Why emerging markets need startup accelerators to produce gold

While I was living in Silicon Valley for a couple of months earlier this year, I had the opportunity to see how a number of the startup accelerators over there function, and also to speak to a number of tech entrepreneurs that passed through their programmes.

The formal definition of an accelerator is a “programme designed to assist startup businesses with financial and/or operational resources that will increase their chance of growth and success”.

After seeing them for myself, my definition is slightly different. I would suggest that: “Accelerators are schools for entrepreneurs, primarily tech entrepreneurs, where you can do your real life learning in a fraction of the time that it would take you to do it on your own.”

Y Combinator is probably the most well known of the accelerator schools, but it actually lies second on a set of 2011 rankings of US startup accelerators, compiled by Aziz Gilani from DFJ Mercury in partnership with IT site Tech Cocktail.

TechStars Boulder is currently rated number one, and other TechStar’s programmes in Boston and Seattle are rated fifth and seventh respectively. Other accelerators in the top 10 include Excelerate Labs, LaunchBox Digital, KickLabs, Tech Wildcatters, DreamIt Ventures, and The Brandery.

They all function slightly differently, with some charging entrepreneurs, and some actually paying entrepreneurs, but there are common threads throughout all the programmes.

1. They all accept a very small number of entrepreneurs — if you get into one of their programmes, you have won the first battle.

2. School only lasts for a few months, and the time is spent grilling you on your business model, how to gain traction, generate revenue, scale your business, and pitch to investors.

3. They have amazing mentors, usually entrepreneurs who have already been through the process themselves.

4. They have amazing networks of everyone you need to be liaising with from the top tech lawyers to the best tech bankers to the must used hosting providers.

5. They all culminate in a live pitch, often called “Demo Day”, in front of a large room or hall packed with potential investors, and after your intensive schooling, the success rate of finding your next round of funding, is incredibly high.

Why do they run these programmes? Simple — they all take a percentage of your company, ranging from three to six percent. So these accelerators are all becoming owners of portfolios of highly successful tech companies.

Wouldn’t it be amazing if we had extensive programmes like these in emerging markets like South Africa?

“What are you talking about?”, I can already hear you saying. Google’s Umbono programme launched in South Africa a few months ago.

Now don’t get me wrong, I think it’s fantastic that Umbono launched, and it’s a step in the right direction, but more is needed.

The IT industries in emerging markets need entrepreneurs to be schooled in the art of creating, launching and scaling a great tech concept, becoming skilled at pitching, and being mentored by dozens of tech entrepreneurs (who in the last few years achieved what this new breed of entrepreneurs are hoping to achieve). These super entrepreneurs then need to be introduced to the right angel investors & Venture Capitalists to fund their ventures.

I see these accelerators (and actually much of Silicon Valley) as functioning like a well-oiled machine. They’ve learned the art of turning entrepreneurs with ideas, passion and the readiness to work hard, into gold.

We’ve got entrepreneurs with ideas (I should know: I wrote an article years ago on angel investing which got ranked on Google, and I still get sent a dozen pitches a week!), passion, and the willingness to work hard.

The emerging market machine needs to gather momentum, and then we can look forward to the tech startup scene in markets like South Africa creating gold.

Image: digitalmoneyworld