It is said that it takes a village to raise a child. A similar argument could be applied to the creation of a successful entrepreneurial business – no one can do it in isolation.
Every successful new business has a support system, which inevitably includes an accountant and other advisers, a bank and other sources of finance, and perhaps a mentor or a formal network to act as a sounding board or a shoulder to cry on.
Small and growing businesses need (and want) to learn from each other; this idea was behind the development of the first ‘business incubators’ in the US in the final decades of the last century. Today, there are thousands of business incubators and accelerators around the world, all helping to bring entrepreneurs together and offer them whatever support they need in a one-stop shop service.
A new ACCA report, Space to grow: new models of business support, looks at how these alternative business support models are helping SMEs and start-ups to achieve rapid growth.
Breathing space
Incubators and accelerators are changing the business support landscape across the world. In 2017, a UK government report identified more than 200 active incubators and 160 accelerators, mostly in London but spreading to cities across the country; it is estimated that there are more than 7,000 incubators worldwide.
Joining the ecosystem means access to potential clients, the ability to introduce existing ones to the right incubators or accelerators, and the ability to learn from and replicate parts of the model
Incubators focus on business creation and development, and are usually physical spaces where entrepreneurs can gather and work, accessing additional services on demand such as training, mentoring or, on occasion, specialist equipment or facilities. Some are not-for-profit institutions set up by universities or governments, while others are commercial.
Accelerators, by comparison, focus on services rather than space, and put a greater emphasis on funding (although many also offer networking and mentoring opportunities). Unlike incubators, accelerator programmes tend to be selective, intensive and time-limited (typically three to 12 months), and payment tends to be in equity rather than fees.
Source: Business incubators and accelerators: the national picture, Department for Business, Energy and Industrial Strategy (2017)
The accountant’s role
ACCA’s report argues that accountants should not feel threatened by these new models but should instead seek to join the ecosystems that are growing around them: ‘The role of incubators is generally either to fill gaps in existing support for business or go above and beyond such support, as well as ensuring that businesses do in fact access that support. They cannot and do not attempt to replicate the accountant.’
The report points out that accountants are ideally placed to augment this evolving ecosystem and explains how they can help their clients navigate this world. It identifies a number of synergies between accelerators and incubators and the services offered by accountants, including access to finance, early-stage growth, networking, advice on access to finance, and their ability to act as ‘technology evangelists’.
Joining the ecosystem, it argues, means access to potential clients, the ability to introduce existing ones to the right incubators or accelerators, and the ability to learn from and replicate parts of the accelerator’s or incubator’s model.
Regional difference
The report also explores the role of incubators and accelerators globally, as well as the differences in regional approaches. In emerging markets, for instance, the ultimate goal may be to foster entrepreneurship as an alternative to employment, and/or to create clusters of new enterprises that could attract inward investment. In more mature markets, on the other hand, incubators and accelerators may focus on high-growth sectors and candidates.
‘Different goals have different patterns of risk,’ says the report. ‘A high failure rate may be acceptable when the goal is to help investors to find the next “unicorns”, less so when it is to create a generation of resilient and self-supporting entrepreneurs.’
Some businesses have been forced to ‘start anew’, and look for a new business model that will help them find new markets or serve existing customers in different ways
The report includes a number of case studies from around the world that illustrate the wide range of approaches in different regions. It also looks at the role of accelerators and incubators in post-Covid-19 recovery.
‘Covid-19 has put extreme pressure on smaller businesses, many of which have had to close their doors,’ it says. ‘Others have experienced extremely rapid growth. Many support networks have found their members and alumni looking to them for support, not to grow but to survive.’
The tools used by accelerators and incubators have, it adds, proved very adaptable during the crisis. Some businesses have been forced to ‘start anew’, and look for a new business model that will help them find new markets or serve existing customers in different ways. Others have had to find ways to cope with explosive growth.
Sustainable approach
The report concludes that accelerators and incubators are beginning to expand their services beyond high-tech and high-growth companies. Their toolkits and resources, and the networks they foster, ‘provide the foundations for an evolving business ecosystem which fosters sustainability, resilience and social responsibility’.
More information
Watch this video by AB and King’s College London on becoming more entrepreneurial
