fed into the design of the ISP. This review revealed the critical role of management capabilities as well as access to mentors and the broader ecosystem. The ISP’s engagement of the RIFs to support with the grant applications was also wise move given incubators and accelerators’ lack of prior experience in participating in similar programmes.
Challenges
The Australian ISP funding for incubators was up to two years. This is a very short amount of time compared to that needed for new incubators to become sustainable or established. Moreover, there were concerns surrounding whether the second round of the ISP, with its reduced budget, would provide enough financial support to the incubators and have a material impact on the ecosystem. Another reported issue with the ISP is that the beneficiaries are typically treated separately, with a tendency for the incubators to compete rather than collaborate. Recent national gatherings of innovation district professionals and incubator managers consistently revealed a desire for there to be a forum or stronger incentives for collaboration. The ISP appears therefore appears to have missed an opportunity to foster collaboration and peer learning within the incubation and acceleration system.
Conclusions and takeaways
The approach of the ISP, and the NISA more broadly, is defined by a high degree of stakeholder consultation and adaptability. Indeed, from initial inception to launch, the programme underwent a number of revisions, based on research, consultations and stakeholder discussions. This process helped to inform the introduction of the Expert-in-Residence funding stream to address identified gaps in skills, competences, and knowhow among incubator managers and staff. Even after its launch, the programme underwent a number of revisions based on changing objectives and other developments.
As with similar programmes in other countries, applicants to the ISP struggled in preparing their applications. Indeed, the process of completing an application was rated as being ‘very high’, with the application process taking a median time of 25 days. Recruiting the four Regional Incubator facilitators to provide support in this area represents an innovation approach to address this problem that proved effective in the Australian context.
The high level of co-ordination that takes place among local, state, and national-level actors, both from the public and private sectors, is also a factor that stands out in New York State’s approach to incubation policy. The Empire State Development's (ESD) flagship Innovation Hotspots and Certified Incubators programme assigns one hotspot to each of the state’s 10 economic development regions, ensuring that startup support services are available across the State. In addition to the base funding provided by NYSTAR to the designated Innovation Hotspots, public agencies – at both the state and national level – fund many of the specific incubation programmes offered by the Innovation Hotspots. The Innovation Hotspots also work closely with local universities and businesses, as well as with other state-sponsored entities such as the Centers of Advanced Technology and Centers of Excellence.
Another factor in New York that has facilitated the development of policies and programmes that are aligned with the interests and needs of stakeholders is the presence of the New York State business incubation and acceleration professional’s trade association (BIANYS). BIANYS has played a significant role in advocating policy at the state and federal levels to strengthen New York State’s incubation system, as described in Box 11.8 below.
The Business Incubator Association of New York State’s (BIANYS) mission is to support business incubation and acceleration programmes throughout the state, and it is governed by a 9-member board of directors elected by the general membership. This professional membership organisation brings together a community of engaged programme leaders of incubators, accelerators and co-working spaces from across NYS. This network of leaders works to foster a dynamic and successful startup ecosystem. BIANYS strengthens the NYS incubation and acceleration system by:
Advocating for policies that support business incubation activities. This includes lobbying for government funding, influencing economic development policies, and ensuring that regulations are conducive to startup growth and innovation.
Facilitating networking among incubators, providing a platform where incubation professionals can share best practices, collaborate on projects, and learn from each other’s successes and challenges. This networking helps to strengthen the overall effectiveness of incubation services across the state.
Providing training and educational resources to incubator managers and staff is another important function of BIANYS. This may include workshops, seminars, and conferences that address the latest trends in incubation management, technology commercialisation, and startup support.
Helping to establish and promote standards and best practices for incubation programmes. This includes providing guidelines on operations, management, and services that incubators should offer to startups to enhance their chances of success.
Facilitating resource sharing among its members, such as access to funding opportunities, partnerships with universities and government agencies, and connections to potential investors or industry experts.
Representing a wide network of incubators, BIANYS helps to raise the profile and visibility of business incubation as a part of the state’s economic development strategy. This can attract more attention and resources from both public and private sectors.
Connecting incubation systems to other public supports
It is important to ensure that incubators can tap into a variety of different funding sources, including public programmes that are not specifically focused on incubation. For example, participants in Switzerland’s Pioneer Fellowship Deep-Tech Incubation Programme (see Box 8.1 for further information) could supplement the CHF 150 000 (approximately EUR 159 000) programme grant with non-dilutive funding through other government programmes that are set up to stimulate industry-science co-operation, such as Innosuisse’s Bridge funding opportunities. Participants also benefit from substantial in-kind public contributions in the form of access to the cutting-edge research infrastructure and expertise available within the publicly funded ETH-domain, which comprises multiple Federal Institutes of Technology and research institutes. Similarly, the United Kingdom’s Catapult Centres have opportunities to apply for other sources of public funding beyond their core grant from Innovate UK on a competitive basis. The Canada Accelerator and Incubator Program (CAIP) permitted applicants to use public funding from other government programmes to contribute towards meeting their matching funding requirements for support under the CAIP. This was also permitted to some extent in Australia’s ISP, providing an impetus for incubators and accelerators to explore and engage with other public funding opportunities.
Incubators also play an important role in signposting startups and scaleups to relevant government supports. Public agencies can strengthen this signposting function by holding regular office hours or installing contacts from relevant government departments at the premises of incubators. A prominent example of this can be found in Station F in France, where multiple public agencies have a local contact point that can provide tailored information to startups on the range of public supports available and how these can be accessed. Similarly, the French Tech Central programme enables entrepreneurs to meet with representatives of various government departments at their local “French Tech Capital”.
