Edward De Bono once said that to be successful you have to be ‘lucky, or a little mad, or very talented, or find yourself in a rapid growth field’.
Entrepreneurs intent on creating new markets or disrupting existing industries need all four in spades. Even then the terrain is treacherous – coming up with an idea (1% inspiration) is the easy bit. Successful execution (99% perspiration) is what really counts. The odds of success are not great and newly-minted MBAs know that – in terms of ‘risk-adjusted’ income alone – they’ll be better off getting a job than starting a business of their own.
London Business School, like other business schools and universities, has struggled to find meaningful ways to support the student intent on starting his or her own venture. This is in stark contrast to the support that students get during the MBA programme – thirty years ago LBS was one of the first to introduce entrepreneurship into the curriculum and since then has built a myriad of courses, competitions, challenges and a huge entrepreneurship community. But none of this completely conditions or compensates students for the looming loneliness and ambiguity of entrepreneurial life, especially when everyone around seems to be happily heading for the relative security of corporate life.
So, what does a business school do to support entrepreneurial students on graduation to convert knowledge gained here into a stream of great businesses?
London Business School’s answer, like so many good ideas, looks obvious in retrospect. We cleared a ‘house’ in the corner of the campus and re-dedicated it as a place where the most committed students could ‘incubate’ their businesses for a year before scaling. And like so many great initiatives, it was created by the students themselves.
Incubating an incubator
Let’s rewind. It’s June 2010 and the latest cohort of MBAs have just hit the streets – most heading for debt-reducing employment. But a group of contrarians are intent on eschewing corporate life in favour of founding a business of their own. This band of five have written to the School to ask whether they can stick around for a few more months to make use of a few unused offices to get their businesses up and running in ‘lean’ mode. The School – spearheaded by Career Central - trusts its students and likes intriguing experiments, so happily agrees.
The space isn’t much. A few shared rooms in a forgotten corner of the School. There is little provided or expected other than tables, chairs, wireless access and the School’s ebullient central heating system as winter descends. But the warmth makes all the difference to those pioneer businesses that use the space to hatch their businesses.
Those first few founders are keen to perpetuate the nascent incubator. They organise a meeting with the Class of 2011, ‘to discuss how to create a permanent incubator at LBS to support generations of entrepreneurs to come’. But by that time they are pushing at an open door – the majority of the ‘incubatee’ businesses are by now self-standing and spreading their wings. All are grateful for the support and keen to share what they’ve learned with students and happy to feature in case studies and School publicity. By the following summer the ‘incubator’ is buzzing with a second cohort of seven nascent businesses.
Fast forward four years. The School now has now set aside and refurbished an entire four-story, an 11 unit house (known as, ‘The House’) on the main campus. 30 businesses (50 or so students) applied for the space and twelve made it through the final cut. These, ‘Deloitte Institute Founders’ receive a bundle of support to build their businesses into viable ventures. Not all make it but most do and those that don’t seem to get offered great jobs by firms that value their entrepreneurial skills.
How does incubation help? And why should the School so enthusiastically back the incubator? It takes no equity or rent in exchange for an office in The House. And it’s hardly flush for space – as anyone who has tried booking space on campus will attest. Well, the consensus seems to be that an on-site incubator creates enormous value for the School in ways that were never envisaged at the outset and are far from financial.
‘It’s a fantastic showcase of entrepreneurship at the School’ says Jane Khedair, who manages the programme and works closely with the Founders throughout. ‘The initiative goes from strength to strength each year and 2016 looks set to continue that trend with the growing interest in entrepreneurship.’ There are valuable lessons to be learned by other universities wondering whether to do the same.
What the ventures value:
We asked some of the current ‘incubatees’ why they were so keen to enter the incubator.
We also asked past occupants of ‘The House’ what they valued most about their year in residence.
Four themes emerged:
1. Support and sharing
The early days of a venture are characterised by a huge amount of loneliness and ambiguity which can be terminally demotivating. Being part of an entrepreneurial community with others who you know, like and trust can make all the difference. Moreover, many of the feelings, issues and choices are new to a rookie founder but not to the world. Since none of the businesses are in competition, everyone gains from drawing on the experiences and insights of others and there’s always someone to share triumph and occasional despair:
[You can] share ideas, contacts and find peer support for those many moments of roller-coaster crisis.
Founder, Pizza Rossa
It's more about the people than the room – sharing experiences, ups and downs with those on the same trajectory.
Founder, Esin Akan
The main benefits are the moral support from the ecosystem of start-ups facing the same challenges.
It's different to other incubators... it creates a really great environment to share knowledge, resources and learnings between the incubator businesses.
2. Working the network
Many also talk about leveraging the School’s network, resources and goodwill in those early months. The ability to ‘drop in’ on faculty, recruit student interns, carry out informal market research, book rooms and set up stall – all are made vastly easier by proximity. Nitzan Yudan, Founder of FlatClub, observes “the network helped me to sort out the administration, accounting and legal so I could focus on sales and growing the business”.
