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CFE-University-Entrepreneurs-Report-WEB PUTTING THE UNI IN UNICORN The role of universities in supporting high-growth graduate startups April 2017 1 ABOUT THE CENTRE Launched in 2013, the Centre for Entrepreneurs think tank promotes the role of entrepreneurs in creating economic growth and social well-being. It is home to national enterprise campaign, StartUp Britain. The Centre is an independent non-proft think tank founded and chaired by Sunday Times columnist and serial entrepreneur Luke Johnson, and housed in the Legatum Institute. It is supported by a prominent advisory board including serial entrepreneur and investor Brent Hoberman, angel investor Dale Murray, Supper Club founder Duncan Cheatle, Betfair founder Ed Wray, and fnnCap founder Sam Smith. 2 CONTENTS EXECUTIVE SUMMARY 4 UNIVERSITIES AND GRADUATE ENTREPRENEURSHIP: PLAYING THEIR PART IN THE REVOLUTION 5 PART ONE: THE NEED FOR INCUBATION GRADUATES’ UNQUENCHED THIRST FOR ENTREPRENEURSHIP - AND WHY UNIVERSITIES SHOULD PLAY A BIGGER ROLE 6 CURRENT SUPPORT FROM UNIVERSITIES 10 HOW SHOULD UNIVERSITIES SUPPORT GRADUATE ENTREPRENEURS? 13 PART TWO: WHAT WORKS IN GRADUATE INCUBATION? WHAT WE ALREADY KNOW 18 INTERVIEWS WITH UNIVERSITY INCUBATOR MANAGERS 20 INTERVIEWS WITH UNIVERSITY INCUBATEES 28 CASE STUDY: GRADUATE INCUBATION IN THE US 32 UNIVERSITY INCUBATORS – WHAT HAVE WE LEARNED? 33 PART THREE: THE FUTURE CHALLENGES 34 OPPORTUNITIES 37 RECOMMENDATIONS 40 CONCLUSION 43 REFERENCES 44 ACKNOWLEDGEMENTS 46 3 EXECUTIVE SUMMARY THE PROBLEM: lives to become entrepreneurs, and have KEY RECOMMENDATIONS ASPIRATION NOT ACTION the knowledge to develop innovative business ideas. Studies have found To improve the rate and sustainability Young people’s entrepreneurial potential them to be more inclined than non- of graduate entrepreneurship, more remains underdeveloped: Young people graduates towards entrepreneurship, universities should consider setting up aspire to be entrepreneurs more than any and – when they do start up – more likely graduate incubator programmes, building other age group, but are unlikely to act on to be running high-value companies. on existing ones, or adding a graduate their intentions. According to the Global That relatively few graduates become track to incubators currently only available Entrepreneurship Monitor (GEM), the gap entrepreneurs is a missed opportunity. to spin-outs or external SMEs. This between intention and action averages could be done alone, or in partnership 6.1% for 18-24 year olds, versus just 1.6% THE SOLUTION: with other universities, the private sector for 25-34 year olds. UNIVERSITY INCUBATION FOR (banks and coworking spaces) or local Young entrepreneurs do not have the GRADUATES government (local authorities and local support they need: According to the GEM, enterprise partnerships). 18-24 year olds are almost 20% less likely Why incubation? Graduate entrepreneurs to report they have the skills, knowledge need full-time, intensive programmes The government should recognise the and experience to start a business, tailored to their equirements. These should importance of graduate startups (and compared to the general average. This offer mentoring, monitoring and training as not just that of university spin-outs) in suggests that young entrepreneurs well as practical necessities such as ofce realising its policy objectives. Graduate require tailored support in order to space, low-cost business services, funding startups are greater in volume and more overcome their inexperience and act upon and networking opportunities. Incubation is diverse (sectorally and geographically) their ideas. able to offer all of these concurrently, and than spin-outs, and therefore more likely is identifed by existing research as a highly to drive growth across the whole country. Universities have a role to play: With effective support mechanism for early- University-managed graduate incubators close to 50% of people aged 17-30 now stage businesses. should be the anchor institutions for this attending a higher education institution growth. – compared to 12% in 1979 – universities Less than half of UK universities currently have unparalleled access to what is offer incubation to graduates: According to Existing metrics tracking graduate essentially a captive audience. Universities the Centre’s analysis, less than half (47%) of entrepreneurship (primarily the Higher have expertise, infrastructure, resources, the 130 UK universities offering incubation and links to the wider community that Education Business and Community report this being available to graduates. are key to providing effective business Interaction survey and the Destination Taken as a percentage of all 163 UK higher support. of Leavers from Higher Education education institutions, this means that