How Successful Is Business Incubation ?

Business incubation is relatively new and is still evolving. There are some 900 incubators in the USA (over 600 recognised by the National Business Incubation Association - NBIA) which have been used for a number of different purposes, e.g. job creation, wealth creation and industrial regeneration, and their success has been measured in different ways. The most prominent incubators are those which have generated substantial local economic growth and/or development of new technologies, e.g. Austin Technology Incubator, Kansas City Centre for Business Innovation and Massachusetts Biotechnology Research Institute.

Much more work still needs to be done in analysing the impact of incubators. However, it is worth noting that the EU survey of its Business Innovation Centres (a form of incubator) found that survival rates for new businesses in a BIC were 88% compared with 50% for small businesses generally.

Why have business incubators become so popular? Very simply, because they work

The average stay in an incubator is three years.

• The average firm in an incubator increased sales by more than 400% during their stay- a Compound Annual Growth Rate of 59%. [University of Michigan Study as quoted in AJC, ""New Study Lauds Business Incubators", 10/29/97]
• Survival rates show between 80% and 87% of all firms graduating from incubators survive through their first three years outside the incubator. And their "for-profit" brethren claim survival rates as high as 90 to 95%. Compare this to the general business failure rate of 30 to 60% (10 to 20% per annum) business failure rate for start-ups as a whole, and a 70% to 80% survival rate for venture capital backed companies.