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Why Y Combinator type models won't work in India

Why Y Combinator type models won't work in India
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India has seen the emergence of several accelerators and incubators in the past few years. Some of them are doing an excellent job, but many others are still getting their act together.

Many of the accelerators and incubators are already running 3-5 batches, and have now started realizing that blindly copying the Silicon Valley style accelerator models will not work in the Indian context.

Most of the accelerators and incubators, who replicated the Y-Combinator model lost precious time, and as is with most organisations, they now find it difficult to completely redesign their offerings.

As a result, they end up making modifications on their existing models, which may not have been as effective as perhaps a homegrown model, that is relevant for the Indian entrepreneurial eco-system, could have been.

Mimicking Silicon Valley

India’s entrepreneurial ecosystem has often tried to mimic the Silicon Valley, largely because many of our initial entrepreneurs and angel investors hold rich amount of experience in the US – particularly from the Valley. As a result technology, and particularly technology, started becoming the prime sector for entrepreneurial opportunities to pursue. Launching a startup in tech space was easy as it cost less and it was relatively easier to find the risk capital.

As the market and ecosystem evolved gradually, entrepreneurs started exploring newer areas of opportunities. Also, a new breed of students or young professionals started exploring entrepreneurial opportunities. They did not yet have the experience or exposure to business dynamics and needed the mentoring support from more experienced entrepreneurs.

Forums like TiE and NEN did fill in the gap, but serious entrepreneurial ambitions needed more structured and on-going handholding and mentoring. Hence, accelerators and incubators emerged and became a popular first-stop for aspiring entrepreneurs.

Why it won’t work?

Many of the accelerators and incubators tried to copy the successful models from the US, particularly the highly successful Y-Combinator model, but those who copied that model soon realised that the model won’t work when replicated in the Indian context.

Here’s why:

Due to the widespread startup culture in Silicon Valley, many aspiring entrepreneurs already had the experience of working in startups. They understand the challenges, complexity faced and efforts required to get a concept into the market. Hence, Y-Combinator can afford to identify startups, whose ideas and teams have great potential and provide them the rocket-fuel to take off. But, that is not the case in India.

First-time entrepreneurs in India have limited understanding of the dynamics of business; hence, what they need is a foundation that can first help build assistance, and then the rocket-fuel for smooth take-off. Y-Combinator can do it in three-months because most of the entrepreneurs there are business-ready.

But in India, precisely for the reasons stated above, our programmes need to be designed for a longer duration – up to a year-long, so that we can help entrepreneurs and give them the time required to become business-ready.

Unfortunately, most of the early accelerators in India run their business models on a three-month basis, which they are now gradually trying to unwind from.

Mentors spend serious time with startups in Silicon Valley-based accelerators because there is a large pool of serial entrepreneurs, many of them are between their ventures and have enough time to give back to the next generation. They also have the capital to back teams. But again, that is not the case in India.

We do not have a pool of mentors, who have the bandwidth to undertake a one-on-one deep-engaged mentoring for startups. As a result, our programmes have to be designed with a combination of sessions that are one-on-one and also one-to-many.

The road ahead

Access to markets, B2C as well as B2B is relatively easier now for Y-Combinator companies as it provide their companies a seal of class. In India, we have yet to create accelerator brands, whose portfolio companies are waited with eagerness by the market. It will happen someday soon, but till that happens, accelerator programmes will have to be designed to assist in market access as well.

Portfolio companies of Y-Combinator and other major Silicon Valley accelerators come under the radar of investors the moment they are accepted into the programme. While that is also the case with some of the better-known accelerators in India, most portfolio companies from Indian accelerator programmes fail to find funding. Hence in India, we need accelerator programmes that are designed to prepare companies for Series A funding.

It is good to learn from the best practices of other more successful players. But a different ecosystem needs a different approach that is most conducive for that environment.

This piece is not meant to be a criticism of Indian accelerators. In fact, these early movers are the foundation of the fast-evolving entrepreneurial wave. The intent of writing this article was to open the debate on what is most relevant for India and how can we individually and collectively move towards a stronger entrepreneurial ecosystem, where startups are getting nurtured, funded and are becoming successful, and then return to give-back to the ecosystem.

Edition: December 2016

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