survey) should be made more robust by: only around a third (37%) of universities Universities are not doing enough to tracking outcomes over greater periods clearly offer incubation to graduates. Many support graduates in entrepreneurship: of time; distinguishing more effectively university incubators focus exclusively on Universities are not supporting graduates spin-outs and/or external SMEs. between (a) freelancers and high-growth as effectively as they could. Only a third businesses and (b) student and graduate (34%) of recent graduates felt university What about students? entrepreneurs; and introducing stricter prepared them well for entrepreneurship, The Centre’s guidance to the individuals and institutions and only around 1% of graduates are interviews with university incubator completing them. starting their own business six months managers and users suggest that students and even three years after university. tend to be at an earlier stage of their Existing support focuses on students journey as entrepreneurs, and fnd it An umbrella body encompassing at the “pre-startup” phase, rather than difcult to incubate a business alongside graduate-focused university incubators in graduates actually launching companies. their degrees. Despite this, entrepreneurial the UK should be established, to enable students should be prepared for incubation collaboration, best practice sharing and A missed opportunity: University through existing forms of curricular and standardised data collection/performance graduates are at an ideal time in their extracurricular support. benchmarking. 4 UNIVERSITIES AND GRADUATE ENTREPRENEURSHIP: PLAYING THEIR PART IN THE REVOLUTION By playing a larger role in supporting graduate entrepreneurs, universities can drive economic growth and innovation, boost local graduate retention, contribute to the government’s policy agenda in higher education and industrial strategy, bolster student recruitment and, most importantly, help more young people fulfl their aspirations. This report explores how universities might do so. Research shows that while many young Yet start-up rates among graduates remain students in “enterprising thinking” and pre- people aspire to be entrepreneurs, they low – at least compared to the potential. startup activities (predominantly awareness are also the least likely of all age groups And one reason for this may be the lack of raising and idea generation), rather than to act on their intentions. While a certain support from their universities. For many helping ambitious graduates actually start drop-off between intention and action is to graduates, starting a business simply feels companies. be expected, the size of that gap strongly too risky compared to a stable job in the suggests that young people face signifcant corporate world. Often, all that is available to a graduate barriers to becoming entrepreneurs. entrepreneur is periodic access to some This suggests universities can play a desk space, a part-time mentor and one-off The myth of the “lone wolf” entrepreneur bigger role in helping graduates with good is above all just that – a myth. Aspiring business ideas and the right motivation workshops and events – support more founders beneft from training and support turn their aspirations into reality. Not suited to active students – rather than as much as anyone else on a new career only would this enable more graduates a full-time, intensive business support path. A small minority may persevere to pursue their ideal vocation, it would programme. We believe more universities through a combination of luck and sheer also bolster universities’ reputations as should offer graduates tailored incubation determination. But for most young well as contribute to regional economic support, which is why later in this report we entrepreneurs success hinges on access development, productivity growth provide a best-practice guide based on in- to the right kinds of mentoring, training, and innovation. depth interviews with managers at existing networks and funding – particularly when graduate-focused incubators. disadvantageous circumstances are The good news is that many at work. universities already do a lot to support But universities will have to overcome entrepreneurship. Over the past several key challenges in order to improve their Which is where universities come in. decades entrepreneurship and enterprise support for graduate entrepreneurs. University graduates are at an ideal time in education has become increasingly their lives to start businesses. Through their recognised as a core component of what These include uncertainty around future exposure to a range of ideas and activities universities do. The bad news – at least funding, a fawed set of metrics and subpar they are particularly disposed
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