Incubation in Entrepreneurial Ecosystems

1. Takeaways for governments

Abstract

This chapter is a synthesis of the main findings and policy lessons for governments from the report in the design and implementation of public supports for incubation.

Encourage incubators to act as entrepreneurial ecosystem hubs and connectors

In addition to the traditional role of incubators in offering working space and business advisory services to startups and scaleups, they are beginning to emerge as hubs and connectors in their entrepreneurial ecosystems, connecting their clients with investors, mentors, public supports, customers, suppliers, researchers, and other partners and offering gateways for other ecosystem actors to access promising firms. Government policy should encourage incubators in this critical ecosystem connector role.

The success of incubators as hubs and connectors is often underpinned by well-connected and energised personnel who are pro-active in building links between their clients and other entrepreneurial ecosystem actors. An example is the proliferation of “demo days”, which are often the climax of acceleration programmes, where startups make pitches to attending investors or customers. It is also common for representatives from public agencies to have desks or office hours within incubators where they can showcase relevant public programmes and respond to queries from entrepreneurs. Another example is the nurturing of ecosystem connections when incubators bring delegations of their entrepreneurs and startups to high-profile and well-attended networking events within the local or national ecosystem.

To support this development, governments can:

• Prioritise funding to incubators with high embeddedness in the entrepreneurial ecosystem and strong internal competencies for networking and ecosystem building.

• Give preference to funding applications submitted by consortia to jointly deliver incubation programmes.

• Apply matching funding requirements for public grants for incubators to ensure supported incubators have links with others in the ecosystem.

• Provide quality assurance (e.g. through certifications or quality stamps) for incubators to strengthen their credibility with investors and other entrepreneurial ecosystem actors.

Promote individualised services, including coaching and mentoring

Incubators have changed significantly in the past 10-15 years as they adapt their service offering to the evolving needs of startups and scaleups. One of the trends is an increased offer of customised and individualised services to client firms, including more personalised coaching and mentoring.

Coaching and mentoring is one of the most important aspects of business incubation. Its one-to-one nature ensures that the advice and connections provided are highly customised to the specific needs of individual entrepreneurs. However, coaching and mentoring is an area where the quality of support provided by incubators varies quite widely. Quality can be inhibited by a lack of sufficient funding, which limits incubators’ ability to recruit and retain top-tier coaches and mentors with the necessary blend of technical expertise, entrepreneurial experience, and interpersonal skills. Even putting aside the issue of funding, it can often be difficult for incubators to find the right profile of coaches and mentors, particularly when searching for individuals with more specialised expertise. Another challenge is ensuring that the quality of advice provided by coaches and mentors is of a high standard, which requires robust recruitment, matching, training and monitoring procedures that incubators do not always have in place.

Sometimes the provision of more specialised and bespoke services requires more collaboration among incubators, for example putting together their pools of mentors or advisors or approaching investors together as consortia.

Ways for policymakers to facilitate more bespoke and individualised services within incubators are to:

• Earmark funding for the recruitment or payment of high-quality coaches and mentors through dedicated coaching and mentoring streams within public funding programmes for incubators.

• Establish coaching and mentoring guidelines for incubators to follow as a condition for public funding, including training and monitoring procedures.

• Enable greater resource sharing and collaboration between incubators. This can be promoted through the formation of incubator networks or designing public programmes to allow entrepreneurs to receive support from multiple incubators simultaneously.

Increase the number of specialised incubators

One of the trends of the last 10-15 years has been the emergence of more specialised incubators. This may involve specialisation in sectors like life sciences, marine technologies, or creative industries, targeting entrepreneurs from specific population groups, or focusing on companies at particular development stages. Specialisation has strong potential to improve the quality of support provided to startups and scaleups by enabling incubators to align their services more closely with the specific needs of their clients, for example through tailored coaching or investor connections and more productive peer learning. Another benefit of specialisation is that it enables incubators to build deeper networks and expertise in the areas of concern to their clients. However, there are some risks and drawbacks associated with specialisation, including greater exposure to sectoral downswings, potential competition among entrepreneurs within a cohort, and a loss of diversity within programmes. Furthermore, the success of specialised incubators depends on local contextual factors such as the nearby presence of skills, businesses, knowledge institutions or investors with expertise in the relevant sector. Overall, it is important for incubation systems to maintain a mix of generic and specialised incubators.

• Governments should support specialised incubators where there are distinct needs and sufficient local demand and capabilities.

Encourage internationalisation

Incubators are also providing more support to help their clients enter foreign markets, which can be a main driver of scaleup. Enabling the early globalisation of startups is particularly critical in countries with smaller domestic markets, although “born global” startups are also prevalent in larger economies. Incubators are one of the main channels through which governments can support startups’ entry into markets abroad. Some of the leading incubators offer immersive soft-landing programmes, where cohorts of startups spend time in an incubator abroad to enable companies to build networks and relationships internationally. Three areas of policy action that can help are to:

• Steer incubation systems to greater focus on internationalisation support by making incubators’ competence in this area a criterion for receipt of public funding.

• Fund dedicated programmes for startup globalisation, including immersive soft-landing schemes with placements of company staff and operations abroad.

• Incentivise incubators to form partnerships and networks with incubators and other ecosystem actors abroad.

Use funding systems and capacity building support to upgrade quality

Public funding underpinned the early development of many incubation systems and remains an important part of the funding mix of incubators today, alongside other sources of revenue including service fees, rents, and equity stakes in client companies. An OECD policy mapping confirms that incubation policy has entered the mainstream, with 31 out of 38 OECD countries having an active incubation policy as of 2025. In total, the mapping found 70 incubation policies at national level, which exist alongside numerous initiatives delivered by subnational governments. Incubation policies principally promote incubation by providing grant funding to incubators. However, there is considerable scope for policy to be more intentional in lifting incubation outcomes through more stringent performance management across the incubation system and more support for capacity building and professional development in incubators.

Key opportunities are to:

• Tie funding amounts to agreed deliverables and performance through systematic monitoring of the activities and outcomes of incubators, with possibilities to scale down or withdraw funding in cases of underperformance.

• Incorporate non-financial assistance for incubator personnel such as training, peer learning schemes and support guidelines.

• Create networks of incubators to foster peer learning.

To operate effectively, incubators also need time and resources to build contacts and become recognised by startups and scaleups and other actors in the entrepreneurial ecosystem. A lack of programme continuity is a common weakness for incubation systems, which is due in part to the short-term nature of many incubation support policies and programmes. Short-term funding periods can inhibit incubators’ ability to plan strategically and result in more time being spent by incubator personnel on applying for funding rather than delivering programmes. In some countries there is also an issue of resources being spread too thinly or too uniformly across very large numbers of incubators, with insufficient selectivity in allocating funding amounts.

Governments can also support quality upgrading in incubator systems by :

• Providing longer-term financial horizons for incubators, e.g. offering support for at least a three-year period.

• Being more selective in some incubator systems where resources are spread thinly and quality varies by incubator, prioritising deeper support for a smaller number of incubators with the greatest potential to generate impact.