By assisting start up ventures to become fully operational and sustainable enterprises, accelerators play an important role in the journey of an entrepreneur
Recently a friend asked me: since the publication of your books on entrepreneurship, what has changed in the ecosystem? That set me thinking. My first book Entrepedia was published in 2011, and in 2015 I revised some of the content based on new developments in the ecosystem. My second book Start up Stand up was published in 2016 and I can say, right off the bat, that two things that have changed since then are the proliferation of accelerators and the appearance of social commerce on the scene.
In this column, we will discuss accelerators.
What is an accelerator? It is obviously a term borrowed from English language and it means pretty much the same as its dictionary meaning – which means, it speeds up or hastens whatever it is meant to. In the context of an entrepreneur, if he is part of an accelerator, it would accelerate the growth of his business.
You may ask, is there a difference between an incubator and an accelerator? Indeed, there is, and the difference is in the stage of business. In an incubator, the entrepreneur may just have an idea in his head which he will build into a business idea when he develops the product, creates the nine building blocks of his business model and takes his product to market. In other words, until he gets his first paying customer. Incubator, therefore, is a very early stage platform where the idea for a product is germinated and built upon.
The accelerator is, in a sense, a growth incubator. Here, the entrepreneur has validated his product by getting his first paying customer. Now he wants to build a community of users to grow his business from one to many. In other words, he seeks the help of the accelerator to scale the business.
A very subtle but common distinction between the two, by way of its usage, is also this: incubators typically are in college campuses; accelerators are found in large organisations.
There are many reports which use both incubators and accelerators synonymously. Suffice it to say that in the last couple of years, both have proliferated in India.
What are the benefits of joining an accelerator? What services does the entrepreneur receive from the accelerator that will facilitate the growth of the business?
For sure, the accelerator provides the following:
Mentorship: The accelerator may provide mentorship through their own Entrepreneurs-in residence or their industry connections. These connections may be by way of domain knowledge (technology, healthcare, storage devices, etc.) or credible experience in large organisations in managing strategic business units. Both kinds of mentors are critical to growing the business. Whilst a domain mentor will contribute to product development and customer discovery, a management mentor will help build the organisation around the product.
To my mind, this is one of the most critical services that an accelerator provides, as having a mentor is an excellent risk mitigation strategy.
Seed capital: The entrepreneur may need capital both for product development and customer development. If his product is capital intensive, for example, something in the realm of robotics or AI or VR, he may not have the resources to build and reach it to his customer. This is especially true if the product is a device and is an enterprise solution. The accelerator may fund this against equity and hand-hold the entrepreneur in its deployment.
Network: The third most critical service that the accelerator provides is access to service providers such as web/app developers, CAs, contract and compliance professionals, branding agencies, digital marketers and the like. In many cases, they may also be able to facilitate customer acquisition through their networks and channels. I have seen huge value in this. I always used to maintain that mentors not only bring knowledge and skill to the table but they open doors as well. Till one day I realised that we had begun to see the emergence of a very interesting phenomenon in our own habitat. We realised that an incestuous relationship had emerged amongst all our CARMamentees themselves. They were producing and consuming amongst themselves! In the process, they had created a remarkable value chain serendipitously!
Earlier on in this piece, I mentioned that large organisations may set up accelerators. Companies like IBM, SAP, even Shell have understood the benefit of the in-house accelerator. This is how the model works. Let’s say, an employee with a good performance track record has stumbled upon an idea which may be directly related to the business of the organisation, or in an adjacent area or in a new area altogether. It is now a matter of time when he will resign from the organisation to pursue his entrepreneurial dream.
What if, instead of losing him, the company reaches out to him with the following proposal: stay on in the job, but work on your business idea alongside, we will support you with mentorship, seed capital, and network. Once the business grows, we may decide that you will be our service provider or partner; or we may decide to license your product against a fee, or we may buy out your company at market value. Any which way, there are no losers here.
Some of the best-known accelerators are Y Combinator, Indian Angel Network, Axilor, Khosla Labs, 5ideas Startup Superfuel, Ncuberoot, Tlabs, etc. There are campus accelerators such as those in the IIMs and IITs that are equally well known.
Their proliferation in the last couple of years suggests that they have proved their value in the start-up habitat to give direction, speed and focus to their member businesses
