It is raining startup accelerators. In the last two years, we have seen accelerators sprouting up and taking root in Singapore.
Accelerators come in all forms: international accelerators like StartupBootCamp and Alpha Camp, both of which have conducted bootcamps globally; big local names teaming up with overseas accelerators like SPH Plug and Play; or DBS Hotspot Pre-accelerator which runs on its own; or a series of local players like Lithan EdTech Accelerator and UNFRAMED.
Infocomm Investments Pte Ltd (IIPL), the wholly-owned investment subsidiary of Singapore’s Infocomm Development Authority (IDA), played a pivotal role in the creation of the accelerator scene. It has provided BASH (Build Amazing start-ups Here), a location in Block 79 and partnered with a number of accelerators to conduct their three-month bootcamps on a rotational basis.
But with all the hype, as a startup, is it worth participating in an accelerator program? I sought the opinions of four startup founders who graduated in the following bootcamps: JFDI.Asia (JFDI), StartupBootCamp FinTech (SBC), SPH Plug and Play (SPHPP) and another who is currently in the DBS Hotspot Pre-accelerator (DBSHP). Due to the sensitivity of information shared, all names have been changed.
Views on bootcamps and promises
Ben’s business is a fintech startup. He decided to join SBC because it was the only fintech-focused accelerator in Singapore at that time. The benefits promised were the pre-seed funding, access to partners like MAS, DBS, PwC, Mastercard & a host of mentors in the financial services space. He agreed that SBC fulfilled their promises in providing him access to the relevant mentors.
Similarly, Ethan joined SPHPP since it was the best fit for his content focused company, where he could learn some related skills from the parent company SPH to turn his focus more to a content provider role.
SPHPP provided funding, grants, mentorship, curriculums and most importantly, link-ups. It was unfortunate though that SPHPP was not that experienced in the education industry, therefore, “we failed to get connected with local big players in the industry.”
Charlie also joined SPHPP because his startup was a digital content play and it was in-line with the focus of the programme. His intent was on learning the methodologies, and he found what he learnt to be useful. His setback was that there was a heavy emphasis on SPH’s internal mentors, and more could have been done to get more external mentors for a different viewpoint.
Alvin is currently in DBSHP. He signed up to push his idea further, but in going through the program, this has changed since then. He commented that, “You would learn Biz Model, design thinking, UI/UX, storyboarding, pirate metrics, basic legals, pitching and fundraising.”
He has made a lot of connections through mentors and investors, and feel that the resources are too overwhelming. “With so much help and freedom that is given, it made us reliant and complacent,” he laughs.
Dave joined JFDI because he felt it was best in this geographic region. He said that, “They certainly put up a good show during demo day with the line-up of investors present so I would say they have delivered on their part.
What is lacking from the whole program is the maturity of the eco-system, the lack of quality mentors with no domain expertise, advice from investors or startup seniors who have not really “made it” before and the overemphasis on demo day pitching.”
He also notes the venue could be improved and the alumni support could be better managed as well.
It is a rule of thumb that accelerators give a small token sum to the startup in exchange for a small equity stake of 6-10%.
Comparing the various term sheets, DBSHP took a refreshing and most friendly approach by giving out S$25,000 (US$17,780) as an award with no equity stake. SBC gave S$24,500 (US$17,420) for 6-8% and SPHPP offered S$30,000 (US$21,330) for a flat 6%.
JFDI was deemed unfriendly with a S$25,000 (US$17,780) convertible note, with 7% equity fully diluted in the next round of financing. Should the startup fail to raise any funding after 36 months, JFDI may clawback the principal loan and interest.
Dave felt that while the nominal sum works as a great confidence booster and the termsheet was signed quickly, the non-dilutive clause was slightly sneaky since first-time founders do not know anything or would not go into that level of detail. He also felt it was not clearly communicated by the accelerator from the start.
Another point taken to task was the offer of S$150k (US$106,660) intangible value of mentorship. It was difficult to quantify and thus odd that JFDI included this as a value, given that all accelerators were offering free mentorships.