Public support programmes for incubators are common internationally and are an important tool for raising the capacity of incubators and strengthening the supports they provide to startups and scaleups. Public financial supports for incubators are sometimes complemented by the provision of capacity building assistance to raise the internal competencies of incubators and promote best practices. Different countries have taken different approaches in deciding which organisations to fund and how, based on the particular bottlenecks and challenges in their country as well as wider political priorities. This diversity of policy approaches has yielded a number of general lessons for policymakers to consider when designing public supports for incubation:
Go long: Incubators need time to build contacts and a reputation within their entrepreneurial ecosystem, which are crucial factors shaping their effectiveness in supporting the development of startups and scaleups. It is generally advisable for public funding programmes for incubators to provide financial support for at least a three-year period to enable the assisted organisations to plan strategically and become established in the ecosystem. Long-term funding brings the added benefit of reducing the time and expense associated with applying for funding in the case of incubators or assessing applications in the case of programme operators.
Be selective: Funding incubators will not necessarily deliver an impact if the beneficiaries lack the core competencies, experience, or connections needed to effectively support startups and scaleups. Given the heterogeneity that exists within incubation systems, national funding programmes can generate stronger impacts by prioritising applicants with a track record of supporting startups and scaleups, high embeddedness in the entrepreneurial ecosystem and strong internal competencies. This can be supplemented by smaller scale national funding, as well as non-financial support and assistance from regional authorities, to build the capacity and professionalisation of less performant incubators.
Know the objective: Incubation systems contain a diverse range of organisations that deliver different activities and supports. This means that the effects of funding the system are highly dependent on which organisations are funded and the conditions attached to the funding. National funding programmes for incubators need clearly specified objectives so that selection criteria and performance conditions can be set accordingly.
Know the system: Each incubation system faces its own bottlenecks, shortcomings and development priorities. This means there is not a one-size-fits-all funding policy for incubators. Public funding programmes should seek to understand and address the specific challenges that exist within the incubation system, for example by earmarking funding for specific activities such as coaching, or by allocating resources to sector-specialised programmes or programmes to support the internationalisation of startups.
Encourage co-operation, not competition: Most incubation systems would benefit from more collaboration among incubators and between incubators and other entrepreneurial ecosystem actors. Public funding programmes can incentivise this by rewarding joint-applications or applications from consortia of multiple organisations. Grant allocation systems can also be designed in a way that avoids the perception of incubators competing over a finite pool of funding.
Supplement funding with non-financial assistance: The most successful support programmes for incubators will generally go beyond the provision of funding to selected incubators; they also incorporate non-financial assistance such as training, peer learning schemes and support guidelines to raise the effectiveness of the incubators in the programme.
Measure performance: A common challenge for incubation systems is a lack of reliable and comparable data on the activities, performance and impact of different incubators. From a policy perspective, this makes it difficult to identify gaps in service provision, make funding decisions, and establish the impact of public support programmes. From the perspective of startups and scaleups, this makes it difficult to identify the most suitable programmes. Governments should implement performance measurement frameworks for incubators that include metrics on the activities of incubators and the performance and perspectives of their client companies. The periodic provision of necessary data should be a condition for incubators’ participation in national networks and support programmes. To avoid excessive reporting burdens, frameworks should focus on a relatively small number of core metrics.
Align and steer: It is important for public funding programmes for incubators to be coherent with related programmes in other policy areas. When setting the objectives and admission criteria for public funding programmes, policymakers should consider whether these are coherent with the entrepreneurial ecosystem and consistent with wider government priorities.
Co-ordinate: Structures that bring incubators together are key to fostering collaboration, information and resource sharing, and peer learning within incubation systems. They can also help to align efforts towards strategic priorities and can be a platform for the delivery of capacity building supports and matchmaking with other entrepreneurial ecosystem actors, including investors and large corporations. Governments should establish networks of incubators, with defined criteria for joining the network and periodic events and activities to bring together their members.
Set standards: Governments can play an important role in providing quality assurance for incubators, to help them and their clients to establish credibility among investors, customers and other actors. Participation in national networks or public support programmes can serve as a quality label (either implicit or explicit) for incubators, depending on the profile and credibility of the issuing entity within the entrepreneurial ecosystem.
Create focal points: To raise the profile of an incubation system, governments can promote the creation of visible focal points or hubs that co-locate a high number of startups, support programmes and other ecosystem actors. These hubs can also facilitate the sharing of resources and facilities between incubators and provide greater opportunities for networking and collaboration.
It is also important to note that a healthy and dynamic surrounding entrepreneurial ecosystem is another important prerequisite for an effective incubation system. The task of supporting the incubation system cannot be separated from the wider task of fostering a productive entrepreneurial ecosystem. Measures that can be taken to strengthen entrepreneurial ecosystems include, among other things, steps to strengthen the availability of risk capital – for example through co-investment funds – and initiatives to create a more entrepreneurial culture, for example through changes to school curricula, the promotion of startup competitions, or the introduction entrepreneurship programmes or modules within universities (OECD, 2025[36]).
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← 1. Grant sizes within a programme often evolve over time, as can be seen, for example, in the case of Australia’s Incubator Support programme (see Box 11.7Box 11.7). This is often a function of changes in the total budget allocated to the programme.
← 2. In Norway’s programme, grants are extendible for up to an additional five years, depending on performance and subject to review.