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    Startup Accelerators: A New Horizon for Bangladesh’s Startup Ecosystem

    LightCastle Analytics Wing

    JolPi is a technology company that sells home based IOT (internet-of-things) devices i.e. gas leakage alarm, appliance control, access control etc. What sets them apart from the rest? Well, they just received the ‘National Demo Day Award 2017’ and were announced as the ‘Top Investable Startup 2017’ by the ICT Division of Bangladesh Government.

    Bangladesh has seen quite a few startups like JolPi coming up in the last few years- success stories that instill Bangladesh’s cred for innovation in the global startup community. However, behind those cheerful stories there are also plentiful failures and steep learning curves. Under the behemoth presence of huge conglomerates and prestigious multinational corporations, the life of a startup is not so fluid in Bangladesh.

    On the other hand, as Bangladesh’s economy is booming, business opportunities and development of new sectors are only a matter of time. Socio-economic conditions are improving and people now hold more disposable income. They are looking to improve their quality of life, spending on entertainment, travelling, commodities and opening up new avenues for businesses.

    There is business to be done, opportunities to be taken-  but that comes through a treacherous path. Most founders lack the financial know-how to run a business. They struggle to keep the startup afloat- to hold cash in-flow. A viable solution to this? Startup accelerators. And in JolPi’s case- it was GP Accelerator.

    ACCELERATORS, THE SAVIOR OF STARTUPS

    Accelerators are short term cohort based programs that provide mentorship and educational experiences to their graduates. Accelerators ultimately guide startups to a public demonstration or pitching event at the end of their program.

    Startups usually go through five distinct phases in an accelerator: awareness, application, program, demo day, and post demo day.

    With an exchange of equity, accelerators tend to their startup graduates as business partners, thinking of the startup as their own concern. Accelerators’ investment in a startup cannot be measured just on the basis of the seed fund they provide- their approach is multifaceted. Whatever a budding startup lacks, accelerators try to make them whole. Teaching the graduates about basic finances and accounting principles, building a proper organogram, developing a viable business model, connecting startups with more investors etc. are some of the extrinsic things a startup gets in an accelerator program. But through the mentor-mentee relationships and a network of alumni startups- the actual learning potential is so much more.

    To demonstrate the differences between accelerators and business incubators:

    Brad Feld, cofounder of TechStars- a leading accelerator platform operating in the USA- likened the accelerator experience to immersive education, where a period of intense, focused attention provides the founders an opportunity to learn at a rapid pace. Learning-by-doing is vital to the process of scaling ventures, and the point of accelerators is to accelerate that process. In this way, founders can compress years’ worth of learning into a period of a few months.

    HOW DID ACCELERATORS COME TO BE?

    Startup accelerators are the results of capitalist economies where private initiative and entrepreneurial spirit is celebrated. Although the first accelerator in Bangladesh came in 2015, they have been spawning across Europe and USA since the mid 2000’s. The first seed accelerator was Y Combinator, which started back in 2005. It’s a tech startup accelerator located in Silicon Valley. In its main program, they interview and select two batches of companies per year and take them to the Valley for three months. Startups receive seed money ($120,000), advice, and connections in exchange for 7% equity.

    Then in 2006, TechStars was founded- and in no time, it became the next big thing. In exchange for 6% common stock, each company accepted into Techstars receive $20,000 plus a $100,000 convertible note, access to the Techstars network for life, over $1M worth of perks, and a three-month accelerator program. Through the Techstars Worldwide Entrepreneur Network, founders and their teams are able to connect to other entrepreneurs, experts, mentors, alumni, investors, community leaders and corporate partners.

    These two pioneers have paved the way for accelerators to be an integral part in startup ecosystems. Startups in Silicon Valley have benefited themselves from accelerators- they made the modern unicorn company (a startup valued at over $1 billion) possible. Unlike angel investors, incubators or venture capitalists- accelerators have a more hands on approach. Accelerators provide founders without a business background a scalable business model for their startups and help them establish a sustainable flow of funds.

    Following the Silicon Valley accelerator model, the rest of the world caught up pretty soon. Bangladesh was no different. First came venture capitalists and incubators, which then paved the way for accelerators in Bangladesh.

    THE BANGLADESHI STORIES

    In Bangladesh, accelerators have come through the initiatives of telecom operators. Grameenphone have their GP Accelerator, Robi have an employee-only incubator program. With the advent of 3G technologies and an increasing number of Wi-Fi networks in Bangladesh, consumption patterns among telecom customers- a majority of whom use smartphones now- has changed. Revenues from voice calls and text messaging services are drying up with an increase in internet usage. Telecom companies are now wanting to get into the data businesses. These corporate accelerator programs are enabling the telecom operators to tap into fresh talents and ideas. Through this they expect to capture data based businesses and diversify their portfolios.

    The government has shown initiative to realize its Digital Bangladesh vision with the establishment of an incubator program and last year’s Connecting Startups competition. They are developing an accelerator program called iDEA Accelerator under the supervision of its ICT Division. It can become an important player in the startup accelerator scene. With the emergence of hi-tech parks, this program can provide integrated solutions for upcoming startups.

    Startup competitions have been trending in Bangladesh- having seen a surge in business competitions. The winners of these competitions come under the banner of the sponsor corporations who then help the startups in their initial funding and logistical support. But the scope of these competitions is often very limited, operating in single cities like Dhaka or Chittagong. Almost always a relatively well-off startup is chosen as winners- whereas startups that actually needed the logistical support keep lagging behind.

    At present, GP Accelerator is the benchmark of accelerator programs in Bangladesh. They are accepting applicants for their fourth batch of startups- taking five startups at a time. They hold a 4-month boot-camp that provides seed funding, mentors, curricula, in-house development resources and investor access to the founders and their teams. With three batches of alumni, their program is already developing a rich network of mentors and investors.

    But all these cater to startups with a technological background. These programs leave out a vast spectrum of new ventures trying to make their places in a diverse range of industries.

    AN ACCELERATOR IN THE AGRICULTURE SECTOR

    Unnoty (www.unnoty.org)- which is altogether a different kind of player. It’s an initiative of LightCastle Partners, which aims to shift the focus away from the capital- into the semi-urban and rural regions where there is an acute scarcity for infrastructural support for small and medium businesses (SMBs). Working with USAID, LightCastle Partners Ltd is employing standard accelerator models and curricula in the Unnoty  platform- with the exception that it focuses on the agriculture sector. The ultimate beneficiaries will be the farmers, who’ll be equipped with education on how to improve their businesses.

    Unnoty is a Peer-to-Peer Accelerator Network Program (P2PAN) that works to enable growth of high potential small and medium businesses (SMBs). Their platform has three distinctive features- first is the assimilation of a group of like-minded Traders/NGOs, second is the transfer of specialized and structured knowledge and skills, and third is the facilitation of forward market linkage and access to finance.

    The startup ecosystem of Bangladesh itself is still in a molding and shaping stage and accelerators are a relatively new concept here. There is an overflow of business ideas- but a lack of proper and well-groomed new ventures. With a stream of startup success stories, there is a market for startup accelerators- but not many of them are being established apart from a few corporate initiatives. This needs to change. Accelerators in present-time Bangladesh can be a lucrative business itself. For the sake of our local business environment, accelerators will have to step up as important players in the overall ecosystem.

     

    Salman Zamal is a Junior Associate at LightCastle Partner. For further details and clarifications, please contact here- [email protected]

    LightCastle Analytics Wing is the research division of LightCastle Partners. It is tasked with producing periodic reports on the different sectors of the economy, analyzing trends in markets and making methodical, thorough and intelligent analysis to improve strategy and drive business growth.