Note: A check on JFDI’s website shows that they have upped their game with S$50,000 (US$35,560) for 8.888% equity stake and a promise of S$70,000 (US$49,790) follow-on seed round funding
For all founders I interviewed, they found the amount of funding and equity quite fair, as their focus was on the learning and potential follow-on funding promised. Alvin shared a more practical perspective,
Most startups fail. So giving away equity of a startup has more advantage for a founder than for the investor. Because if it fails, they learn a lot from experience and they start over again. Furthermore, the accelerator has to offer mentorship, relevant connection and resources for the startup to move, because they definitely see the potential in the startup and want to make more money.
Despite being backed by strong brand names and having IIPL as significant partner to the accelerators, it did not guarantee a follow-on funding. So far, none of the interviewees had any follow-on funding.
To be fair, Alvin is still currently undergoing the DBSHP bootcamp, and Ethan and Charlie had only recently graduated last month from SPHPP, but that meant no committed investors on demo day.
For Ben at SBC, he felt that his business, which is on social impact, is still a new vertical which angels are unfamiliar with and VCs (venture capitalists) found his company in a stage too early to be invested in. He also felt that he was at a disadvantage, given that he was a first-time founder.
For Dave, JFDI provided investors and was offered follow-on deals but Dave preferred to get his own means to raise capital. I surmised that he was not happy with the terms offered.
Alvin shrugs off the issue of follow-on funding, even if he does not get any during DBSHP Demo Day. “We don’t need the money, and won’t want any VCs to pressure us, and keep our equity until we are really ready to scale.”
For Ben, however, he has been bootstrapping and feels that it has been very tough with the lack of funding.
Advice by startups
So, should a startup join an accelerator? The founders give a resounding yes but with a dash of advice.
Ben of SBC says, “I believe a first time founder should take part in an accelerator programme if they are lacking the right connections in the space, like fintech. Besides having great traction, having been part of an accelerator helps to also increase the startup’s credibility when meeting up or asking for partnerships with corporations or organisations related to the space.”
Ethan of SPHPP clarifies that, “I would say the startup should be very clear on why they want to join an accelerator, instead of joining it since many successful ones joined accelerator programs before. Also, it important to pick the right accelerator program, it is always good to talk to some alumni, to know more about the values and the culture of the program, see if it fits your personality and your needs.”
Dave of JFDI agrees, but adds on, “If you are planning to join one, aim for the best accelerators in your industry. Companies in the US that make it into the best or top accelerators, for better or for worst, get more venture capital dollars or spotlight thrown at them and that is a fact. Now that the accelerators are going vertical, you should really look into one that fits your industry or domain expertise.
The hardest part of an accelerator is knowing who not to listen to. Startup accelerators often pride themselves on the mentorship and advice they provide to their batch. With all the mentors and speakers, you’d think you will get a revelation or golden actionable insights to focus on your business.
The truth cannot be further from that. I met a ton of smart, confident people, and they’re going to talk a lot about what “you should really do” in their opinion. Let’s not forget that they’re super confident because they either manage a lot of money or they have successfully raised some money (not exited).
Naturally, people put in a position to give advice will … always give advice. So you’re going to get a lot of advice. Each one is going to listen to you for about five minutes and then talk for 40. That’s the nature of the startup world.
You’ve spent months and years researching and knowing your field and they have thought about it for two minutes. Remember that you know your idea more than anyone.
Lastly, it is okay to bootstrap. Since the term accelerators are meant to … accelerate your business, you will naturally be inclined to fundraise, but not all businesses are meant for venture capital and there’s nothing wrong with that. Businesses and entire countries were built on the bedrock of bootstrapping.”
Alvin of DBSHP jokingly rounds up this article about joining an accelerator, “Those that got rejected really missed a great chance, even if you take away the funding and the masterclasses, pizzas and the community here are awesome!”
This article is part of the Share! Series. Disclaimer: The author is a core mentor of the recent SPH Plug and Play bootcamp.
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