Pushing the accelerator button

09/09/2020 - 17:00

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Accelerator programs are a practical way to encourage the early-stage tech scene, putting fledgling startups through a three-to-six-month program of mentoring, and providing equity funding.

Pushing the accelerator button
Online agricultural broking business Farmsave was recently bought by US-based Farmers Business Network. Photo: Stockphoto

Accelerator programs are a practical way to encourage the early-stage tech scene, putting fledgling startups through a three-to-six-month program of mentoring, and providing equity funding.

Accelerators usually run a competitive selection process to sift out those startups they feel they can best assist and scale.

This year’s Plus Eight accelerator in Perth – run by Spacecubed and backed by local corporates – drew more than 70 applicants from across Western Australia.

Twenty-four of them were invited to a bootcamp, from which 15 were chosen to progress through to the mentoring phase.

A final seven were selected to receive a share in $350,000 of investment funds.

Do accelerators work?

Y Combinator ran the first accelerator program in San Francisco in 2005.

Techstars got going in Boulder, Colorado, the following year. While there have been some notable successes – Airbnb came out of Y Combinator – opinions vary as to what impact accelerators have.

The Global Accelerator Network (GAN) reports that, among its 105 accelerator members in 2019, each startup went on to raise an average $US547,000 in the year following the accelerator, most of which came from angel investors.

The cumulative value of all GAN startups was more than $US10.8 billion, having raised a collective $US2.1 billion.

Only time will tell how many will scale and become great businesses.

Perth accelerators

The first accelerator programs in Perth started in 2013, around the same time as the first co-working spaces, the first Startup Weekend, and the first angel investor group.

This also coincided with the downturn in the local economy.

In terms of the right conditions to start a new business, that was as good a time as any.

Upstarts

One of the first accelerators to also provide seed capital was the Amcom (later Vocus) Upstart program, founded by local internet entrepreneur Robert Nathan in 2015.

Mr Nathan had visited and studied other accelerators, and his program became part of GAN, of which Techstars is also a member.

“I ran the program for two years according to the Techstars accelerator playbook: a three-month, mentor-driven program with 40 mentors and seven or eight chosen companies,” Mr Nathan told Business News.

“We provided some space and seed capital for a small percentage of the business, and finished up with a demo day [pitch night].”

“The problem was, there was no follow-on capital. And today, four or five years on, only three of the 15 companies across the two cohorts remain active.”

Three out of 15 may not be that bad an outcome, especially if one or two of them return 10-fold or more.

And that’s the aim: pick the best, but understand that only one or two will be spectacular.

Plus Eight

The successor to the Upstart program was the Plus Eight program, which ran its first cohort in 2017, investing in 25 (mostly local) startups since.

HUMM Tech graduated from the program a few years ago and has since moved to California, raised some significant sums, and is now commercialising its productivity improver head patch.

Uno Group and recent Innovator of the Year winner udrew are both recent Plus Eight graduates and among the shining lights of the local startup scene.

Another graduate, online agricultural broking business Farmsave, had a significant exit last month when it was acquired by the US-based Farmers Business Network.

“Having been exposed to thousands of startups in the last few years, I am confident that we are working with some of the best early-stage companies Perth has to offer,” Plus Eight entrepreneur in residence, Derek Gerrard, told Business News.

“The teams have managed to adapt well to the challenging environment we are all in at the moment and I think already all would be able to say they have genuinely accelerated the growth of their business through the program, more than if they were progressing on their own.”

Whether accelerators make the difference is perhaps not the point.

They do seem to be an important part of a healthy startup ecosystem, and for that they deserve our attention and support.

Charlie Gunningham is founder and principal of digital strategy advisory business Damburst, and a mentor on the Plus Eight program.

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