SUPPORTING PLACES OF WORK: INCUBATORS, ACCELERATORS AND CO-WORKING SPACES CONTRIBUTORS Supporting Places of Work: Incubators, Accelerators and Co-working Spaces Prepared on behalf of the Greater London Authority by; URS Rory Brooke, Greg Openshaw and Lucy Farrow Gort Scott Fiona Scott and Gemma Drake Ramidus Consulting Rob Harris #1 Seed. Raj Ramanandi ABBREVIATIONS 3D Three dimensional BID Business improvement district BIS Department of Business, Innovation and Skills GLA Greater London Authority HM Her majesty IAC Incubator, accelerator and co-working space IOTBay Internet of Things Bay (http://iot-bay.org/) IP Intellectual property LA Local authority LB London borough LEP London Enterprise Council PTAL Public transport accessibility level QMB Queen Mary Bio-science SME Small and medium enterprise UK United Kingdom UKBI UK Business Innovation US United States of America VOA Valuation Office Agency YES Youth Employment Scheme iii Pop-up shops in Camden Collective’s C/159 EXECUTIVE SUMMARY OBJECTIVES AND APPROACH these types of spaces are not always obvious and they This study has been commissioned by the Greater typically these three spaces have overlapping features. London Authority (GLA) to explore and map the provision Typical features of IACs are considered to include: of incubator, accelerator and co-working space (IACs) in London. IACs play an important role in the provision • Incubator spaces: Provide work space designed to of work space and support to start-up and small actively support the growth start-ups or a business businesses and encompass a wide range of models. in its early stage of development. A distinguishing This report examines the current provision of IACs feature of an incubator is the provision of business in London and outlines the potential benefits both to support. Businesses leasing space in an incubator businesses and to the surrounding areas in which IACs are chosen through a competitive application process are located.The research conducted also supports and do so to access business support facilities which the development of an interactive map of IACs across may be provided by the incubator management or London and their offer, which it is intended will be hosted their partners. This support is provided in return for by the GLA. The role of the public sector in supporting a share in profit or minor equity stake in the business. IACs in order to enhance these benefits is discussed and • Accelerator spaces: Typically provides space to recommendations put forward. start-up businesses or existing businesses (which might have been operating for several years) with the A number of research tasks were undertaken to inform potential for fast growth and good financial returns. this work, including: A key characteristic is the fiercely competitive nature of the selection process and dedicated support • Review of existing information and literature about provided by the space management and/or investors IAC provision and offer who working closely with the business to guide their • A data gathering exercise, to inform the IAC mapping growth. In return for access to space and business and analysis of growth support an accelerator will require an equity stake. • Ten interviews with IAC providers and an additional This support lasts for a defined short period, at six detailed case studies which time the investor will decide to expand their • A survey, sent out to all London local authorities to involvement or exit the business, either of which will ask about IAC activity and the borough’s potential result in the business moving on from the accelerator to accommodate further provision space. • A survey investigating the views of businesses • Co-working spaces: The spaces provide a occupying IACs, and stakeholder consultations with combination of workplace and supporting facilities policy makers. at affordable rates with easy in-out contractual conditions. The renting of space is set up to attract DEFINITION users who require ad hoc and short term access Although there is no universally accepted definition of to workstations and supporting facilities such as IACs, characteristics common to IACs can be identified. meeting rooms. The format of space is primarily open All three types of spaces – incubators, accelerator and plan and of an informal setting, aimed at facilitating co-working spaces – offer environments designed to an interactive and creative networking environment suit small and micro businesses with varying levels of to form a sense of community among users. business development offered. The differences between • For the purpose of this study, however, it is more v Executive Summary appropriate to focus not on the difference between A design and format of space which enables and IACs themselves but by their differences with facilitates interaction between businesses and with conventional office space (including serviced investors. or managed office space). Our work highlighted the wide range of characteristics PROVISION OF IACS IN LONDON covered by IACs, including wide variation in size. The mapping exercise found 132 IACs in London. IAC The IAC market in London was also found to be young, provision is concentrated in boroughs of the Central though we acknowledge that the concept and operation Activities Zone (CAZ) and CAZ fringe boroughs. There is of incubators has been active for some decades, and a particular cluster of IACs in the inner East London area showing rapid rates of growth, with the majority of IACs in the London Boroughs of Islington and Hackney established in the last three years. The analysis of current located around Old Street roundabout and extending provision therefore shows only a moment in time and across the Shoreditch area, St. Luke’s and Clerkenwell/ should be considered in relation to emerging trends Farringdon; and clusters too in areas of LB Camden which may change the nature of provision in the future. (around Bedford Square); and City of Westminster We estimate that, during a given working day, upwards (Soho in particular). These locations have clusters of of 3,800 SMEs occupy IACs in London. Given the businesses involved in digital technology, communication availability of short term membership options and the and other creative businesses. The higher incidence of relatively high turnover of start-up and SME businesses, start-up and entrepreneurship within these sectors also the actual number of businesses supported during the has a knock-on effect in terms of demand IACs. course of a year is probably significantly higher. Research found that IACs provide space for a wide range of business types and sectors. Almost 80% of Potential future trends in IAC provision could see the business activities were classified in the fields of: digital; market covering a broader range of sectors, including advertising, marketing and communications; designer- those with workspace requirements beyond pure desk makers and product design; production, TV, music and space working, such as shared specialist equipment photography; or with a social enterprise and charity such as 3D printers. This could be beneficial to small focus. By number of IACs, over two thirds offered office and start-up businesses who require access to specialist space (B1a/b use classes), around a quarter offered equipment to test and develop their ideas. workshop space (predominantly B1c/B2 use classes rather than B8), and less than ten IACs providing There is increasing awareness among local authorities laboratory space. Coverage in outer London was sparse that IACs, which operate targeted social programmes, and tended to include IACs with a social focus that can generate socio-economic benefits to communities operate in partnership with local authorities, charities which extend beyond commercial or economic returns. or housing associations. The role of the public sector in supporting and facilitating IACs and activities conducted by providers has the The key characteristics observed in relation to IAC potential to expand in order to secure these social offering to businesses were: benefits. Flexibility in relation to membership and pricing IACS AND BUSINESS GROWTH according to use, which anecdotal evidence suggests The benefits of IACs tend to depend on the has made IACs ‘affordable’ to small businesses. The characteristics of provision and also the motivation focus here is on the short term nature of commitments, behind their establishment (and that of the founder’s). provision of all required services (i.e. telephone line, However, the study found that there is a lack of broadband, etc) and low up-front costs rather than on monitoring (and therefore data available) which tracks price per unit of workspace, which is relatively high in the success and progress of businesses working out some instances. of IACs, which makes it difficult to quantify the wider commercial or economic benefits of IAC provision. This High levels of support which were found in all types of is in part due to the space typology being young (over space, including co-working spaces. The provision of half IACs being established in the past two years and the formal or informal business support also differentiates majority within the past 5 years) and evolving in nature many co-working spaces form traditional serviced office but also due to the breadth of IAC management models. spaces. For instance, IACs led by business angels who invest vi Executive Summary capital and expertise to work with a select number of back into use redundant commercial space but also businesses only are more interested first and foremost in because it helps to tackle any negative perception finding fast growth businesses rather than supporting all issues which could potentially impact on surrounding businesses which utilise their space. Entrepreneurs businesses. For example IAC providers are taking on acknowledge that there is a fine line between business temporary use of retail space on high streets and offering success and failure, and high churn rates are not these for little or no cost to occupiers. The benefits of necessarily reflective of failure.