Opinion: As a mentor and investor, I think startup accelerators are failing miserably

A successful entrepreneur is someone who passionately drums up resources and creativity to unearth new market opportunities. But the ecosystem plays an important role in fostering entrepreneurship. The ecosystem consists of many players—from the government to universities. But my interest has been in accelerators, incubators, and mentors.

Over the past two decades, I have participated in innumerable initiatives 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. While the excitement of creating new ventures gets me out of bed in the morning, there is a ghastly fear that keeps me awake at night.

That’s because the idea of accelerators, incubators, and mentors is great in principle, but it largely doesn’t seem to be working!

Without having to define success, I think that the success rate of startups coming out of incubators and accelerators is lower than the already abysmal rate of startup success in general. This is very 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 any 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, etc.). 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?

 

Why they fail

  1. The economics of accelerators and incubators are such that top mentors/professional staff cannot be afforded. This leads to paper pushers and clerical folk—however well-meaning—running the programs. And this frustrates founders.
  2. Incubators/accelerators have turned into echo chambers that repeat the same inane slogans that initially excite founders but eventually just bounce off of them.
  3. Cloud credits, limited time use of free shared offices, and other low-value but tangible benefits are easier to communicate than the seemingly intangible prospect of mentorship.
  4. Often, the very intent of setting up an accelerator/incubator is suspect. Examples of these are academic incubators that are primarily shared office spaces, accelerators run by the lowest rung employees in a VC firm that are only seeking to expand their deal pipeline, and initiatives by tech companies that are merely distributing free credits to expand their product’s user base. If mentors, accelerators, and incubators are unable to contribute to a founder’s success, they are failures.

 

Why mentoring is the weakest link

Mentoring is at the core of the value that incubators and accelerators provide. But mentoring is the weakest link.

Superficial relationships

Our ecosystem has several altruistic mentors that genuinely want to help founders. But in the absence of a structured arrangement or deliverable, their relationships with their mentees tend to either remain superficial or short-lived.

Mentoring for the wrong reasons

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 these people.

Mentors that think they know it all

When founders face obstacles, they seek input 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,” “let me find out more about this before I respond,” or “I know someone that could help you with this.” Instead, I find mentors feeling compelled (and confident) in responding to every query that the founder poses. This superhero mentor that “can solve everything” is usually the least valuable. Unfortunately, it takes time before their hollowness becomes obvious.

Relationships that aren’t kept on track

I am saddest when capable and sincere mentors engage with capable and sincere founders, yet no value is created. A founder meets a mentor who gives outstanding counsel, and that is where it ends. The founder gets busy with her/his daily operations and the mentor doesn’t think it is her/his 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 that are doing a favor for the accelerator/incubator and hence cannot be held accountable.

Founders turn elsewhere

After being disillusioned by jibber jabber “mentorspeak,” founders end up thinking that the only kind of mentor that has any value is the one that can help them fundraise. 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 rethink what we expect from these arrangements. I’m sure that what I propose below is just one of the many approaches, and you might have another way of looking at things. My recommendations stem from my limited experience as a mentor to several startups in a formal or 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

Don’t teach entrepreneurs how to succeed

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 you are addressing people who are exploring the thought of entrepreneurship (e.g. university students) or when you are conducting a workshop on a specific, fact-based topic (e.g. a new tax provision that has implications for entrepreneurs).

Create a real community

Create a community of founders where they can help each other. And I mean a community, not just a dysfunctional WhatsApp group, Facebook page, or 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 interaction and prefer the more controlled one-to-many approach. They are worried that their constituents (the founders) will become unions and complaints will get magnified. This approach is self-defeating.

Allow founders to choose their mentors

Provide a platform for founders to choose a few mentors from a pool of several. Likewise, support the mentoring engagement only where the mentor has chosen to work with the specific startup too. The idea of “here is our mentor panel and all of them will help all our startups,” is likely to end up in slogans, cliches, and superficial engagement.

Have multiple mentors

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 on 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 in discussion about the startup.

Have a center of authority

Having a center of authority (such as the founder of the accelerator or the CXO) can be helpful if two conditions are met:

  1. The center of authority commands the respect of all constituents (founders, mentors, and partners)
  2. This center of authority is more of a facilitator of processes than an operating participant. As an example, the center of authority would inquire and follow up with mentors about their startups, rather than become a mentor themselves.

Align economic interest among all participants

This is desirable to maintain long-term sustainability of your mentoring arrangements and is better than just hoping to stumble across altruistic mentors that can sustain their enthusiasm in long-term mentoring. Of course, economic alignment is not the panacea here, and far more curation is required in selecting mentors. (Note: The method of aligning economic interest is a deep and controversial topic in itself, and I hope to write about it someday).

Iron out the mentoring relationship

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.

Get mentors to give advice carefully

Mentors should 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.

Know that you won’t be enough

Understand that, more often than not, all the resources of a mentor/accelerator/incubator put together will prove insufficient to help founders. This is where making introductions and providing connections becomes a crucial part of the mentoring process. An insecure person that pretends to have a foolproof solution to all problems is a fake and is highly unsuitable as a mentor.

Get founders to ask questions

Attempt to answer founders’ questions, but recognize that a more important role is to help them 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 that fall short in operationalizing their strategies. Both these types of founders have a greater probability of success if their mentors can help them think through their blindsides.

 

Final words

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. While I’m certainly no guru in this space, I’ll happily share my thoughts with you on matters where I do have a view. So, feel free to share your comments and queries below. Thanks.

 

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. So, chill!
  • Painting accelerators/incubators/mentors with the same broad brush can lead to some ambiguity.
  • There are literally over 50 incubators/accelerators that I have engaged with. So, any attempt to map my comments to any one specific organization is neither appropriate nor valuable.

This article was first published on the author’s LinkedIn page.

 

Source: https://www.techinasia.com/talk/startup-accelerator-epic-fail