Saturday, April 13, 2024

What if incubators and accelerators are doing more harm than good to startups and scaleups?

They may have been conceived as engines for producing innovative new technology companies, but experts told the first annual Drive Conference in Waterloo on Thursday that incubators and accelerators are largely failing the startups and scaleups who participate in them.

Much of the Drive Conference, which was held at the Lazaridis School of Economics at Wilfred Laurier University, was focused on how to better develop and support scaleup ecosystems — companies that have achieved a certain level of growth. Startup ecosystems, on the other hand, have often been accompanied by a range of incubator and accelerator programs in which entrepreneurs receive mentorship and business training.

Johan Wiklund, Al Berg Chair & Professor, Syracuse University and a Lazaridis Visiting Chair at Wilfred Laurier University, said he had conduced a research study that looked at the success rates of startups that had gone through such programs over a 10-year period. “Success,” in this case, meant that the company survived and had achieved some level of growth. The study also looked at a number of startups who hadn’t been incubated.

Though he didn’t cite any specific figures, Wiklund said the results were clear: those who were not in incubator and accelerator programs performed better than those who had.

“People firms, entrepreneurs, might become too comfortable in an incubator,” he said. “You need to become competitive in the market. You need to eat your competition. To qualify for an incubator program, however, you have to meet certain criteria, and those aren’t the same ones as being successful in the market. If they start by being organized one way in an incubator, it can hard to adapt in a tough market environment.”

When Wiklund later studied firms who moved into an incubator program after launching on their own first, for example, he said those firms fared better than those who had never been part of an incubator as well as those who had.

Menno Van Dijk, founder and CEO of ScaleUpNationsaid he’s tended to work with scaleups lead by teams in their late 30s and early 40s. He likened incubators and accelerators as a sort of extended education for recent university graduates. That said, he also compared building a business to learning to skate on a small rink as a child and then skating on a canal later.

“It’s a different game. I wouldn’t measure performance (based on what happens at the skating rink,” he said.

Although Wiklund acknowledged many incubator and accelerator participants find value in such programs and a chance to meet similar entrepreneurs, there is surprisingly little innovation on how the model is executed around the world. This includes staples like 24-hour hackathons, teaching the Business Model Canvas and Lean Startup approach.

“I’ve seen it across four continents, and it’s amazing how similar it is,” he said, adding the homogeneity extends to gets in.  “It’s mostly white or Asian men, socially confident, tall, who drink coffee and ride bicycles,” he said. “But it should not be a monoculutre. We need ecosystems.”

Entrepreneurs might also be better served if they were learning within environments that look more like the corporate enterprises they’ll be trying to sell into, Van Dijk added.

“There’s this the whole idea of designing these to look like American student dorms. That’s not at all how large enterprises have ever been built,” he said. “There are the wooden tables, ping pong tables, everyone in a T-shirt and funny posters on the wall.”

It’s possible incubators and accelerators will improve, but Wiklund suggested they need to think about focusing more on scaleups. This would be “not so much about helping infants learn to walk, but to help toddlers learn to run,” he said.

Van Dijk said a better analogy would be thinking of entrepreneurs as teenagers, a group that’s notoriously adverse to hearing advice but who can respond well when they’re provided opportunities and coaching.

“Of course, that’s difficult and I think a lot of people go, ‘Let’s just create more babies.’ It’s more fun, and easier,” he said.

Drive Conf wraps up on Friday.


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Shane Schick
Shane Schick
Shane Schick is the Editor-in-Chief of B2B News Network. He is the former Editor-in-Chief of Marketing magazine and has also been Vice-President, Content & Community (Editor-in-Chief), at IT World Canada, a technology columnist with the Globe and Mail and was the founding editor of Shane has been recognized for journalistic excellence by the Canadian Advanced Technology Alliance and the Canadian Online Publishing Awards.