3 reasons why you should join an accelerator as a startup
8 minute read
Starting your own business is no easy feat. After all, it takes much more than ambition, drive, and an epic idea to build a successful business.
A new business owner needs to have access to capital, mentorship, and the right structural resources to ensure that they don’t fall into the 30% of startups that fail just within two to five years.
This is where the accelerators come into play, helping startups to flourish and avoid a premature death in their business lifecycle. Accelerators are not a new idea, having emerged in the early 2000s, with Y Combinator perhaps being the most successful example of one.
Unsurprisingly, accelerators have grown to become an essential component of any emerging startup. But for all the benefits it provides, many question the viability of jumping onto the accelerator bandwagon and deciding how to navigate the decision in doing so.
Curious to find out more? Keep on reading to learn more about the role of accelerators in Southeast Asia and more importantly, if your business should participate in one.
Accelerators in Southeast Asia
For the uninitiated, startup accelerators are a fixed-term, cohort program that culminates in a graduation-cum-pitch event (i.e. demo day) to acquire capital.
While often interchangeably used with incubators, differences do exist between the two terms; accelerators are a faster track to gaining guidance, education, and funding in a competitive market.
While accelerators were popularized in Silicon Valley, USA, Southeast Asia has proven itself to be an emerging force in the global market – with Singapore and Hong Kong being at the forefront of this change.
Accelerators in Southeast Asia have greatly benefited from the support and funding of these two governments. For instance, the Singapore government had allocated more than USD$60 billion into encouraging R&D, growing VC funds, and launching accelerators with relevant support organizations.
Several decades later, Singapore now houses over 3000 tech startups, 190 intermediaries and has even been hailed as the second Silicon Valley with a value estimation of US$22.5 billion.
Meanwhile, the Hong Kong government had set up the Innovation and Technology Bureau to oversee its start-up ecosystem, shortly before launching the Innovation and Technology Venture Fund (ITVF) to encourage venture capital firms to co-invest in local innovation and technology start-ups.
Such measures have allowed accelerated venture capital activity in the region to flourish and with continued government support, have helped to narrow the gaps in funding opportunities for startups.
As such, it is no surprise that Southeast Asia’s startup scene has been able to grow tremendously over the years and has even expanded to range from deeptech to fast-moving consumer startup ventures.
While Singapore and Hong Kong have always been attractive to businesses for a multitude of reasons, it is truly the strong entrepreneurial spirit cultivated from a strong startup ecosystem that makes this region a unique landscape for accelerators (and startups) to thrive in.
As a result, this has given rise to complementary industries that have now become integral to this new ecosystem – and accelerators fall right into the heart of it.
Why do startups join accelerators?
With these results, it’s hard to deny the benefits that accelerators can bring to a young startup – and here are some of the main reasons why.
- It fast tracks startup growth. Startup accelerators are an excellent way for early-stage startups to scale up quickly. The knowledge and mentorship of industry experts will help new businesses quickly identify their best growth strategy, and how to best achieve it. Essentially, accelerators are an entrepreneur’s boot camp for growth.
- It creates invaluable connections. Being a part of an accelerator means you are connected to an extensive network of other businesses. These connections are invaluable for any business as the goodwill accumulated across such a high-level network may pay off in the future, be it through business advice or seeking investors in the future.
- It’s prestigious and a positive indicator of your business. Think of completing an accelerator program as graduating from a top-notch university with a Master’s degree. It’s prestigious, exclusive and can act as social validation for potential investors. It’s a rubber stamp of approval that indicates your business potential , and just could be your gateway to other opportunities.
The downsides to startup accelerators
However, as with most decisions, there is always a flipside – and startup accelerators are no different.
- For starters, time is one major factor. As the saying goes, time is money – and engaging in a startup accelerator will take anywhere between 10 to 16 weeks. For a new startup, this could be a significant issue as the fast-paced nature of startups highly prioritizes the value of time. A day’s progress could just make or break your business. If the value derived from these startup accelerators doesn’t match up to the benefit gained during this period, such as product innovation or research, it could be a devastating loss.
- The second downside would be your business objective. As mentioned, most startup accelerators culminate in a ‘demo day’ to attract new capital and investments. If this isn’t the present focus of your startup, you may find yourself at the risk of fundraising at the wrong time. This could potentially have an adverse impact on your company’s focus and lead to disastrous effects in the long run.
- On the subject of capital, the last drawback would be cost. As a new startup, equity is your form of currency in receiving valuable assistance. Accelerators are generally for-profit and often hold equity in their client’s firms. As such, they typically take between 5 to 10% of pre-seed equity to pay for the program. This could be a hefty cost for a less mature startup. As such, one has to be certain of the value that that one specific accelerator program will bring to your business if pursued. In a saturated climate with over 7000 startup accelerators worldwide, choosing the right program for your business might prove to be trickier than it seems.
COVID-19 had a tremendous impact on how businesses are run, with startup accelerators being no exception.
Worldwide, accelerators had to quickly undergo a massive overhaul in response to global healthcare regulations. Demo days, the pinnacle of accelerator programs, were pushed online as many programs pivoted to being conducted digitally.
Despite these changes, accelerators have proven themselves to be resilient amidst the pandemic with regional investments flourishing.
Singapore, in particular, has received an influx of foreign investment. The Singapore Economic Development Board (EDB) reported foreign investments into Singapore to total $17.2 billion in 2020. Meanwhile, research from Singapore’s Cento Ventures recorded a record number of investments in Southeast Asian startups within the first half of 2021.
Amidst a global pandemic, Southeast Asia still remains a viable option for investment and an attractive place for startup accelerators to flourish.
Is an accelerator the right move for my startup?
Deciding to participate in an accelerator may just be one of your first major decisions as a business owner. Once you’ve assessed the pros and cons of doing so, your decision will ultimately boil down to two factors: the maturity of your startup, and your level of experience as a business owner.
Below, we’ve summarized your decision based on these two factors.
Ultimately, a startup accelerator isn’t necessarily the perfect step for every startup. While most may agree that the program is an excellent way to fast-track your business, the benefit derived will differ depending on the nature of your company and your own personal factors.
One must thus carefully evaluate and weigh the options available to them.
Regardless, startup accelerators are only one such means of growing your business. There is a whole range of other options for businesses to choose from as well. Here are some other methods to consider.
If you are keen to join an accelerator, why not download our Asia’s Accelerator and Incubator guide – filled with relevant accelerators suitable for your business!
Have any questions or require more guidance on starting or managing your business? Talk to our Sleek team to get started with a free consultation today!
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