As the incubator becomes known as a place that spawns great businesses, professional service firms and other providers begin to see it as a source of future clients and want to provide pro bono support in the expectation that the businesses will grow with them. This becomes a virtuous circle, since input from those providers – like Deloitte and Landor Associates – further increases the odds of success.
3. Credibility counts
Competition for a place in the incubator grows each year. Those that make it receive the ‘Deloitte Institute Founder Award’ which includes a place in the incubator for a year. It’s a great brand that seems to have developed a cache and currency of its own. Emilio Sanz talks of ‘the badly needed credibility a start-up needs by having the ‘LBS stamp’. And Nitzan again, “The ability to contact a potential customer and say – ‘I’m calling from a London Business School Incubator company’ is ten times more likely to get a response than ‘I’m calling from Startup-you-never-heard-of’”. Nitzan, incidentally, reckons that one year in the incubator was worth £200k, a tiny fraction of this being the rent waived.
4. Free space
This part of the incubator ‘deal’ comes at the bottom of everyone’s list. Of course it helps but it isn’t the major factor. Luciana Nook, Founder of ‘Nookservices’ sums up the sentiment, ‘if the business outgrows the space then we will find somewhere else, even if it comes at a cost.’ Meanwhile, the School smiles.
Given this lack of price sensitivity, some – including some alumni entrepreneurs – question what a notoriously space constrained (and prestigiously post-coded) school has to gain in giving subsidized space to profit-seeking businesses for a year.
There are four good reasons:
- The businesses are invariably self-funded at the outset. None of the Founders draw a salary. We want scarce resources to focus on developing the business and growing value into the business before selling equity.
- The School derives real value from the good-will of the Founders, principally in sharing their experiences with ‘those about to’ (they regularly feature to share experiences in class) and as regular (and symbiotic) ‘media partners’, providing both news and content.
- This is a visible and material way of celebrating, rewarding and giving genuine status to those brave souls who opt to start their own business, which enhances the School’s reputation for enterprise and puts ‘entrepreneurship’ firmly on the map as a career option.
- Charging (rent and even more so as equity) would change the relationship with the School, currently based on mutual goodwill, into an instrumental relationship. This isn’t what we want.
- Ultimately, as a stream of great businesses spawn from the School, everyone wins. Zabetta Camilleri, co-founder of SalesGossip sums it up:
Our one year stint in the LBS incubator enabled us to take SalesGossip from a 'good idea' into a fully-fledged funded start-up. The support from the incubator helped us structure a solid business plan, trail our alpha product with a closed group of customers, test our proposition with brands and retailers and raise our first round of funding. Due to the solid foundations of Salesgossip we've now built a profitable fast growing business with 1.5m customers and we're working with some of the biggest fashion brands and retailers in the UK and Worldwide including Nike, Ted Baker, John Lewis and Net-a-Porter.
So far we’ve incubated over forty businesses - here’s a snapshot of the ventures that made it into the incubator this year. You can view the full profile of the other forty here.
Jason Power SLN2015, Founder, ‘ Nookly’: Tackles inefficiencies in the residential lettings market by empowering tenants and valuing estate agents’ time.
Floris Wentholt MiM2013, COO, TableLink: Has developed a first-of-its-kind social book and pay platform, to revolutionise going out.
Andrea Sommer EMBALJ2015 and Oliver Pilgerstorfer EMBALJ2015, Co-founders, Colmeia: An app that makes the most of in-person networking with advanced geolocation and memory technology.
Charles Dupont MiM2011, Co-founder, Markit: A web-based application for A-level maths, offering real-time marking and feedback.
Shefali Modi JEMBA2012, CEO, EncycloKidia: The first online marketplace for children’s services – with services and reviews, all in one place.
Mohamad El Rafei MiM2012, Antonio Leone MiM2012 Co-founders, Hiperpool: An exclusive job marketplace for high-potential business talent.
Patricia Eskinasy EMBALS2015, Founder and CEO, ExperiencEconomy: A digital hub, connecting the creative industry – the LinkedIn for creative professionals.
Jon Smith MBA2015, CEO, and Matthijs Hovelynck MBA2015, Product Director, Pobble: A worldwide digital classroom wall, showcasing children’s work – boosting imagination, confidence and literacy standards.
Norah Prida Bay SLN2015, CEO and Founder, Nickle: An app modernising savings and credit through mobile technology.
Ollie Chipp EMBALS2015, Founder, GramaGen: Generating profitable energy products from fertiliser by-products.
Shahnoor Meghani SLN2015, Co-founder and COO, Banking Qualification: Bringing high-quality learning and development to the banking sector with accredited qualifications.
Pratyush Lal MBA2015, Co-founder, Fosho: An online B2C platform where shoppers can bid and buy at the right price, in just two minutes.
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