Can an Incubator Increase Your Company's Odds of Success?
WHY YOU SHOULD CARE
Because if you can stack the odds in your favor, why not do it?
By Laura Chubb
OZY and JPMorgan Chase & Co. have partnered to bring you an inside look at how entrepreneurs are coming up with innovative methods to help the communities around them. Enjoy the rest of our special series here.
Start-ups seem to be the businesses that grab the most headlines these days — thanks to an enticing combo of disruption, twentysomething billionaires and playground-like offices. But behind many a wildly successful start-up, there was first a start-up incubator. And without these unsung heroes, big names including Airbnb and Dropbox might never have lived to make the impact they do today.
There are estimated to be more than 1,000 business incubators in the United States, and each one plays a starring role in getting startups off the ground. According to research by the National Business Incubation Association:
Companies nurtured in a business incubator have a survival rate of 87 percent, compared with 44 percent for unassisted enterprises.
So what is it incubators actually do? It’s all in the name: They help “hatch” companies and keep them alive until they’re strong enough to go it alone. That could involve anything from plugging new companies into an influential network, training them in business strategy, gifting hard-won, industry-specific knowledge or providing a workspace. Given those early years of operation are the most volatile for a new business — the marketplace has little sympathy for lack of experience and capital — it’s no wonder incubated companies are twice as likely to succeed.
It doesn’t have to be all about apps and sharing-economy platforms, either. New businesses of all stripes are essential ingredients for prosperous communities; according to the U.S. Bureau of Labor Statistics, the number of jobs created by establishments less than a year old totaled 3 million in 2015. And many of these startups aren’t just creating money and jobs — a number of incubators focus on jump-starting companies rooted in social good and ultimately helping build a more inclusive economy. In America’s inner cities, for example, research from the Initiative for a Competitive Inner City has shown that small businesses (those with five to 249 employees) and micro-businesses (firms with one to four employees) are the primary drivers of job creation and employment rates.
By bringing people together with a common mission, more happens.
Martin Clark, Allia
“Despite tremendous suffering after Hurricane Katrina, New Orleanians were taking things into their own hands, saw challenges, took action and started to build what we called social enterprises,” says Andrea Chen, co-founder and executive director of Propeller, a nonprofit incubator that supports new businesses focused on the city’s social and environmental challenges. More specifically, it prioritizes ideas around food access, health, education and water management. Founded in 2011, Propeller has already launched more than 100 ventures that have generated $62 million in revenue and financing.
A world away from the sweltering climes of Louisiana, Allia’s Future Business Centers in England also incubate new companies geared toward positive change. JPMorgan Chase, a dedicated financial backer of incubators, recently funded the research for Allia’s expansion into east London, where unemployment has long hovered between 5 and 15 percent above the nation’s average. The new center will provide both space and expert advice to entrepreneurs tackling environmental, economic and educational needs; what’s more, the research estimated it would create 400 new jobs in its first three years of full operation.
The world needs new business, and new business needs incubators. As Martin Clark, deputy CEO and development director at Allia, puts it: “By bringing people together with a common mission, more happens: more impact, more economic growth, more sustainability.”
- Laura Chubb, OZY AuthorContact Laura Chubb