Why accelerators are turning away startups in hot sectors like ecommerce

BENGALURU: If you are an emerging startup, in one of the hot sectors that VCs have been pouring money into, chances are accelerators would not give you a second look, as market leaders have emerged and best practices are becoming fairly well documented.

Accelerators are entities that jumpstart a startup's business in the initial days, helping them with figuring out the right business model and getting the first customers.

Even Microsoft Ventures, one of the country's top accelerators, said it prefers a startup which is solving a big problem in the technology space. About 50% of its 1,850 applications for the batch were consumer-facing ideas across different segments.

"We don't do pure-play ecommerce. The Bansals and Aggarwals seem to be born with the talent to run such companies. There is no deep technology play there for us to help them with," said Ravi Narayan, director of Microsoft Ventures, who said they are open to companies that are tech-enabled and are solving problems in the consumer space.

Guhesh Ramanathan, who runs seed incubator Excubator in Bengaluru, said he gets applications from startups in the field of grocery, food delivery, retail etc.

"We back off from those areas. If it is a market that is over serviced , it does not make sense for us to get into it," said Ramanathan, who has come up with a pre-accelerator programme for six week, where companies can come up with execution strategies to get customers, before they are ready for acceleration.

"Everyone you meet in the ecosystem is connected to ecommerce in one way or the other. You can seek mentoring from networking events or at coffee shops," said Anil Chikkara of Marco Polo Ventures, which engages with startups for a 3-6 month period remotely, to help them tweak their business model and get them their first customer. "There are ample opportunities to do this, than was possible two years ago."

Even investors see little value in such companies going through accelerators.

"I'm not sure how contextual they are now for the ecommerce space and what value they can add," said Venkatesh Peddi, executive director at IDG Ventures India. He added that in today's day and age, good companies in the space (read on-demand, hyperlocal, e-shopping, utility services) are moving past the angel funding onto the VC round so quickly that they cannot afford to spend four months inside an accelerator.

Several people in the industry agree that that enterprise firms stand to gain much more from accelerators, than those in the crowded consumer market.

"In the SaaS (software-as-a-service) context, not many know about go-to-market strategies and product development. Mentors can add a lot of value there," said Peddi.

Over the past two years, the accelerator system in India has gone through a sea change. At one point, there were 40 of them across India. Several perished, some like Kyron, took on the corporate accelerator model identifying B2B startups that corporates can partner with. Microsoft Ventures has now decided to look at only late-stage startups.

But Excubator GSF, the multicity accelerator said it continues to accelerate consumer internet startups, which spread themselves across sectors like media, car rentals and the like. GSF said it helps them get early traction without spending millions of dollars, refine quality of idea and bring forth its network of investors, said Rajesh Sawhney, cofounder of GSF, which has 42 companies in its portfolio.

ET View: They don't need accelerators

At last, there's a place where consumer internet companies are not fawned upon. The common complaint is that startups doing more complicated work don't receive enough funding. Incubators and accelerators are, by definition, the bridge linking raw entrepreneurs with hardnosed investors and sceptical business customers. They typically offer space to work in, seed capital as well as provide counsel through the first few months of starting up. Aggregating services from hotels to hospitals is essential. Startups doing this are naturally sought after by investors. But they don't need an accelerator since the game they play is not so complicated. Asking them to desist from applying to accelerators is common sense.