In the past 10 years, there has been an enormous rise in the number of startup incubators, first in the US and then in Europe, with other regions following suit.

Today, the per capita number of startup incubators in Europe is the same as in the US, which is partly due to increased European government support. Incubators are perceived to only help companies survive their earliest stages of development, but their role is evolving.

Company factories

Being relatively new, startup incubators – or company factories – are still in flux and this is why we see various business models and structures appearing. Many are hosted by universities while others are private initiatives. A third of all European incubators, for example, have a private company legal entity.

Different incubators can have quite different missions – some exist to encourage student entrepreneurship while others focus on generating returns. And there is a growing third group of academic centres supporting incubators, entrepreneurs and students with evidence-based knowledge, such as the Innovation and Co-Creation Lab at the London School of Economics.

Perhaps the biggest trend is the developing role of incubators – from helping nascent companies to survive their early stages to adding value to those companies and the surrounding ecosystem.

“Growing a business is hard. It is like planting a tomato seed in a forest and hoping it grows in a fairly hostile environment.”

In November 2014, Bounts was awarded a regional growth fund grant, backed by the incubator, that allowed him to expand the team and hire four local employees. Currently, Bounts has over one million users in the UK alone and members in 11 countries.

The key ingredients

Building bridges

While the different models can vary, flourishing incubators build connections between universities, business schools, startups and the local economy. US seed accelerator the Y Combinator has succeeded by bringing the right mentors to the party and taking advantage of the proximity to Silicon Valley.

The changing role of startup incubators

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Undoubtedly, incubators bring benefits to all stakeholders in the innovation process. Their role is to create shared prosperity. Entrepreneurs gain a range of benefits that help them increase their chances of creating sustainable companies, while early-stage investors benefit from accessing a bundle of high-quality startups that have already received professional advice.

Corporations are also starting incubation programmes, as it provides them with a pipeline of potential acquisition targets. And professional services companies can build their future client book by providing free advice to new businesses.

The role of startup incubators will continue to evolve. As well as helping new businesses survive, incubators are beginning to add value to startups and benefit the wider business ecosystem.