Of the many claims that have been made against the ‘millennial’ generation, lack of entrepreneurial ambition is definitely not one of them. According to the 2017 NatWest Entrepreneurship Monitor, on average 55-60% of those aged 18-30 would like to start their own business, compared to around 35-40% of the general population.
This has not gone unnoticed by universities, which are increasingly offering entrepreneurship-related degrees. In the last (2012) edition of the National Centre for Entrepreneurship in Education mapping survey, 85% of responding universities said they offered awards and modules in enterprise or entrepreneurship, leading to academic qualifications. A search of UCAS today identifies a surprising 290 undergraduate courses across 83 institutions that feature entrepreneurship.
But while many young people aspire to be entrepreneurs, they are the least likely of all age groups to act on their intentions. In the UK, only 3.9% of 18-24 year olds are engaged in early-stage entrepreneurial activity at any one time, compared to 8% of 25-34 year olds and 9% of 35-44 year olds.
Although young founders have the enthusiasm for business, they lack experience, knowledge, skills and contacts. They are more likely to find unforeseen obstacles challenging. This may explain why, again according to the GEM, young people – when they do manage to start up – are more likely than older entrepreneurs to close their businesses within the first 12 months.
Enter universities. They have the expertise, infrastructure, resources, credibility and links to the business community that are key to providing effective business support. Despite having unparalleled access to what is essentially a captive audience, many universities under-deliver when it comes to supporting graduate entrepreneurship.
This is a huge missed opportunity. University graduates are at an ideal time in their lives to become entrepreneurs, and have the knowledge to develop innovative business ideas. Graduates have been found to be more likely than non-graduates to be involved in early-stage entrepreneurial activity and more likely to be owners or founders of high value companies (in terms of turnover, staff employed and innovation).
“Every young graduate with a promising business idea should win the support they need to put it into practice – and who better to play this role than their very own universities?”
The role that universities can play is in business incubation. Graduate entrepreneurs need full-time, intensive startup programmes tailored to their requirements. These should offer mentoring, monitoring and training, as well as practical necessities such as office space, low-cost business services, funding and networking opportunities. Incubation is able to offer all of these concurrently, and is identified by existing research as a highly effective support mechanism for early-stage businesses.
But less than half of UK universities currently offer incubation to graduates. According to our analysis, less than half (47%) of the 130 UK universities offering incubation report this being available to graduates. Taken as a percentage of all 163 UK higher education institutions, this means that only around a third (37%) of universities clearly offer incubation to graduates. Many university incubators focus exclusively on spin-outs and/or external SMEs.
According to the Destinations of Leavers from Higher Education (DLHE), an annual survey of university leavers, just 0.7% of graduates are starting their own business six months after graduating, compared to 4.5% that are freelancing. Three years later, 1.2% are setting up their own businesses, while 4.8% are freelancers.
While universities may be well equipped to offer support to early-stage entrepreneurs, not enough are extending that support to graduates. Given the substantial gap between young graduates’ startup intentions and activity – despite graduates’ suitability towards founding and running high-value companies – universities could and should be doing more to help realise graduates’ obvious entrepreneurial potential.
“There can be far more support for entrepreneurial graduates who are ready to turn their ideas into action.”
“But there is plenty of startup support for students,” I hear you say. There are many good student enterprise programmes across the UK; however, at the Centre for Entrepreneurs, we believe that the focus of incubation should be on graduates rather than students. While students are certainly not lacking when it comes to entrepreneurial aspiration and innovative business ideas, most are (or should be) too busy with their degrees to truly commit to launching and running a successful, growth-orientated startup. As any entrepreneur will testify, starting a business is a huge commitment that requires enormous investments in time and energy. Graduates, far more than students, have this in abundance.
Of course, there are exceptions to this – some students can successfully balance business formation and studies. But overall, encouraging students to start up during their studies is likely to negatively impact academic performance, and create unnecessary conflict between a university’s joint commitments to educating its students and preparing them for professional life.
Getting young people to act on their entrepreneurial intentions is not only a good thing in itself but provides other benefits for the wider society. By supporting graduate entrepreneurs, universities can drive economic growth and innovation, boost local graduate retention, bolster student recruitment and, most importantly, help more young people fulfil their aspirations.
“Although young founders have the enthusiasm for business, they lack experience, knowledge, skills and contacts.”
An increase in graduate entrepreneurs can also lead to more philanthropic donors and, in turn, even more entrepreneurship. American universities are particularly good at this – they have a longstanding tradition of closely knit alumni networks, and these communities are put to excellent use. Many US incubators owe their existence to entrepreneurial graduates: Drexel and Chicago’s (Polsky Incubator) incubators bear the name of alumni donors; Harvard’s Launch Lab was established by six alumni “founding donors”; and, rather impressively, Stanford’s StartX was set up by a recent graduate from the class of 2011.
The rapid expansion of enterprise and entrepreneurship education in higher education over the past decade is a great achievement. We should congratulate universities for acknowledging the value of entrepreneurial students and graduates, not just in terms of starting companies but also for the benefits of enterprising behaviour in their lives and their careers.
But there can be far more support for entrepreneurial graduates who are ready to turn their ideas into action. While expanding such support will not be easy, a changing policy landscape – including far-reaching higher education reform and an emphasis on industrial strategy and inclusive growth – offers significant opportunities to place graduate startups high up on the agenda. Above all, we believe that every young graduate with a promising business idea should win the support they need to put it into practice – and who better to play this role than their very own universities?
Matt Smith is director of the Centre for Entrepreneurs think tank, which published ‘Putting the uni in unicorn: the role of universities in supporting high-growth graduate startups’ in 2017. The Centre now runs the Incubator and Accelerator Network – an advocacy and best-practice network for incubator managers.