SUMMARY
Common Myths Around Accelerator Programs In India and what ambitious founders should demand from them
Axilor’s call for applications for its Summer’18 batch close early next week. Startups in consumer-tech, enterprise, healthtech, fintech and deeptech can apply here.
Running the largest accelerator program in the country, we get not only hundreds of startup applications but equally high number of questions from founders. The questions make three things clear:
- The founders carry several notions about accelerator programs (most of them unflattering for accelerators!)
- They are not quite clear in their own minds on what they should expect as outcomes from an accelerator program
- They find it very difficult to distinguish different types of programs and which would be best suited for their startup.
There are articles every week espousing opinions on lack of ‘successful’ startups coming out of accelerator programs in India or on semantic distinctions between incubators and accelerators. But just a few of them focus on founders and what they should demand from a program or how they should decide.
Based on the most common questions which we repeatedly get asked, here is an attempt to bust some commonly held myths by founders on accelerator programs complemented with data from Axilor’s own experience.
Busting The Most Common Myths Prevailing About Accelerator Programs In India
MYTH 7: Accelerators Are For Idea Stage Startups And Young, Inexperienced Founders
Most founders tend to look at accelerator programs as being most relevant for idea stage startups. Nothing could be farther from truth. The gestation period for moving from an idea to having early users is possibly the most unpredictable. To get real acceleration and become investible, startups which are post-product and with early traction (users/revenues) will be far more suitable to benefit from a good accelerator program.
90% of the startups in Axilor’s cohort are typically post-launch and at different stages of pilot to revenues.
On age and experience, it is tempting to equate young age with entrepreneurial success. But absolute age matters less than the experience relevant to the problem the startup is addressing.
On an average, most founders admitted into our program have spent two years working on the problem, honing their proprietary insights. While we have fresh graduates and very experienced folks, the median experience is about six years and most of them with prior startup experience.
MYTH 6: If My Startup is Already Making Revenues, Then An Accelerator Program Is Not Useful
Early revenues can be misleading. As most venture investors will vouch, the search is not for early revenues but early signs of product market fit.
More than 50% of startups in our last batch were post revenues with revenues ranging from INR 2-7 lakhs per month. By the end of the program, they accelerated their traction 2-3x (some upto 10X) and revenues but more importantly found the path to product-market fit.
MYTH 5: An Accelerator Program is Some Free Credits, Free Space And A Demo Day
Free credits and free space are not such a bad deal if they help you save on some real burn. But the problem is when you merely get these and nothing more. And then there are demo days! Most investors have specific investment themes and would like to meet startups that fit those. And Demo Days force everyone to meet everyone, reducing relevance.
At Axilor, startups get 4X more benefits through exclusive partnerships and there is NO Demo Day. Most investor meetings are with senior VCs and one-on-one thereby helping startups get face time and feedback.
MYTH 4: Being Part Of An Accelerator Is A Negative Signal To VCs
Last few quarters have seen a steep fall in seed deals. As VCs increasingly set aside capital towards earlier stage startups, they are looking actively at a qualified pipeline of seed deals.
Being part of a well-run accelerator program improves discoverability among VCs and is a positive signal for being part of a qualified pipeline.
MYTH 3: But The Accelerator Program Does Not Invest
Many accelerator programs do not offer funding but merely provide ‘investor access’ at the end of the program through a demo day. The few that do are able to support only a small round with no ability to do follow-on’s. While funding is important in early stages, what is also equally important is how well the early investor can support you in the next few rounds.
At Axilor, we recently upgraded the program to include upfront funding, followed up by a commitment to participate upto 10% of the next institutional round.
MYTH 2: Accelerators Don’t Tell Me Clearly How My Startup Will Benefit From The Program
For any ambitious founder, they should demand three outcomes – what is the acceleration and business growth, what is the exit momentum and whether they hit their important milestones, including funding.
MYTH 1: Accelerator Programs Do Not Produce Category Leaders
It is true that India does not have good accelerator programs that operate at the same scale and predictably improve odds of success of startups as some of the global ones. Globally, good accelerator programs produce category leaders consistently.
In fact, in US, one third of the startups that raised Series A came from an accelerator. While we are quite far away from that number in India, things are changing. There are several new models and platforms emerging and choice for ambitious founders is growing.
Other tech ecosystems have demonstrated the role good accelerator programs can play in building a sustainable pipeline of early stage startups and predictably improving their odds of success. Over a period, successful graduates who have come from these programs and the strong founders’ community that these accelerators have built have created a virtuous loop that allows them to get better with time. In India, this is beginning to happen. At least, at Axilor, one batch at a time.
10 Questions Every Founder Should Ask Before Joining Accelerator Program
Track Record
- Has the accelerator produced successful startups in the sector your startup belongs to?
- Have the graduating startups (and what %) gone on to raise funding from VCs and seed funds?
Peer Set
- Does the program attract best startups and ambitious founders in the sectors your startup belongs to?
Growth
- Does the program have past evidence of helping startups accelerate their traction?
- Do you get access to a large customer / partner base as part of the program?
- Does the program offer dedicated hands-on mentoring help in critical areas for your startup’s success by people with prior startup or operating experience?
Funding
- Does the program provide capital without involving high equity dilution? Will the program support you in follow-on rounds?
- Are the program terms simple, non-exclusive and do not involve onerous rights?
- Does the program enable you investor access that allows you to raise VC / seed funding?
Alumni
- How large is the founder community and how active / helpful is the community? Will you continue to have access to the benefits of the program and partnerships even as an alumni?
