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Supporting student entrepreneurship

Since it is Global Entrepreneurship Week, I thought I'd share a few thoughts about student entrepreneurship.

In many ways, universities are great environments for young entrepreneurs: secure, highly-networked, resource-intensive, with a diversity of expertise and innovative ideas, where one can find like-minded individuals mostly unburdened by mortgages and family.

And the good news is that most institutions are now accustomed to the idea that they should be engines of economic growth, with so-called ‘third stream’ activities firmly embedded.

Although staff entrepreneurship has historically received rather more attention, the National Centre for Entrepreneurship in Education (NCEE) reports that the vast majority of HEIs now also offer students entrepreneurship support of some kind, such as student enterprise clubs, hot-desking facilities, mentoring and so on – substantially different even to 5 years ago.

Outputs are also changing. According to HESA, in 2007/8 universities reported 1,977 new startups from fresh graduates (within 2 years of graduation), with a running total of 3,960 active firms. By 2013/4, the annual formation rate had risen to 4,603 new startups, with a running total of nearly 10,000 active graduate startups. Three-year survival rates - one indicator of quality - have also increased. [1]

That’s the good news. The bad news is that student startups still have trouble scaling: in 2013/4, startups by new graduates employed 18,500 people and had a cumulative turnover of £475M – well more than double the jobs and turnover reported in 2007/8. But growth has come principally from the number of firms, rather than their size.

Moreover, whilst the rate of change is quite rapid, absolute levels of student entrepreneurship remain fairly low and lag far behind those in the US. A study for RBS showed that only one in 17 young people in the UK are ‘actively engaged’ in early stage entrepreneurial activity, compared to one in 10 in the US.

In addition, the NCEE found in its last survey that student engagement rates with enterprise support schemes average only around 20%, with some HEIs reporting virtually zero engagement.

Why should we care about this?

Firstly, it is in students’ interests. Sure, most student ventures will fail, and we should not shy away from that fact. But failure often provides the valuable ‘real world’ lessons and practical mindset which employers repeatedly report as lacking. Entrepreneurship education has repeatedly been shown to boost employability.

Secondly, it is in universities’ interests. All HEIs want highly-motivated, independent thinkers. Such students are increasingly including enterprise support within their decision-making, and expect more than schools. Institutions which treat enterprise as an afterthought will find that they lose such students elsewhere.

Thirdly, it is in the national interest. The Social Market Foundation recently noted that those educated to degree level or above are twice as likely to become ‘high-value entrepreneurs’ – those scaling their businesses and contributing most to economic growth. However, it also found a relatively low proportion within the UK compared to other developed economies. Enterprise education and support can help close this gap.

Perhaps the biggest benefit, however, is that for every student becoming an entrepreneur, many more will end up in ‘intrapreneurial’ roles - innovating from within, improving productivity, competitiveness and economic resilience.

So what should be done to encourage student entrepreneurs?

Foremost, in my view, all HEIs should take student enterprise seriously. The lack of formalised policies in many illustrates this is not yet the case.

Some academics still fear entrepreneurship as a distraction; other resistance comes from careers advisors preferring to guide students into ‘secure’ careers (which, perhaps not coincidentally, boost full-time employment rates by which they are often judged). Though well intentioned, these sentiments are misguided.

Entrepreneurship Education produces Champions of Innovation

The next priority should be to embed enterprise education. Lord Young’s report, Enterprise for All, echoes the messages from The Enterprise Education Trust, Young Enterprise, NCEE and others. It should start with the recognition that potential entrepreneurs are not confined to business schools but spread across all faculties. This has much broader benefits than creating entrepreneurs: as one study put it, ‘entrepreneurship education produces Champions of Innovation’. 

Successful institutions also nurture enterprise ecosystems, internally and externally. 

Institutionally, this goes beyond enterprise education, potentially including physical space, IP advice, mentorship, business plan competitions (ideally with incentives), hackathons, pitching days, student enterprise societies, connections to VCs, in-house funds, networking sessions, etc.

Externally, this involves innovative relationships with business, government and civil society, supporting a holistic approach to social and economic development. A rich ecosystem takes years to develop but eventually attracts those who help perpetuate it.

It can also pay hugely to leverage alumni support. Beyond advice and contacts, some universities are experimenting with alumni crowdfunding platforms. Unfortunately, many alumni report that despite their willingness to help, they are rarely asked; this is a missed opportunity.

Support should also be two-way: anecdotally, the peak time for company formation is immediately after graduation, tailing off in the following 2-3 years, meaning that support for recent graduates is particularly important. Links between universities and business support infrastructures are therefore vital. This can be a challenge for students looking to establish a business some distance from their place of study.

Some HEIs may need to consider different kinds of innovation. The fact that ‘commercialisation’ is often synonymous with ‘technology transfer’ – in the more research-intensive institutions, at least – illustrates that many HEIs have been historically focused on technology startups, and may not be well-structured to deal with ideas that are smaller, less scalable, cultural, creative or social.

Clearly, not everyone is cut out to be an entrepreneur, and there are reasonable arguments that what we need are not more startups per se, but higher levels of innovation and enterprise. However, the growth of youth enterprise in general – and student entrepreneurship in particular – is a welcome trend which every university should embrace, for everyone’s benefit.

 

[1] HESA data from HEBCI survey. One caveat is that this data only counts new firms receiving formal support from the university. The increased numbers could mean, therefore, that universities are simply offering more support or otherwise becoming better at counting graduate startups. In addition, student numbers have also increased by >8% over the period.​ 

Photo from hackNY Spring 2011 Student Hackathon by @matylda

 

Author

Christopher Haley

Christopher Haley

Christopher Haley

Head of New Technology & Startup Research

Chris leads Nesta's research interests into how startups and new technologies can drive economic growth, and what this means for businesses, intermediaries and for the government.

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