Why should startups join an accelerator programme
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Starting up is a challenging journey. The odds are stacked up against you. The chances of failure are significantly higher than success. And that is true the world over.
This is because the startup is dealing with a number of risks – concept, market, product, etc., and the founders have to navigate all these odds to be able to succeed. As my friend RehanYar Khan, Managing Partner, Orios Venture Partners, says, “For a startup to succeed, various functions such as product development, pricing, technology, operations, customer service, marketing, finance and HR management have to be cohesively performed. Execution of each of these elements has a direct impact on the performance of the venture.”
According to Rajiv Sodhi, Managing Director, Godaddy India “In a startup, there are several mainstream and support functions, and if any of these functions is a weak link, the whole venture may derail.”
Even with a great product and a great team, if the pricing is wrong, the startup can fail. Even if the product, pricing, target segment and market are right, and the customer support programme is wrong, the startup can fail. In my experience as a mentor, I have seen that time and again startups focusing on key areas that seem apparent and immediately visible, but falter in thinking about the areas that are not so obvious.
And that’s where accelerator programmes come into the picture. Accelerator programmes are mentoring in a much more structured and longer-term format. An accelerator programme is expected to help startup founders see the bigger picture and help them understand the complexity of doing a business, so that they are better prepared for success. Of course, it is another issue that only a handful of the accelerator programmes end up doing this well.
Accelerators have a responsibility in ensuring that the startup is well positioned to deal with not only seed stage investors, but venture capitalists (VCs) as well. Many times, brilliantly conceived business plans have taken a hit due to lack of funding, simply because they failed to convince VCs to put their money in the second round after the initial seed funding stage is over.
Only 1 per cent to 2 per cent ventures out of all the business plans that VC’s see, get funded.
Does going through a good accelerator programme help?
Chances of getting direct VC funding in India is very low, only 1.4 per cent. This is because startups in India take much longer to mature. They are, therefore, not very viable for VCs to invest in. In fact, because VCs need businesses to be slightly more mature than startup stage, they tend to rely on accelerator-backed companies as their source of deal flow.
Based on data from 2012, accelerators in India have helped fund 89 companies vis-a-vis less than half this number getting funded by angel investors and VCs. So, it is clear that though direct VC funding is little, going through an accelerator doubles the chances!
VCs have woken up to the potential of investing in Indian startups and the figures will soon show an upward trend. In this scenario, accelerators will play a major role.
Accelerators are not just for startups
Contrary to popular belief, it is not just startups that can benefit from accelerators. Existing businesses too can leverage from their expertise and fast-track their way to success.
The good part is that the accelerators will not let you compromise along the way, since what matters most to them is that the foundation of the company should be firmly in place. Even businesses that are in early-growth stages can benefit from a good accelerator programme.
They can work as a perfect springboard if you are looking to expand or diversify and can help take your business to the next level altogether. The case is similar to that of a person who is already health-conscious and fit and regularly goes to the gym. Do they really need a personal coach? You might say ‘no’, but the reality is that it is this set of people who are already very driven and committed to achieve complete fitness and who can benefit the most by engaging a personal trainer. It is these people, who can get the best result and outperform the rest.