A successful entrepreneur is an outstanding individual who passionately drums up resources and creativity, to unearth new market opportunities. But the ecosystem -- consisiting of many players, ranging from the government to universities -- plays an important role in fostering entrepreneurship. But my interest has been in accelerators, incubators, and mentors.
Over the past two decades, I have participated in innumerable initiatives taken by accelerators and incubators in India. And I have angel invested in and/or mentored dozens of startups. I truly believe that entrepreneurship is the engine of our economy, and needs to be facilitated as much as possible. And while the excitement of creating new ventures gets me out of the bed in the morning, there is a ghastly fear that keeps me awake at night.
The idea of accelerators, incubators, and mentors is great in principle, but it largely doesn't seem to be working!
Without begging the issue of how one defines 'success', I feel that the success rate of startups coming out of incubators and accelerators is lower than the already abysmal rate of startup success in general.
And this is distressing.
Given that most of what I do revolve around working with founders, it is embarrassing, nay, humiliating to acknowledge that the seemingly great idea of business accelerators/incubators is not yielding fruit. Here are some scary facts in India:
- Consider the list of the top 20 to 30 startups in terms of numerical metrics (revenues, valuation,...). Almost none of them were ever a part of an accelerator/incubator.
- Take the case of the top two to four academic institutions (typically engineering/business schools) that have emerged as the fertile breeding grounds for the most successful startups. Paradoxically, the top startups from these institutions were never part of the business incubators in the same institutions.
- Even incubators/accelerators that have been around for years, and have "processed" 50+ startups, usually don't have even one startup that has achieved impressive revenues/valuations. But why?
Top reasons incubators, accelerators, and mentors fail
- The economics of accelerators and incubators are such that top-quality mentors/professional staff cannot be afforded. This leads to paper-pushers and clerical folk, however well-meaning, running the programmes. And this frustrates founders.
- Incubators/accelerators have turned into echo chambers that repeat the same inane slogans that initially excite founders and eventually just bounce off them.
- Cloud credits, limited-time use of free shared-offices, and other low-value but tangible benefits are easier to communicate than the seemingly intangible mentorship.
- Often, the very intent of setting up an accelerator/incubator is suspect. Examples: academic incubators that are primarily shared office spaces; accelerators run by the lowest rung employees in a venture capital firm that is only seeking to expand its deal pipeline; initiatives by tech companies that are merely distributing free credits to expand the user-base of their product. If mentors, accelerators, and incubators are unable to contribute to a founder's success, they are failures.
- Mentoring is at the core of the value that incubators and accelerators provide. And mentoring is the weakest link.
Our ecosystem has several altruistic mentors. They genuinely want to help founders. But in the absence of a structured arrangement or deliverable, their relationship with their mentees tends to either remain superficial or short-lived.
Often, mentors turn to mentoring for all the wrong reasons. I have seen mentors try to prospect their mentees, and convert them to paying customers. Others merely want to include the word "mentor" in their resume. Not much can be expected from such mentors.
When founders face obstacles, they seek inputs from mentors. But given the broad spectrum of these obstacles, mentors rarely possess the expertise necessary to spit out solutions. The most helpful responses would actually be: "I don't know," or "let me find out more about this before I respond," or "I know someone that could help you with this," or "here is some more information I need from you before I am able to start thinking about my response," or "I cannot help you decide, but here are some of the factors you should consider."
Instead, I find mentors feeling compelled (and confident) in responding to every query that the founder poses. This superhero-mentor who can solve everything is usually the least valuable, but, unfortunately, it takes time before their hollowness becomes obvious.
I am saddest when capable and sincere mentors engage with capable and sincere founders, yet no value is created. A founder meets the mentor, who gives outstanding counsel. And that is where it ends. The founder gets busy with her daily operations. And the mentor doesn't think it is her place to follow up with the founder. It is important to complete the feedback loop.
Accelerators and incubators should keep the mentoring relationship on track. But in most cases, the mentors are invitees who are doing a favor to the accelerator/incubator and hence cannot be held accountable.
After being disillusioned by jibber-jabber mentor-speak, many founders develop the attitude that the only kind of mentor who has any value is the one who can help them fundraise. And the glorious edifice of 'mentor utopia' comes crumbling down.
Is all lost, or is there still hope?
Having been an entrepreneur twice, and angel investor/mentor dozens of times, I suffer from the belief that problems can be solved; even if the odds are stacked up against me.
