In the past decade, a wide range of business acceleration models have emerged around the world in both developed countries and increasingly, in developing countries. In their essence, these accelerator programs (APs) are a way to shorten the journey of start-ups, resulting in either quicker growth or quicker failure. More specifically, an accelerator program typically provides short, focused interventions aimed at scaling the most viable start-ups and providing the necessary financial means for growth.
Despite their growing popularity there is little systematized knowledge about the different types of acceleration models and approaches which have emerged. Particularly in emerging countries, the insights into the performance of these programs is limited.
Enclude – in collaboration with Emory University’s Goizueta Business School and the Aspen Network of Development Entrepreneurs (ANDE) – is doing a research project on accelerator programs in several Sub-Saharan African countries, on behalf of the World Bank Group’s infoDev.
This study has surveyed different types of accelerator programs in developing countries, in an effort to better understand how they operate, why they do things the way they do, and what makes them more or less effective in fostering sustainable entrepreneurial growth. Along the way, we compare different entrepreneurial ecosystems in order to support conclusions about whether and to what extent APs add more value in a mature entrepreneurial ecosystem–such as Kenya or South Africa–or in a developing one, such as Nigeria or Tanzania.
Although the research is still in progress, some preliminary findings – based on a landscape analysis of 24 APs in 11 Sub-Saharan African countries – are already apparent.
Clear Differences between APs in Mature and Developing Ecosystems
There are differences between APs working with enterprises in developing entrepreneurial ecosystems and those working with enterprises in mature ecosystems, since the differing needs among early vs. later stage enterprises require APs to tailor the type of support offered.
Developing ecosystem APs tend to focus on the initial pre-revenue stages of enterprise growth. These APs are characterized as ‘supporter’ types, focused on basic entrepreneurial skills and providing more on-site support at the AP premises. APs in mature ecosystems often target companies in their later stages of development, and tend to allow them to work at their own offices instead of a shared working space. In these cases, support services look beyond basic business skills to provide more marketing and pitch training, focusing on presentation and communication skills.
Mentorship Systems are Underdeveloped
The mentorship systems offered by the majority of the APs in the sample have some clear limitations. Few APs have a well-articulated system for selecting and vetting mentors, or to assist and monitor them in delivering services. Often there is no dedicated person on the AP management team in charge of mentorship, or developing a mentorship base.
Many APs reported difficulties identifying and committing experienced mentors to their programs, possibly because of the lack of an established culture of “volunteerism” and “open source mentality” in their countries – which would generate benefits indirectly for mentors, such as recognition, new contacts, or return favours from mentees. Often it is exactly these indirect benefits which are not embedded in the mentorship programs and thus make it less attractive for potential mentors to join.
Linking Ventures to Capital is Barely Happening
One of the key elements defining accelerator programs is their aim of providing some type of access to capital for ventures. However, in Sub-Saharan Africa AP participants are rarely able to secure financing with the help of these programs. Although over 87% of the APs in the report a desire to provide access to capital, only 38% actually offers a guaranteed financial grant or investment for some or all participants in the program, and even fewer (22%) actually sign a capital raising mandate with participating enterprises. Moreover, we found only two APs in the sample that could be considered specialised in and knowledgeable about corporate finance. In general, expertise in capital structuring and matching and venture and investor needs appear to be shallow with most APs.
Overall, our research indicates that the majority of APs sampled in SSA are more like incubators than true accelerators, focusing more on training and infrastructural support and less on the access to finance component.
The reasons for this seem to be threefold: a) ventures are relatively less advanced and struggle with more basic challenges such as a lack of reliable office and infrastructure, b) APs themselves are not yet “modernized” to be fully focused on acceleration with a savvy investor mind set and c) most investors (themselves often impact investors) are located in the more advanced ecosystems such as Kenya and South Africa. A more sophisticated answer on why APs in developing ecosystems have not (yet) evolved to the type they are elsewhere in (more) developed countries could be given when more in-depth data on venture acceleration has been collected.
Stay tuned for more on what is holding back the evolution of APS in developing ecosystems as our research progresses. For more information, contact Kristof Racz at email@example.com.