Accelerator programmes for African tech startups are slowly moving away from the batch-based “Silicon Valley approach” in favour of on-demand, needs-based, and corporate-supported models.
The classic accelerator model, established in Silicon Valley and Europe by the likes of Y Combinator and 500 Startups, sees acceleration firms take significant stakes in startups in exchange for some advice, mentorship, connections and, in some cases, a small amount of funding. They typically see large numbers of startups take part in short, batch-based programmes that conclude with a demo day.
Yet this “spray and pray” approach has not really worked in Africa. 88mph, which ran programmes in Nairobi, Cape Town and Lagos, closed its doors after minimal success, and increasingly accelerator programmes on the continent are more niche-focused like, say, Injini or AlphaCode, look at later-stage businesses, like Knife Capital’s Grindstone, or choose different models altogether.
Alina Truhina is chief strategic officer at Founders Factory Africa, which launched in Johannesburg in 2018, from where it plans to design, build and scale 100 disruptive tech startups across Africa over the next five years in partnership with corporates such as Standard Bank and Netcare.
She says the traditional accelerator model does not work in Africa because entrepreneurs on the continent require “concrete and tangible support” in building their product, tech, talent, growth solutions and their business as a whole.
“They most often also require help in aligning their product to market and user needs,” she said.
Founders Factory’s model is different. Truhina said it has seen that founders who have access to specialist deep-tech, data science, growth marketing, product and design talent, to name a few, succeed faster and grow better businesses to scale. Founders Factory Africa, then, provides a 45-person team that co-delivers product and solutions with founders, co-building with them and their teams.
“We are also corporate backed which means founders get access to infrastructure and value chains of large conglomerates that propels the growth of their startup,” she said.
“Corporate partners help unlock scale faster. A startup that has access to data, network, customers, distribution, IP, capital and market footprint is much better placed to scale faster than a startup that’s trying to compete with corporates or grow merely on its own.”
Deeper levels of support over longer periods, and with corporate support, are becoming a trend on the continent. Another Johannesburg-based company, Sw7, just partnered with Amazon Web Services (AWS) to launch what it claims is Africa’s first virtual B2B tech accelerator. Co-founder Keith Jones says there is no data to suggest Silicon Valley-style accelerators offer value in Africa. In fact, the two largest datasets that are available, from ANDE and Catalyst4Growth (C4G), show little or no lift directly attributable to these programmes.
“Our experiences have shown that to offer value businesses need on-demand support over a two or three year period, or longer. Our markets are B2B-first, complex, hard to access and slow to lift. The Western-style accelerators offer exclusive support for a small group of select businesses in a specific location over a short period of time. It takes a B2B technology businesses three years or longer to lift, so providing three months of support has to be recognised in the context of this journey,” he said.
“Western-style accelerators provide a marketing vehicle for corporate sponsors, cheap equity for the accelerator and access to funding and support for emerging businesses. These models are expensive, low volume, inefficient, time-intensive and don’t show great returns in terms of material support. Financial sanity will prevail at some point.”
Sw7’s model, by contrast, aims to provide ongoing, accessible, needs-driven acceleration support for early and late-stage businesses.
“We believe this is the route to systemic lift and the first step towards offering value-based acceleration support,” said co-founder Odette Jones.
London-based, Africa-focused accelerator The Baobab Network works in a similar way, without cohorts and providing different companies with different assistance depending on need. Head of ventures Richard Sears said though cohorts represented an efficient way for accelerators to reduce costs and increase the number of startups they work with, they “commoditised” founders.
“Every startup is unique and you have to treat them that way if you want to add real value. By doing away with cohorts and building a bespoke accelerator programme for every startup we work with, we make sure we are adapting to the specific needs of each set of founders, maximising our impact,” he said.
Sears also sees corporate partnerships as key.
“Partnerships really are at the heart of our accelerator programme. Our corporate and investment partners provide consultants to work on the ground with startup founders; they provide services to startups, from technical infrastructure and graphic and industrial design to legal and financial advice; they provide follow-on investment into our portfolio; and crucially they provide revenue to allow us to sustainably grow our business and support more startups,” he said.
All of these are innovative approaches, but unlikely to become the norm any time soon. Odette Jones said traditional, batch-based models will remain for the time being, though this will change.
“The models are known, the processes established and funding always flows down established channels. The batch processes will continue to serve more and more specific niches, much of this will be sentiment and marketing-driven rather than needs-based,” she said.
“These models serve less than half a per cent of the market so they are unlikely to be material contributors to any lift in the markets,” she said.
All agree that real acceleration support for African tech startups is about more than just the money. Truhina said capital is important only if it is sequenced correctly.
“First the founders need to build a solid product and a solution that aligns to market, then the business would be able to absorb the capital inflows. Currently many investors are unable to invest as the startups are either too early or have not arrived at a product-market fit. So the most important component is the ability for us to tangibly support entrepreneurs to build solutions that are scalable,” she said.
Slowly but surely, this tangible support is started to be provided in a way that suits African contexts much better than the renowned Silicon Valley-style models that have been aped on the continent in previous years.