Incubators probably don’t actually work that well

Maybe incubators don't really work

In our grand race to deify the Bay Area culture while ignoring the fact that modern-day San Francisco may someday go the way of Detroit (and simultaneously ignoring the fact that Steve Jobs himself predicted the demise of the tech industry), we oftentimes don’t look at concrete research.

Well, here’s a little bit.

The Kauffman Foundation went and analyzed 35 academic papers about the relative success and value of incubators — where tech startups often enter to get access to resources and networking — and also analyzed one paper that was, in turn, an analysis of 38 other papers. Basically, they looked at incubator success from a variety of standpoints and found that, well, there’s not a ton:

Although incubated businesses have slightly higher employment, growth and sales, they also have slightly lower survival rates after they graduate. Overall, say the researchers, the difference in performance between incubated and unincubated businesses is marginal. One research paper Fetsch examined found no significant difference between incubated and non-incubated businesses. She cautions that one paper isn’t enough to determine whether or not incubators work, but she’s also concerned that so many entrepreneurs, policymakers and incubator providers believe incubators are a boon for startups. “There’s no evidence of that yet,” says Fetsch.

You can’t go ahead and say “Incubators don’t work!” but there’s also no real evidence that they do. If you watched that Amazon original show, Betas (which was pretty good), the whole “incubator” idea was kind of treated like a farce. Same with Silicon Valley, which I believe returns this evening on HBO.

I’ve never worked in SF or other incubator communities and I’m sure there are places that provide a lot of tangible resources, both physical and connection-wise, but in general it seems like a little bit of a scam for some semi-rich guy to offer up a bunch of supposed “help,” not really offer said help, and then get rich on the back end through, essentially, serendipity.

As always, I could be wrong. But this may be one reason that many believe entrepreneurship is dying.

Ted Bauer

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