by Lim Qiu Ping
INNOVATION, technological change, internationalise – words and ideas like these are nothing new regarding how Singapore economy is steered. The SkillsFuture initiative and the principle of lifelong learning are being pushed hard. And the report from the Committee on the Future Economy released in February recommended strengthening the innovation ecosystem and raising the profile of startups.
Singapore is trying to reinvent itself, especially economically, at the individual, organisational and national scale. At the bleeding edge of this re-invention is the startup scene. Singapore’s quest for Silicon Valley-ism has seen the development of ecosystems that contributed to the vibrancy of startup hubs the world over.
One notable ecosystem piece is the accelerator: an intensive, short-term and structured programme available to founders that assure mentorship, funding, emotional and educational support, networking with potential partners and investors; all culminating in a public pitch event known as demo day. In exchange for participation in their programme, accelerators take equity, typically less than a 10 per cent share, from the startup. They earn when the startup successfully ‘exits’ – referring to how startups are to develop till they can either get publicly listed or be acquired by another business entity.
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Questioning Singapore’s accelerator boom
So, what are the bearings on a startup ecosystem if accelerators are the ones finding it difficult to survive? During mid-2016, at least 15 accelerator programmes could be found in Singapore, not least due to efforts by the wholly-owned investment arm of the Infocomm Development Authority, known formerly as Infocomm Investments (IIPL) and revamped as SGInnovate in November last year, which helped fund and launch several accelerators.
Questions were raised if there have been too many accelerator programmes here. Since 2014, IIPL (now SGInnovate) has embarked on an accelerator strategy to pump up the startup ecosystem of Singapore. It began signing Memorandums of Understanding (MoU) with commercial accelerators and corporations, creating partnerships where IIPL supported accelerators to run their programmes for a certain length of time. The first such partnership was with Joyful Frog Digital Incubator (JFDI), a commercial accelerator, in March 2014. Other examples included the European financial tech accelerator Startupbootcamp FinTech, brought in in October 2014. And the partnership that sprung up with Singapore Press Holdings (SPH) and California-headquartered accelerator Plug and Play in April 2015, formed SPH Plug and Play. Meanwhile, corporations such as DBS Bank and Mediacorp jumped on the bandwagon, setting up their own corporate accelerator programmes.
Then on Sep 14 2016, JFDI announced in a blog post that it would cease operating as an accelerator. It had not only been the first accelerator partner of IIPL but also Singapore’s first ever accelerator programme, founded in 2010. Three months later in January 2017, SPH Plug and Play confirmed that they would be closing.
How viable is the accelerator model in Singapore?
Ultimately, accelerators are businesses and businesses, no matter how valid its products and services to a community, survive according to the calculation of dollars and cents.
Mr Hugh Mason, 50, the co-founder of JFDI, explained the difficulty of sustainability in his company’s blog post. “In Asia, the time to exit is more like six to eight years and the valuation at exit is perhaps 30 [per cent] of that it would be in the US,” he wrote. In short, JFDI was unable to generate sufficient returns (from equity obtained) fast enough to cover the “high costs” incurred while operating in Singapore. He further recognised that the accelerator business model carried over from US did not fit well in the local and Asian context.
The model consists of setting up a team, which could include paid personnel such as programme directors, facilitators and a full-time secretariat. This team is only able to handle so many startup cases per programme batch, even if it benefits the accelerator to groom as many startups as possible in hopes of hitting gold with one that could garner a high valuation.
With this business model, the accelerator outfit is non-scalable. Mr Jarrod Luo, 32, a startup founder as well as startup consultant, explained the model and how the profitability of an accelerator is curtailed because of this. “To scale, you have to do a one-for-one multiplication… if you want to increase the cohort size, you have to increase your team size. [It is] logistically heavy, it takes a toll on your corporate communications, internal qualification… co-ordination gets more expensive as the team grows.”
Mr Luo’s role as a startup consultant from his consultancy firm 2Bite is akin to that of an accelerator programme. It has been financially tenable for him, so far. He has served as mentor to and point-of-network for startup founders, tailoring knowledge and advice on growing a startup to the needs of his clients, who were travelling on their own entrepreneurial journey. Payment type, however, is negotiable, rather than following the rule of equity in exchange for participation.
Accelerators in perspective: just one piece of a bigger puzzle
To point, the function of and need for accelerator programmes should be subordinate to the progress of the entrepreneur, who encounters different issues at different phases of growing a startup. The accelerator as a device has its place in the startup ecosystem because its structured curriculum provides some form of stability in an industry characterised by risk and unpredictability. Nonetheless, it is possible for the individual to gain guidance, know-how, contacts and even funding through other means.
As startup founders, Mr Luo and his two partners chose to skip the accelerator experience when Tembusu Systems, their financial technology startup, was founded in 2014. They already possessed the skills, vision and structural knowledge to develop their business idea. “We weren’t like newly graduated students with no contacts in the world and no exposure; no experience… We were already quite well-placed in whatever we’re doing. We’re already consultants. We had the necessary contacts in the local Singapore scene,” he explained. Participating in an accelerator programme was not cost advantageous to them and what the accelerators offered was not “critical”.
Other founders have also bypassed the accelerator programme experience, such as those from startups Shopback and ViSenze. The first is an e-commerce business and the second a visualisation and artificial intelligence technology used in e-commerce. Their source of support and grooming comes from NUS Enterprise, the entrepreneurial arm of the National University of Singapore (NUS).
A bigger vision?
NUS Enterprise facilitates entrepreneurship in a wider scope than the accelerator concept, more like a matrix of human and infrastructural resources as well as knowledge base. Truly, its greatest asset is its community – and relationships within – built through time. Though officially beginning in 2001, its roots could be traced back to 1988 when a university-level centre called the Centre for Management of Innovation and Technopreneurship was started. It was meant to “nurture entrepreneurial learning and venture creation among the NUS community”.
Describing how it stood apart from standalone accelerators, NUS Enterprise acknowledged the “significant benefits” of being set in a university “with strong roots in education and research”, even as it remained open to those outside of the NUS fraternity. The aim is to create culture, not only success stories. Part of student life could include six months to a year’s internship in startups for immersive learning, facilitated through a NUS Overseas Colleges (NOC) programme. Shopback was started by alumni who knew one another as course-mates or through NOC. NUS researchers or serial startup founders could also mentor and re-invest in younger entrepreneurs, as they did with ViSenze. University alumni could return and tap into the entrepreneurial community established, gaining support and resources for startups planted within the ambit of NUS Enterprise. Other advantages include “access to technologies, research and intellectual property developed at NUS”. Start-ups such as ViSenze, have been spun out of technologies developed in NUS.
The accelerator is but a part of the NUS Enterprise mechanism, called the NUS Start-up Runway. NUS Enterprise explained it as “a series of initiatives and activities that help [startups] to grow and scale”. On its website, NUS Start-up Runway calls itself “the most comprehensive university-based incubation/acceleration programme in Singapore”. Access to it is part of the package of participating in the wider ecosystem unique to NUS Enterprise. With or without utilising the accelerator, people thrive in the startup industry. Therefore the industry thrives.
Perhaps, questioning what bearings the business survival of accelerators has on the startup ecosystem is to miss the forest. Rather, the thought for how healthy and self-sustaining the ecosystem is should frame the challenge of figuring out the most apt model for accelerators in Singapore.
Featured image by Sean Chong.
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