The data this is based on (very flawed) and that needs improving can be found here.
Ah, the election finally arrives and so I’m reflecting on what it was like five years ago as a new government arrived. I was fresh out of university and boy the world was an exciting place. Social Investment, Big Society, the world was abuzz with new visions for how society was going to evolve in the five years of coalition government.
Yet I realised just how fatally flawed the Big Society implementation plan was (I think it’s hard to fault the thrust of vision) after attending an event in Milton Keynes at which the Prime Minister was both relaunching the Big Society and also announcing the launch of a new social sector venture, perhaps only a month old. I did wonder if the Prime Minister had better things to be dealing with than hailing the advent of an organisation that must have been turning over barely £20,000 at the time. This wasn’t quite “we’re going to put a man on the moon”, this was “I came across this interesting thing at a dinner party and despite the data am setting government policy accordingly”. Since, I’ve thought a lot about incubation, scale, early stage investment. And hype.
In the past five years there has been a lot of investment put into early stage social incubators. The Cabinet Office put a good deal of money into a Social Incubator Fund. Some of the incubators that have cropped up are impressive and, though it’s not a core area of focus for Hub Ventures (we do support some student venture successfully, but don’t have a magic bullet solution), I’m intrigued by the results. Most especially because I’m interested to see the impressive examples of growth that we can then emulate. I haven’t seen any analysis of the overall market as yet, and some of the data is quite hard to find so thought would have a stab.
The analysis is slightly imperfect and could be significantly improved so would appreciate input or someone pointing me towards where some real research has been done. I just have this nagging feeling that many of the incubator/accelerator programmes aren’t quite achieving what we’d hope (i.e., something like rapid growth/scale). Growth isn’t at all easy as I’ve reflected on elsewhere but surely we must be able to do better than we are doing?
The data includes the Big Society Network Nexters (now defunct), UnLtd’s Big Venture Challenge, Hub Launchpad, Bethnal Green Ventures, Deloitte Social Innovation Pioneers, Nesta Innovation in Giving, Wayra UnLtd, Nesta Social Action Fund, Teach First Innovation Unit. I couldn’t find any data for UnLtd Fast Growth winners before 2014 and I don’t think (but couldn’t be certain) that BVC ran in 2012. There are likely some glaring errors.
The data is here in Google Docs. I’ve left it so that you can comment. If you’d like to make any edits then just download in excel and send back to me at adam.oboyle [at] hubventures.org
So on the dataset:
- There are about 380 incubatees listed in the programmes above, so if it was fully analysed it’s quite a good sample size. Of that 380, some are part of multiple programmes, having been part of often two but up to four incubators. So overall represents about 320 individual organisations/entrepreneurs/teams
- To save time, I made an assumption that anything funded in 2014 was likely to be going still
- The analysis mostly includes new enterprises, though Deloitte has taken some quite well established organisations into its programme
- I stripped out medium and large charities who were part of the Nesta Innovation in Giving Programme though at a glance they don’t seem to have been better or worse at getting new ideas off the ground than new organisations. (See Tab 2 for interest)
- I made fairly rough estimates from looking at associated websites as to whether organisations seemed ‘active’
- I tried to assess if organisations had been part of multiple incubator programmes, some changes of name made that tricky.
- I got bored Googling after a while so would appreciate any edits/input as didn’t analyse about 80 organisations.
- I didn’t analyse the relative success of incubator programmes, but noticed a near 50/50 failure rate of startups in the Nesta Innovation in Giving Programme as I went through. I got the hunch that the evaluation they produced in December 2014 missed out a few recent closedowns I could find details of from 2015. More analysis needed of the relative success of programmes in any case.
- I realise these programmes themselves are trying to do different things. BVC and Deloitte are more accelerator than incubation, perhaps, but I see their functions as all roughly the same.
My quick analysis (of the 300 listings I looked up) suggests the following:
- Encouragingly, the failure rate is still quite low, though we’re dealing with things funded in the last 1-4 years mostly, so that’s perhaps to be expected.
- Of the 300 listings I looked up:
- about 50% still seem to exist and have only been part of one incubator programme.
- about 15% have almost certainly failed
- about 10% seem so small as to be negligibly important (certainly not occupying anyone full or part-time).
- about 80 listings (25% of the total) were then for organisations who had been part of more than one incubator/accelerator programme. One organisation had been part of four, five had been part of three and about 37 had been part of two programmes.
- Of the 300 listings I looked up:
- Does this chime with the Venture Capital ‘batting average’ that suggests about 1/3 of ventures should fail, 1/3 should tick along and 1/3 should grow and do well?
- Unfortunately, however, I am not aware of any organisations on the list achieving hugely significant growth of impact or scale. Some seemed to be doing well but had achieved nothing ‘stellar’. I’d revert again to my thoughts on growth.
Questions I’m left with for now:
- Why is nothing really growing/scaling?
- Is the landscape of growth genuinely improving for those that startup currently? We started Student Hubs that grew into Hub Ventures in 2007 and since then the landscape of incubators has grown dramatically. Is that making a difference?
- What does it mean for an organisation to be part of 1+ programmes? Incubators almost seem to be being used as a holding pattern for some ventures? Given that quite a lot of the funds for these incubators are from similar sources (Cabinet Office, UnLtd etc) is there a problem with some organisations staying alive through incubators? Is this a sign of market failure?
- How many organisations are growing independently of any of these programmes?
- Someone else’s comments to on me on this: “it’s not a great sign for the ‘social investment pipeline’ if: (a) businesses launched by one SIF funded accelerator are hopping on to others rather than finding social investment from ‘Social Angels’ or Big Society Capital-backed SIFIs (b) there’s not enough new ‘social ventures’ coming through to avoid SIF-funded accelerators needing to take on people who’ve already been through other SIF-funded schemes”
Some deeper analysis is probably needed of:
- What did programmes say they wanted to achieve? Did they really achieve them?
- The size of investment in programmes and whether they added value?
This is really rough research but I couldn’t find anything better. It would be great to improve the analysis of the early stage incubation market and then improve the landscape for early stage social sector organisations. What I really really worry about is that lots of ventures are getting to the stage of having had £20,000-50,000 invested in them, are proving promising but then don’t have any idea where to go for the next stage because investors who want a return are (quite understandably) not going to risk larger sums in still quite high risk ventures if they are hoping to get those funds back. And so you need investors who really are very patient at that next stage but who currently don’t exist. The real value of an incubator/accelerator (I’d have thought) is getting you to the ‘next stage’ – not just the training along the way, which talented entrepreneurs should be able to get 90% off Google and in books. I’d say that echoes our experience at Hub Ventures, where we’ve grown to a turnover of £3.5m across our family of ventures, but are rather now scratching around wondering who to turn to next for support.
Finally, on hype, this is my overall favourite article about how social sector startups are going to take over the world. Sadly they haven’t.
This report might also interest on Good Incubation from Nesta, which I haven’t gotten round to reading in full yet.