While I do not have formal data on the subject, my sense of the historic landscape would be that university incubators, accelerators, and even startup weekends — relatively recent phenomena — may have already spun out a larger pool of surviving startups than that pool spun out over the entire history of university business plan competitions. If true, than the predominance of “Garages” (my word for incubators) on college campuses may need to be taken far more seriously.
There are some people out there who consider incubators a hot trend, if not a cliché. In the minds of these folks, incubators are simply playgrounds where monkey bars, see -saws, and slides have been replaced by computers, bean bag chairs, and whiteboards. The undeniably high failure rate of startups from incubators simply adds fuel to the argument that these new venture zones may be more akin to McDonalds playlots.
In my opinion, this “new” phenomenon of shared startup space is actually a reflection of something quite old. Incubators simply bring together and into and single location and clear sight those startup activities that were previously taking place in dorm rooms, apartments, coffee shops, and — well — garages. Furthermore, these community workzones encourage the sorts of behaviors common to vibrant startup communities: e.g., open innovation, tinkering, fluid teaming, demoing, and more.
If you see startup activity from an evolutionary (or natural selection) perspective, than the seemingly random attempts (and failures) of a large numbers of startups is what we need in order to happen upon that small number of surviving ideas and teams. In essence, the purpose of the incubator space is to accelerate natural selection — to curate an ecosystem within which both failure and the glimmer of success surface sooner rather than later, at as little cost as possible. In fact, this accelerated selection is more like evolution than incubation. Most chicks survive incubation. Most variations fail through selection.
From a purely pragmatic perspective, there are a number of more basic reasons for incubators having the potential to trump plan competitions, when it comes to raw startup development:
Building what you can build versus Pitching what you can’t build.
Incubators tend to require of the individuals therein either(a) the ability to build what they are imagining or (b) the tenacity to find someone, right now, to help build what they have imagined. As a result, the teams in these workspaces tend to be in position to act on their ideas, almost immediately.
Plan competitions, however, tend to be populated by ideas presented by teams who lack the capacity to pursue the idea at the moment. Instead, these people are pitching for the capital to acquire those things that early teams truly require — the portfolio of talent required to get through the most uncertain phases of the startup: proof of concept and customer #1.
Learning through mentoring versus Winning by judgment.
The best startup workspaces are more than just walls with whiteboards and power outlets. These spaces aggregate a community of individuals and, importantly, mentors. Building out a startup is ultimately a craft, and mentoring has been the method over the millennia through which craft is developed and refined.
Competitions are guided by judgement, and often conclude with that judgement. Winners are chosen, and that moment can often be the least time the team and the judges ever communicate again.
Furthermore, competition selection is wholly reliant upon the judgment of a small set of individuals. As a result, we significantly limit the population of new firms based upon the impressions of people who, while intelligent and experienced, may not have all of the information or experience that is needed for the best decision at the time.
The best of both worlds
When you think about it, what we really need is the best of both worlds: the market research, feasibility analyses, and capital that go into business plan competitions combined with the tinkering, teaming, and mentoring activities that are common among incubators. Certain universities have already begun to merge these two phenomena, and this combination may very well result in a compelling new cohort of student startups.