In the past year, several start-up accelerators, especially in the technolgy space, have been launched in the country, with four or five announcing plans to start operations since the beginning of this month alone. Some of them are: Pearl Uppal and Gaurav Kachru's 5ideas, Rajesh Sawhney’s GSF Accelerator and The Morpheos founded by Sameer Guglani and Nandini Hirianniah. According to industry experts there are around 15 start-up accelerators in India.
Start-up accelerators help entrepreneurs turn promising ideas into viable businesses; they run mentoring boot camps, and offer office space and seed money in return for an equity stake. Simply put, start-up accelerators are a combination of a seed fund and mentor.
For instance, 5ideas will offer funding between Rs 50 lakh to Rs 2.5 crore. The equity stake involved ranges between 15 and 30 per cent, depend on the business. The firm will shortlist five or six companies based on a 10-point selection criteria which includes team composition, product relevance for Indian consumers, business viability and so on. Then, 5ideas will transfer domain knowledge by internal and external mentors, which will include subjects ranging from search engine marketing to distribution, design, supply chain, among other aspects. The fund will also help start-ups network. The firm will also help businesses in future investment rounds, including access to big venture capital funds. Same is the case with the Morpheos, which focuses on super early stage start-up, offering Rs 5 lakh funding.
The concept of business accelerator, say industry experts, came out of the dotcom era when angel and venture capitalists sought to acquire emerging companies with good business ideas, infuse resources at an accelerated rate to build the company fast and then sell off as a much higher valued asset. Result: Potentially successful businesses could expand more rapidly if given access to the right type of resources.
Here the challenge is in providing easy access to the right organisation – equipping small business owners to become 'intelligent consumers' of no‐cost and low‐ cost local, state and federal resources.
“We have received more than a couple of hundred application in just 2 weeks of the launch. This only explains how difficult it could be to choose the right venture,” says Pearl Uppal, Co-Founder of 5ideas. In the early stages of venture capital funded businesses, the business is more important than the capital. The business often has significant challenges on the human capital (people, experience and expertise) and social capital (business networks, ability to source talent) critical to take it to the next level. 5ideas addresses these gaps, she further adds.
There are a number of successful ongoing efforts in India that are stimulating small business growth with an integrated business accelerator approach with low cost space and business services as well as access to financial and technical resources, mentoring, process improvements and many other critical resources for emerging businesses. Benchmarking efforts also identified different levels and types of support required for start‐up businesses versus emerging/small businesses that seek to expand.
Ashish Kashyap, CEO of Ibibo group says, “For an 'idea' to become a 'business' there is a process supported by a culture that enables the 'idea' to succeed.” Small business owners have no time to locate multiple websites or review capabilities of organisations and resources. Accelerators make available the resources they need in terms of capital, workforce and its development, marketplace intelligence, regulatory and tax issues, and so on.