Setting up University Startup Accelerator Programmes for incubating young startups at universities has been a proven model in the United States for some time and is now thriving in good old Europe. But going about setting up a Startup Accelerator Programmes at a university can be very different to a stand-alone accelerator, hence we have compiled a few tips and hints.
Startup Manufactory is providing corporates and educational institutions with accelerator programme development. CEO Matt Kuppers shares important tips on how to setup successful University Startup Accelerator Programmes.
Start-up accelerators run by venture development professionals support the development of entrepreneurial skills and provide support for early-stage, high-growth businesses and ideas set up by students the university has only limited capability to provide.
At most, universities can provide support on finding jobs through career centres, create value through industry-university collaboration, create revenues for governments and local businesses such as student housing and shops, and how tangible benefits of academic “impact”.
Many university startup accelerators and incubators were launched over the past two years which clearly demonstrates that these programmes are not only becoming a requirement in terms of competing for students, but also provide valuable skills employer increasingly look out for.
How It All Began
Back in 1959, the first business incubator programme was launched in the US. Over the past decades this model has enjoyed sky-rocketing popularity resulting in over 1,200 incubator programmes in the US, and over 7,000 worldwide. [1. NBIA, Business Incubation FAQ, October 2012. http://www.nbia.org/resource_library/faq/.] Research has shown that incubators increases the success rate after five years from 30% to over 85%. [2. UKBI Business Incubation Statistics, http://www.ukbi.co.uk/resources/business-incubation.aspx.] Alongside improved success rates for startups, communities, universities, the economy and society also benefits from the impact accelerating startups can potentially have.
At Startup Manufactory, we are building white-labelled accelerator programmes for corporates and universities. Our team members have been building PwC’s Accelerator, advising startups at Microsoft Ventures Accelerator London, mentored MBA students at London Business School and Said Business School and also developed a comprehensive startup course for INSEEC Group London as part of their BSc curriculum.
Having been working in the space for some time, Startup Manufactory are now sharing our tips for setting up a successful university startup accelerator programme.
Albeit stand-alone accelerators such as Startupbootcamp or Seedcamp are receiving lots of attention, which actually also benefits their incubated startups, university accelerators should be structured differently as the objective is not primarily on big exits and financial returns but should also factor the educational component in and therefore reflect the needs and of the university and the students.
Key elements when defining the accelerator key metrics and structuring:
-Are you looking to ignite innovation and scale newly founded ventures or does your main stakeholder expect for the accelerator to generate a steady rental revenues?
-Can you integrate the accelerator with educational courses/classes providing the complementary and theoretical backup?
-Is the purpose to facilitate the commercialisation of academic IP/patents that may not patentable or too immature for the private seed/accelerator market?
-Will the accelerator programme deliver entrepreneurial skills and create new startups independent from academic activities and become a Petri dish for entrepreneurship at the university?
-How will the local eco system benefit from the accelerator and its students? What will be the connections?
Understand Your “Customers”
As with every venture, not only having a good understanding of the product/service helps but also understanding the customers is key. Therefore, understanding both side of the accelerator, students and stakeholders, helps to align objectives.
We suggest to conduct a stakeholder analysis to identify the different parties involved in the accelerator for a start. As there will be multiple parties on different levels involved, multiple stakeholders within and outside the university will have different requirements.
External stakeholders such as development agencies, funding bodies, business networks, mentors, investors and individuals will also be part of the wider eco-system. Once the key stakeholder have been identified, do what the infamous Steve Blank calls Customer Development: Seek feedback, run surveys, do focus groups in order to test the university accelerator’s vision against the specific requirements for each parties involved.
For example, Isis Enterprise conducted a study with students and academics for a proposed university accelerator. The study found that people, in contrast to what was anticipated, namely more office space, were seeking out “pre-accelerator” support services. This included business model validation services meaning the intellectual process of evaluating the commercial potential of a business idea, identifying multiple verticals, defining value propositions, setting costs against expenditures and eventually validating a business model, often before a product is conceptualised.
A service that Startup Manufactory also provides to its clients and usually comes first, in order to assess the potential of a business idea on which basis we decide whether we take on a startup development project or not.
The Perfect Accelerator?
