Social, Physical, Knowledge & Financial Capitals
As we know, business enablers like networks, co-working spaces, incubators, accelerators provide various Capitals for socio-economic development. Networks provide Social Capital, Co-working space provides Physical Capital (infrastructure) & Social Capital, Incubators provide Knowledge Capital in addition to the other Capitals, while Accelerators provide specialized Knowledge Capital to get startups ready for Financial Capital.
Business incubators and accelerators are expected to improve the capacity of entrepreneurs. However, the big question is, “How can incubators and accelerators improve their own capacity?” Obvious answers would be to attend incubator & accelerator events and conferences. The truth is, they are more useful for networking, but learning from research-driven inputs and global best practices, Organizations like Global Accelerator Learning Initiative (GALI), do produce good research, but their India or Asia sample is extremely small as compared to Europe or North America. What is needed is practical and relevant solutions in Indian contexts. Lets us explain this by using Surge Impact Foundation (SIF) as an example.
Challenge of fast-growing private accelerators
SIF is a nonprofit company founded by Raj Janagam, Ravi Mantha, and Srikanth Bolla with support from Mytrah Energy two years ago, with a mission to fulfill UN’s Sustainable Development Goals. At the accelerator, we want to support 100 startups by 2022.
The founding team has prior experience of incubating 35 idea-stage Social Entreprises. Among the current team of 12 members, close to 50% of them have been entrepreneurs, while others are subject matter experts who have worked in organizations like KPMG, Airbnb, Deloitte, Action Aid & Tata Institute of Social Sciences in the past.
Including our current cohort, we have supported 36 early stage Social Enterprises. From the current cohort, 40% of the startups are from Tier 2 & 3 cities, around 30% of founders are women. From the earlier cohorts, 20% of startups have gone on to raise external funding. Even though we have a well-rounded team with diverse skills, garnered some traction and are poised to replicate the same, it’s a challenge to raise funds as a two-year-old private, non-for-profit accelerator (License for foreign funding – FCRA and most government funds are available for organizations older than three years).
Scaling Investable startups
Anecdotally, a typical startup applies to 1 to 16 incubators/accelerators in a year based on the amount of seed funding provided by incubators/accelerators. The average is 7-9 applications in a year in India. In our interactions with other incubators/accelerators, they have stated that it’s hard to find startups committed to the incubator/accelerator program once the funding is done. This validates the underlying structural issues of using funding to attract startups, as compared to Knowledge Capital.
In order to help the startups we support become investable, we see a need to focus on building our own capabilities at multiple levels. Starting with the SIF team capacity building both in terms of the mindset (thinking like entrepreneurs & investors) and the skillset, helping startups become investable and for investors to have a good pipeline of investable impact startups. We believe that while the above might seem obvious for most incubators or accelerators, an additional strategic outcome of the above three, when done well, would be fundraising for the accelerator itself. This opens a lot of possibilities like research-based thought leadership for industry, government policy framing on socio-economic development through startup incubators & accelerators, impact assessment, strategic partnership in setting up and strengthening tier 2,3,4 incubators, since most of our incubators and accelerators are concentrated in major cities like Bangalore, Mumbai, and Delhi while the regions like Northeast have few and far incubators & accelerators in between.
Capria beta VentureBasecamp partners
Recently Capria VentureBasecamp (VBC), an initiative by entrepreneurs who have built $8 billion businesses and later invested in 200 startups have come together to create a platform to make startups more investable. As part of this, more than 60 incubators and accelerators around the world applied to be part of the first Capria VBC five-day intensive program. Out of the applicants, 20 incubators and accelerators mostly from India and one each from Africa and South America were selected.
After a five-day training program for the 20 selected incubators and accelerators, six of them were selected as the first beta VBC partners. SIF is one among the six selected incubators and accelerators. We value our partnership with Capria VBC and look forward to investing our time and resources to build our capacity in the coming months. The other selected incubators and accelerators include a-IDEA (NAARM), Anthill Ventures, AIC-AARTECH, CIBA, and NASSCOM.
Government strategy for developing startups
Amid an evolving startup ecosystem in India, the central and state governments are taking various measures to support and boost entrepreneurship in the country. One of the central government’s strategies for socio-economic development seems to be setting up or strengthening entrepreneurship cells in academic institutes. While it seems logical to encourage academic institutes to develop mainly student-led startups, the reality is that such incubators are mostly helmed by people with limited entrepreneurship experience. A recent article by an entrepreneur confirms this link. The result is, very few students from the respective institutes have gone on to start companies, and most academic incubators have outside startups.
Most startups are attracted by the free grants provided by the academic incubators, which in turn, is supported by the various central government schemes. To overcome this, some of the some of the leading academic incubators make it mandatory for one of their students or alumni to be part of the startup founding team. The startups on the other hand, to overcome this entry barrier, start a company then ‘hire a cofounder’ from these academic institutes. The financial sustainability of the incubators depending on government grants to sustain themselves is a big question mark?
The government on its part could help with the Capacity building of the Incubators & Accelerators which have made some progress and poised for growth by getting a good membership and program deals from global accelerator capacity building organizations like Capria, GALI, GAN, AVPN and the rest. The new and upcoming incubators and accelerators find it quite challenging, to raise funds to be part of such networks and their programs, which would greatly benefit them.
Scaling up Incubators & accelerators
Research from leading Business incubators like InfoDev – World Bank, Founder’s Institute says the best entrepreneurs are in the mid to late 30s. Student entrepreneurs would always be there. I was one during my undergrad days, but they are usually in the minority. Since most entrepreneurs have some professional experience, it makes sense to get support from entrepreneurs like what SIF is doing for startups and the technology platform and training provided by Capria VBC can especially address this part in scaling up the impact of incubators and accelerators by building their capacity.
Governments, corporates (CSR or innovation) and philanthropic funds interested have a crucial new opportunity to advance socio-economic development by funding or providing a grant to private non-profit accelerators, which support startups that can potentially bring about such transformation.
About the Author
Carl Ebenezer has been experimenting with ways to bring systematic change. This has led him into MNCs, social entrepreneurship, build peer learning communities for change and now impact business acceleration. He can be reached on Linkedin
This article was originally published on Surge Impact’s blog