The incubation industry dates back more than 50 years and has developed and matured in its attempts at compensating for insufficient marketing expertise, lack of managerial expertise and insufficient access to capital in the global markets (Allen 1985, Aerts et al. 2007). The business incubation industry should be understood within the context of its local or regional surroundings, and on the global level, the financial and economic conditions faced by the industrialised countries are crucial factors. Originally, a business incubator was a controlled environment that offered care, protection and growth for an early stage venture – and it was primarily about creating an environment of office spaces and shared resources (Hackett and Dilts 2004a). The incubators were originally part of a geographical and regional development concept of creating growth by copying the successful areas, such as Oxford-Cambridge. The creation of space for academic or high-tech entrepreneurs, however, was not enough to boost development, and both public and private institutions began to develop other activities and programmes designed to support high-potential entrepreneurs.
The traditional conditions of venturing in terms of time (duration of processes, production and communication) cost and place for technological innovations have changed dramatically over the past 50 years (Aerts et al.
2007). We have seen the emergence of a venture capital industry, and large corporations have focussed on innovation and, increasingly, on entrepreneurial strategies following widespread job losses in the 1970s, all of which has contributed to the shape and design of incubating activities (Bruneel et al. 2012). Allen and McCluskey (1990) illustrated the development of the industry by developing a business incubator continuum, to be able ‘to point out the spectrum from a focus on real estate to the capitalisation of investment opportunities and the fostering of new enterprises’ (Aerts et al. 2007, 256). This empirical case of this dissertation is an example of this development in the industry.
Until the late 1990s, most of the world’s incubating activities were publicly funded, but at this time many for-profit or private incubating activities were launched by investors to hatch businesses quickly and bring in large returns. The model involved offering an attractive office space for new companies in exchange for equity (Lalkaka 2010, 169). The maturation of the Internet changed the conditions for incubating activities, just as it changed many other things. It forced most venturing actors to reduce time-to-market, engage in partnerships and embed their products and services into existing value chains and led to the emergence of a consultancy sector for start-ups who could not afford to pay for these services. That is why networks and networking activities became such important concepts, and why the concept of business incubators and their potential for aggregated networks saw increased attention at the beginning of the 21st century (Kemp and Weber 2012, 149). The incremental development of IT and new technologies changed the incubation industry and created the concept of virtual incubators and business accelerators (Bøllingetoft and Ulhøi 2005). Again, as with incubating services from physical service providers, no one really knows what works to create an impact, but business accelerators are appearing all over the world, with a few, primarily U.S.-based, providers as the main pioneers in the field including Y Combinator, TechStars, 500 Start-ups, DreamIt Ventures and the Danish providers StartUp Bootcamp, Accelerace and Founders House. These players have significantly changed the reputation of incubating activities from being public, slow and irrelevant to really serious entrepreneurs into being able to attract ‘high potentials’ and serial entrepreneurs, and as a consequence the design of incubating activities has broadened considerably (Lalkaka 2010, 175).
The following quote from the web-magazine Entrepreneur.com sums up the expected benefits of incubating initiatives – as for example accelerators;
‘For many start-ups, the initial draw to an accelerator is the potential for securing capital to refine their concept or get their business up and running. Companies can expect to receive some funding to get started or gain traction, but the amount of the stipend varies, as does the
amount of equity the accelerator receives in return. The money is certainly a boost, but the real draw for start-ups is the exposure--to knowledge, experts and funding--accelerators can provide. One of the marquee benefits is access to mentors who can offer experienced insight and advice in a concentrated amount of time (Entrepreneur.com 30 January 2013).
Remark the emphasis on the mentor relationship and advices – the belief that experienced insights can make a difference to the success of the entrepreneurial process – which is very much the core motivation and hope of entrepreneurs.Being part of an incubator (broadly defined to include incubators, incubator programmes, accelerators and seed starter funds) has become part of a possible bootstrapping strategy of start-ups, and the booming market indicates a demand for the services provided by the incubation industry.
Hence, the entrepreneurship support arena contains a variety of actors and activities, all looking to make a living and a career from supporting entrepreneurs in incubators, accelerators, living labs, student incubators, maker factories, co-working spaces, start-up competitions and programmes, technology parks, science parks, chambers of commerce, growth houses and the management of industrial zones/clusters. These actors make up a kind of supply chain and are interdependent of each other in the effort to produce and sustain new clients (start-ups) to move through the chain17. In practice, the terms incubator and accelerator are often used interchangeably, but by the definition, the accelerator is something new – even though it could be argued that training programmes for owner-managers, which Gibb studied in the 80s and 90s, resemble the accelerator idea. There are more and more of these initiatives, which are supported by regional authorities and recognised as a necessary element to generate high-potential start-ups.
The course of development of the incubation industry indicates that incubating activities are no longer just a tool for policymakers; by now, it has become a tool for private companies too (from Novo Nordisk and Nike to Disney), private universities, and private investors, although these actors frequently use it in collaboration with public institutions. Many of the non-public incubator models have not yet been thoroughly investigated by researchers but can be categorised as;
17To illustrate,the supply chain of the incubation industry of the fieldwork consists of universities (CBS, DTU, RUC, AAU, SDU, KU), student incubators (Copenhagen School of Entrepreneurship, Katapult), start-up competitions (Venture Cup, Børsens Gazelle), incubators (Symbion, Incuba, 5th) innovation environments (DTU innovation, RUC, AAU), springboard competitions (Connect Danmark), pre-seed investors (Syddansk Innovation, Midjysk Innovation, CAT Science), accelerator programmes (Accelerace, Start-up Bootcamp), regional development initiatives (Vækstfabrikkerne), corporate seed funds (Novo Seeds), private/public venture capitalists (SEED Capital, Sunstone, Northcap), business angels, Vækstfonden, EU, The Danish Business Authority (The Danish Ministry of Business and Growth), the trade council (Eksportrådet under the Danish Ministry of Foreign Affairs) and a few international VCs and corporate funds including Merck Global Health Innovation Fund and Wellington Management Company, LLC.
• Corporate business incubating activities, which is the conceptualisation of incubating activities and application to corporate needs for continuous innovation – or another marketing activity
• Corporate incubating and seed activities, which is the attempt to support and control one’s own industry by nurturing, investing in and supporting it
• Private VC incubators, which are usually funded by venture capital organisations or set up by multidisciplinary consultancies. The latter type is often virtual and profit-driven and does not focus on job creation
The business incubating industry has matured into supporting almost all industries on all levels of venturing, and although it is discussed whether high-growth ventures are young technology start-ups (Mason and Brown 2013, 215), technology based start-ups are still the main target group.