acclerator_emergency_brake

What do Startup Accelerators in India need? Brake and Clutch

Accelerator: a device, usually operated by the foot, for controlling the speed of an engine

Brake: A brake is a mechanical device which inhibits motion.

Clutch: A clutch is a mechanical device that provides for the transmission of power (and therefore usually motion) from one component (the driving member) to another (the driven member) when engaged, but can be disengaged.[source: wikipedia]

Okay. This is a bit of an automobile-inspired post, but here is the story.

When I started driving – very late in life – my instructor (a Bihari guy by the name of Mukesh) said – Sir, life mein aur car mein 3 cheezein important hoti hain ABC – jo ki car mein hoti hain Accelerator, Brake & Clutch. [English: There are three things important in life and car : Accelerator, Brake & Clutch]

In the last few months we have read a whole friggin lot about Accelerators – Microsoft, Vinod Khosla, GSF even Tata. Suddenly the urge to “celebrate startups” has taken a rapid upswing and there is no specific reason why – somewhat like Sid Mallya doing Kingfisher calendar shoots even when Papa is bottom scraping for flying high. In fact, the number of incubators / accelerators has increased by 8x – FOR NO APPARENT REASON.

In the past few months, some basic changes have happened.

One of the major ones is the entry of 500 startups (or the intended entry) which could fundamentally change the angel funding ecosystem in India. This has made most pseudo angels realize that their game has to change – drastically for the better – or else they will be hounded out of deals very fast.

Another realization that has dawned – after a few failed attempts for the larger Series A types investors – is that their pipelines are drying up or their information is coming in late. The endemic reason for this of course is that most VCs do not have an entrepreneurial background themselves. So a new entrepreneur who doesn’t know them on a first name basis, can’t really reach out to them directly. An Accelerator is therefore a nice way to source these early stage deals and make up for that lacuna.

A for Accelerator. B for Brake.

Let’s go back to Mukesh and his simple funda of life. Accelerators are all good – but what are the end goals? What are the value adds to the entrepreneurs AND their companies?

Our good friend Vijay Anand has been running an excellent incubator for some time now. He came up with this excellent comparison. Mukund Mohan also put up a list of accelerators which have literally mushroomed in the last few months (NextBigWhat create this list of accelertors and incubators).

So what are some of the reasons this is happening? Why are some very well known names getting into the business of accelerators / incubators? What is the real value addition to startups to join these gigs?

And of course we want to see who among these are also thinking of the brakes and clutches – because simple accelerators ain’t gonna work (actually, that’s a CRRASH in-making).

Accelerators need to put brakes to control the speed at which they are expanding – right now, its’ more of a real estate competition than mindshare. Some of them work with startups for 4 months duration, some 4 weeks and essentially, try to put 9 women (read: mentors) to work to bring out a great looking baby.

This doesn’t help the startups as many of them have returned back with a totally different product (than what they started with). One of the startups was asked to change the product atleast 4 times as part of an accelerator program as the accelerator team ‘did not like’ the implementation.
That is, feature decisions were often suggested based on hunch ‘my wife doesn’t like blue, let’s use green’ rather than data/product management triaging.

We believe that accelerator need to imbibe the product discipline in startups as part of the process and NOT just spit out a good looking baby within the timeframe.  You might say, YC does the same – infact, they describe themselves as :

“Y Combinator runs two three-month funding cycles a year, one from January through March and one from June through August. We ask the founders of each startup we fund to move to the Bay Area for the duration of their cycle, during which we work intensively with them to get the company into the best shape possible. Each cycle culminates in an event called Demo Day, at which the startups present to an audience that now includes most of the world’s top startup investors.”

Barely copying the YC idea and implementing it half-ass in India isn’t the solution. Indian entrepreneurs need more of a long term DNA (in products) than lessons on ‘how to get funded’.

Plus, how many accelerators are collaborating among themselves? Very few.  It’s a mini mafia, if you ask me.

A for Accelerator. B for Brake. C for Clutch

It is definitely disturbing to see that some of the accelerators have started *owning* their portfolio companies.

We are aware of quite a few instances where startups approached investors directly and got blasted by the accelerator management team for skipping the loop.

Quite like school kids, but that’s how few accelerators tend to treat their portfolio companies.

ABC..D : D for Demo Day.

Which brings us to the biggest bugbear that these accelerators / incubators have – Demo Day. In each of these, Demo day is touted to be that one day when it is going to be decided whether you were born from Virgin Mary – and hence son of God and VCs will write you a cheque. Or you are riffraff from who will be destined to the trash heap of also-rans. We don’t think anything can be further from the truth.
Demo days doesn’t make or break a startup. Dancing in front of investors isn’t the call of the hour – startups are too long term to depend on one day for their success.

Brings us back to the questions of what Accelerators are and what they should be.

Today the major focus is on getting to Demo day and getting the pitch right. The goal of the startup however should (as of any other company) be to get users – traction and money (in this order). And the accelerators with their short term focus on just fund raising aren’t doing the best service to that.

Actually, if you look at it – most of the accelerators act like iBankers – nothing wrong, but they should just call themselves iBankers?

Skin in the game?

Most of the accelerators/incubators lack a skin in the game. E.g. some of them do not put in money and focus more on mentorship. Most of the startups we talked to wished that accelerators also provide a chunk of money and focus more on operational mentorship (“How TOs”).

We think mentorship is important but too over-rated. The truth is that a lot of entrepreneurs have not taken to mentorship as a part of these accelerators. It is also populated by many who muddy the waters too much.

One might ask – why aren’t self made entrepreneurs in India not publicly associated with any of these Accelerators and mentoring startups (some of them are LPs, but that’s not the optimal contribution, we believe). While there are a few good ones – like Amit Gupta (inMobi), Shekhar Kirani (Accel) etc who are giving back by mentorship, the majority of mentors do not have enough skin in the game to put in effort.

In fact we think it should be a requirement that the mentors PUT IN MONEY in the startups they mentor. As we all know, gyaan is dime a dozen in India and the usual suspects add minimal value.

So what is your take on it? If you are in one of these incubators and are feeling too warm – let us know.