While there is no perfect accelerator or incubator, it may help to look what others are doing in the space. Comparing US and UK university startup accelerators reveals interesting findings:
-Accelerators based at universities created an average of 30 ventures per year.
-Most programmes were hosted either by an Entrepreneurship Centre or a Tech Transfer Office.
-Eight of the programmes were hosted by more than one host.
-Staff numbers varied between 1-12 with most programmes having 1-2 core employees.
-In most cases, the programme manager were no academics but had a business or entrepreneurial background.
-Students and alumni served as most common source for accelerator staff.
Diversify Your Funding Portfolio
As opposed to stand-alone accelerators, which are mostly funded through service fees, sponsors, investors and tenant rent, university accelerators are offering no-charge services to their students. Another model for capturing value from participants is equity investment, royalty agreements, dividend agreements and convertible loan notes. Those agreements however, require a long lead time between 5 to 10 years before the portfolio starts creating a significant return.
More fundamentally, it remains to be seen whether accelerators in general are good business as most accelerators have been founded in the past couple of years according to an article in the Economist. [3. The Economist, Getting up to speed, January 2014, http://www.economist.com/news/special-report/21593592-biggest-professional-training-system-you-have-never-heard-getting-up-speed.] Even for top-tier universities and business schools it takes a long time and a bit of luck to reach a self-sustaining model.
Most startup incubators and university accelerators are funded by their university hosts, or had mixed funding sources:
-Economic development agencies.
Despite external funding sources, universities need to make sure to provide continuous support to their university accelerator programmes, although there are multiple ways to go about this support. Keeping the educational and also personality building benefits a university accelerator has in mind, those “softer” benefits should always be part of the vision.
Building Your Case
The most crucial step is to build a a strong business case for internal approval for which Startup Manufactory provides extensive support as part of our engagement. While a financial return is always the best argument for winning potential investors over, is is also useful to point out the educational benefits for the student body as well as the impact on the community which are:
-Successfully incubated ventures coming out of the university accelerators are likely to remain in the local ecosystem and therefore contribute to employment levels as well as create channels for industry-university interaction.
-According to a study of the NBIA in the US, every $1 invested in an accelerator, translated into $30 in local tax revenue. [4. NBIA, Business Incubation Works,1997; NBIA, 2006 State of the Business Incubation Industry]
-University accelerators serve as launchpad for student ventures that may not be exploited by traditional transfer channels.
-Entrepreneurship is increasingly considered as career choice for students. More and more students decide to shun the typical investment banking or business consultancy job upon graduation to start their own business.
-A 2012 survey found that over 33% graduates from the millennial generation expressed interest in launching their own business. [5. Lent A (2012) Generation Enterprise: The Hope for a Brighter Economic Future; Lent A (2012) A time for heroes? RSA Journal, Autumn, pp 16-17.]
-A university accelerator increases alumni engagement both on investor and on mentor level. A 2014 QAA report highlights that “Entrepreneurial alumni are the main source of donations to universities and are more likely to be inclined to donate if they believe that their time at university had a material influence on their subsequent entrepreneurial success.”. [6. QAA Scotland, “Creating Entrepreneurial Campuses: A report for Scotland.” February 2014.]
By using the data referenced for this article you can certainly bolster your case. Startup Manufactory is happy to provide you with further support necessary to produce relevant documents in the planning phase.
Design For Success
Designing a sustainable and successful university accelerator programme is key. Good policies, efficient governance and operational practices are part of this process. First of all, a university will have to look closely at its IP policy and benefits-sharing policies to make sure those are well structured and attractive enough for the incubated startups and also investors make a good return. Startup Manufactory is able to provide extensive support on all aspects of structuring.
As for the externalities, multi-level communication channels and strategies are pivotal to attract the attention the startups need, bring in mentors and service providers and connect investors for financial and expert support and generate buzz to attract the media.
Within the university, awareness for the accelerator is key to attract participants, mentors, volunteers and so-called social media groupies, mostly young students that spread the word using through their social media and increase exposure on an informal level.
Especially for smaller institutions, starting a university accelerator as part of an entrepreneurship course is a great way to improve their positioning in the educational market and attract more students and increase the number of applications.