It wasn’t terribly long ago that incubators were a niche concept. In 1980, you could almost count them on your two hands—there were just 12. Today, there are literally thousands littering Canada and the US.
While only a few are prominently famous—think Y Combinator in Silicon Valley and TechStars in New York City—hundreds upon hundreds more in every shape and size have triggered a tidal surge in this service of fostering startups. The idea is great: mix quality mentorship with access to funding to cultivate ecosystems of successful technology companies.
Yep, the idea is great. But do they actually work?
Your Capital Edge wanted to find out. So they did some in-depth research, speaking with representatives and looking at reports from more than a dozen leading incubator and accelerator programs across North America, including the Toronto Business Development Centre, as well as a variety of companies who have completed such programs.
And what did they determine? While perhaps slightly vague, Capital Edge concluded that “there is no broad consensus on just how effective these programs are.” Data collection was an issue, they noted, because of how new most incubators are and how many years it takes most companies to actually become measurably successful. Another problem was that these accelerators hand-select companies they personally believe are poised for success, effectively stripping most results from possessing valuable meaning.
Ultimately, it’s difficult to imagine that mentorship and funding access harms business potential. But then again, there are plenty of examples of non-incubated companies and even bootstrapped companies that have achieved tremendous success. With this emerging wave still in infancy, it’s impossible to truly gauge its effectiveness for at least another five years or so.
Today’s early-adopter startups are our lab rats. Down the road, we’ll see whether or not they made the right decision, and whether incubators will remain a staple in entrepreneurial society—or fade out of the picture after failing to accomplish what they promise.