2024 U.S. Life Sciences Incubator Survey

Executive Summary

CBRE’s 2024 U.S. Life Sciences Incubator Survey provides insight into the life sciences incubator industry and explains how incubators help cultivate startups.

Methodology

This survey was conducted from November 2023 through January 2024. Twenty-seven U.S. life sciences incubators were surveyed. Twenty-three have operated for over a decade and eight run multiple locations. Of those surveyed, 48% are independent or private, 37% are supported by educational institutions and 15% are funded by state or county governments or economic development organizations.

The Need for Incubators

Ninety-five percent of life sciences incubators offer accessible lab/office space and mentorship.

Startups that grow from innovative research at educational institutions often cannot afford to lease full office and lab space, making incubators essential resources. Most respondents offered wet labs but there were also dry lab, mixed-use and no lab space offerings. All incubators we surveyed were at least 50% occupied, including 59% that were at least 75% occupied and 19% fully occupied. Over the next decade, 63% expect to open more locations and 52% also project the average size of their locations to increase.

Figure 1: What do you view as the primary roles of your incubator?
Select all that apply.

Respondents elaborated on how their space offerings align with other services provided. One respondent highlighted their unique approach, combining tailored mentorship, cutting-edge resources and a collaborative community to foster entrepreneurs’ business growth and personal development. Respondents also noted the importance of providing specialized equipment, such as cold storage, fume hoods, emergency power and modular benches, to cater to their startups’ unique needs. Some incubators offer shared equipment and lab space, while others provide them for each startup’s exclusive use. Many respondents see room for future innovation in both lab spaces’ flexibility and large lab equipment’s mobility.

Figure 2: What type of lab space do you primarily provide?

Real Estate and Fee Strategy

Incubators do not have a one-size-fits-all real estate or fee strategy.

Incubators vary in real estate strategy, fee structure and fee sum. Forty-eight percent of respondents lease real estate, 33% own real estate and 19% have a mix of owned and leased space. Fee structures range from per month to per bench, suite or headcount, or mixed models. Fee sums are often driven by real estate market rates and space size.

Figure 3: Do you charge your startups a fee?

Incubators favor locations near educational institutions, housing/living space and retail amenities.

While 37% are education-based incubators, nearly all (86%) seek space near educational institutions. This is more than double the next two most-selected location options, housing/living space and retail amenities, which were each selected 33% of the time. Counterintuitively, only 29% noted it is critical to be near a major medical facility, such as a hospital.

Figure 4: What do you prioritize being near when opening your incubator?
Select all that apply.

Funding

Funding sources vary, with room for growth.

There are multiple funding options for incubators. Forty-three percent receive funding from government agencies, 14% are financially supported by academic institutions and another 14% are self-funded. Since most funding comes from government agencies, academic institutions and client rent, only three respondents directly invest in their incubator companies.

On a positive note, 62% expect funding to increase over the next five to 10 years, while 33% believe it will remain the same. Only one incubator believes funding will decrease. Two incubators noted they are interested in future creative funding sources.

Figure 5: What is your incubator's funding source?

The Incubator Ecosystem

The diverse incubator ecosystem is comprised of a variety of sub-industries.

The surveyed incubators work with startups from a diverse set of sub-industries. Medical devices are the most common, with 90% of incubators saying they have tenants in this sub-industry. Artificial intelligence and fintech are the least popular but still referenced by 40% of incubators.

Figure 6: What industries are housed in your incubator?
Select all that apply.

Success is in the hands of the tenants.

Most startups join an incubator with a small team, as 75% of respondents noted the average company size is between one to five people. The majority of incubator tenants stay for more than two years, although all incubators offer flexible termination options. Since most incubators are fully or mostly occupied, 80% of them offer different levels of access or maintain a waiting list.

Selecting which companies to grant a spot in the incubator is challenging. Eighty percent indicated that they consider multiple factors when screening potential companies. However, 90% stated the primary factor is the company’s business idea. Other important criteria include the company’s focus on scientific innovation and the potential for the incubator to assist them. This highlights the importance of a synergistic relationship between the companies and the incubators, rather than a traditional tenant-landlord dynamic.

Survey results showed incubators now track a broader range of success indicators in their startups, expanding from capital raised to now also include revenue, job growth and more. Coachability, adaptability and the ability to network and raise funds are evaluated too. Multiple incubators also noted the importance of valuable intellectual property, product quality or service and scalability.

Figure 7: How long is a startup's average stay?

Post-Incubator Connectivity

Continuing relationships is important.

The relationship with a startup continues even after the company has outgrown the incubator. According to the survey, 55% of incubators helped their startups secure their first lab/office. Seventy-four percent follow up with their graduate companies at least annually, while only 21% rarely check in on their graduates. Sixty-eight percent of incubators monitor their graduates’ funding activity. Maintaining these relationships and tracking graduates’ progress is crucial for incubators to gauge their own value. In this competitive industry, ongoing relationships and graduate success stories enables incubators to better market their services to new startups and refine their current practices.

Figure 8: How often do you follow up with graduates?