I think that the rampant failure of accelerators/incubators/mentors can be solved. But that would require us to relook at what we are expecting from these arrangements. I am sure that what I am proposing below is just one of the many approaches, and you might have another way to look at things. My recommendations stem from my limited experience as a mentor to several startups in a formal/informal capacity. Also, I have engaged with many incubators/accelerators and have developed my belief about what seems to be working, and what isn't.
Here's what works and what doesn't
- Avoid a classroom-like approach where entrepreneurs are "taught" how to succeed. These have limited positive value, and can even have negative outcomes. The only situations where the classroom approach can work are when (i) You are addressing people who are exploring the thought of entrepreneurship and want to get an idea of what it is like, e.g., school students (ii) You are conducting a workshop on a specific, fact-based, topic, e.g., a new tax-provision that has an implication for entrepreneurs.
- Create a community of founders where they can help each other. And I mean community, not just a dysfunctional WhatsApp group, Facebook page, bulletin board... Creating a community is difficult and time-consuming. But if you are successful, it pays back manifold. Some institutions discourage many-to-many interactions and prefer the more controlled one-to-many approach (where they are the "one.") They are worried that their constituents (the founders) will "unionise" and complaints will get magnified. This approach is self-defeating.
Provide a platform for founders to choose a few mentors from a pool of several. Likewise, support the mentoring engagement only where the mentor too has chosen to work with the specific startup. The idea of, "here is our mentor panel and all of them will help all our startups," is likely to end up in slogans, clichés, and superficial engagement.
- Engage multiple mentors with each startup. I agree that this can be a double-edged sword. On the one hand it runs the risk of creating confusion in who does what. On the other, it can present a richer opportunity for the founder.
- Also, there is the real risk of founders not being mature enough to deal with situations where different mentors have contradictory points. Despite these potential pitfalls, I have observed some outstanding successes of a multiple-mentor approach. A common point in all such success stories was that the mentors were at ease with each other, and would often engage with each other in discussion about the startup.
- Ensure there is a centre of authority (usually one person, such as the founder of the accelerator, or the CxO) can be helpful, if two conditions are met: (i) The centre of authority commands the respect of all constituents: founders, mentors, partners,... (ii) This centre of authority is more of a facilitator of processes than an operating participant. As an example, the centre of authority would inquire and follow-up with mentors about their startups, rather than become a mentor herself.
Align economic interest among all participants. This is desirable to maintain long-term sustainability of mentoring arrangements. This is better than hoping that one is lucky in stumbling across altruistic mentors who would manage to sustain their enthusiasm in long-term mentoring of a specific startup. Of course, economic alignment is not the panacea here, and far more curation is required in selecting mentors.
- Avoid confusing a mentoring relationship with a consulting arrangement. A consultant tends to have specific deliverables. When I look back at cases where mentors have created substantial value for their mentees, I find that in most cases the specific area where the mentor turned out to be helpful wasn't one that either the mentor or the mentee could have forecasted.
- Think twice before dishing out advice or proclaiming verdicts. Nothing is more irritating than the know-it-all mentor who can provide answers without even spending enough time to understand the question.
- Understand that more often than not, all the resources of a mentor/accelerator/incubator put together will prove insufficient to help the founders. This is where making introductions and providing connections becomes a crucial part of the mentoring process. An insecure person who pretends to have a foolproof solution to all problems is a fake, and is highly unsuitable as a mentor.
- Attempt to answer founders' questions. But recognise that a more important role is to help founders think of questions that need answering. Some founders are operationally driven, and fail to have an appreciation for "strategy." Likewise, there are the big-picture founders who fall short in operationalising their strategies. Both these type of founders have a greater probability of success if their mentors can help them think through their blindsides.
No amount of design and strategy is going to create great accelerators/incubators/mentors if the intent is insincere.
This article is only a starting point. My thinking has evolved over the years, and I am sure that it will continue to evolve. I am certainly no guru in this space, but will happily share my thoughts with you on matters where I do have a view. So, feel free to share your comments and queries below.
Some disclaimers: I am not saying that all accelerators/incubators/mentors are failures. I am sure there are success stories. In fact, I hope that some of my mentees believe that I have made a valuable contribution. Painting accelerators and incubators and mentors with the same broad brush can lead to some ambiguity.
There are, literally, over 50 incubators/accelerators I have engaged with. So any attempt to map my comments on to any one specific organization is neither appropriate nor valuable.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)
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