Startup accelerators play a major role in today’s tech world and new accelerator programs are launched almost everyday. According to Natty Zola (TechStars, MD) they became, “a proven way to quickly grow a startup by learning from experts, finding great mentorship and connecting to a powerful network. They provide resources that reduce the cost of starting a company and the early capital a team needs to get their venture off the ground or to achieve key early milestones. They have become the new business school.” In many ways, accelerators have become a rite of passage for thousands of entrepreneurs across Asia and Oceania and around the world.
The Asian and Oceanian Accelerator Report 2015 from Gust and Fundacity provides an exclusive inside look at accelerator programs in the countries across the region. This report is a follow-up on the Asian and Oceanian Accelerator Report 2014 and its objective is to understand how the accelerator industry has developed in the region, how accelerators are funded and monetized, while providing insights on the direction of the industry in the near future.
To create this report, we surveyed 125 organizations, out of which 54 qualified as accelerators and shared their data with us.
Startup Exits Reported by accelerators in 2015
By capital investments
Australia | Private fund
India | Mix fund
South Korea | Private fund
China | Private fund
Hong Kong (China) | Private fund
India | Public fund
Australia | Private fund
Australia | Mix fund
India | Private fund
Australia | Private fund
To be notified when selected accelerators open new applications
The total number of new Asian and Oceanian accelerator launches has fallen in 2015. This may be an indication that the number of accelerator programs in the market reached a saturation point in relation to the number of innovative ideas and tech companies that currently exist in the market. Nonetheless, more accelerators are entering the market year-over-year.
Out of the 11 accelerators launched in 2015, 4 are focused on specific niche markets, including Health, Education and Fintech.
76% of accelerators in Asia and Oceania are for-profit - the highest percentage in the world.
A majority of the accelerators are for-profit ventures. Typically, for-profit accelerators are funded with private capital by investors who aim to generate profit in the long-term, mainly through startup exits (acquisitions, IPOs) within their portfolio.
100% Private funding
100% Public funding
Mix of both (Public/Private)
Accelerators stimulate growth of companies and this leads to job creation. In addition, they lead to innovations that can solve important problems faced by society both locally and globally.
Accelerators are difficult to monetize and fund in the short term (within 12 months) because early stage ideas usually require many years before they provide returns to shareholders. To support this period of growth, governments around the world provide subsidies and grants to stimulate new accelerators and help them operate.
In Asia and Oceania, 30% of accelerators reported that they either received a mix of private and public funding or were 100% publicly funded.
65% of Asia and Oceania accelerators reported that they are solely funded through private capital. These funding usually come from former successful entrepreneurs who became investors, individual investments or other sources such as angel groups, venture capital funds or corporate investment funds.
76% of accelerators in Asia and Oceania are for-profit. How do they generate revenue?
Many Asia and Oceania accelerators follow the traditional “cash for equity” model, first established in 2005 by Y Combinator. In exchange for investing a small amount of seed money into a startup (around $25,000 on average), accelerators will receive equity in the startup (usually between 5% and 10%).
43% of Asian and Oceanian plan to earn revenue from startup exits within the short term (within 12 months), while 62% of them plan to earn revenue from startup exits over the long term (12 months or longer)
Since cash flow is typically re-invested by startups to grow the business rather than pay dividends and exits usually do not occur earlier than 3 - 5 years into a startup's lifecycle, accelerators generally would not make a profit on investment for several years. To make up for the expensive day-to-day upfront costs of operating their programs, accelerators have recently begun exploring new models that allow them to generate revenue. These alternatives include mentorship fees, renting out office space, hosting events, and corporate sponsorships and partnerships.
85% of Asia and Oceania accelerators plan to increase their revenue in the short-term by incorporating alternative revenue models apart from startup exits.
Similar to other regions in the world, a large number of Asian and Oceanian accelerators rely on corporations for revenue generation. 52% of the accelerators surveyed reported that corporate partnerships are an important revenue channel in the short term, while 50% of them reported that they would be in the long term (greater than 12 months). Similarly, corporate sponsorship also plays an important role for accelerator revenue generation: 44% of accelerators reported relying on corporate sponsorship in the short term and 35% in the long term.
We predict that the relationship between accelerators and corporations will grow significantly in Asia and Oceania. An increasing number of corporations - both large and mid-sized - are looking to startups as a source of innovation to help improve operational efficiency. Startups are also increasingly looked towards for new or differentiated products that they can bring to market.
By number of startups accelerated in 2015
Startups accelerated in 2015
% of accelerators that reported an interest in investing in these markets in the next 12 months
Internet of things
Big data analytics
Social media analytics
The universal prominence of Fintech, Education, Health and Internet of Things is reflected in the investment focus of Asian accelerators as these markets constitute the top 4 markets accelerators are most interested in, in 2015. Interest in startups in the Internet of Things sector has risen from 74% to 75%. However, it fell from being the hottest market to second place after Fintech rose to the top spot from the 6th position in 2014 with 77% of accelerators stating an interest in accelerating startups in this space.
"How do you think accelerators in your country are doing compared to the rest of the world's accelerators and what competitive advantages do you think they have?"
H2 Ventures (Australia)
The factors that have been prominent in the growth of Australia's startup ecosystem have been the principles of substance over presentation. Australian is renowned for it's engineering talent, and with the influx of capital from the Superannuation Industry, Government R&D grants, and meaningful partnerships between Corporates and Universities; the Australian accelerator sector is seeing a boom in facilitating well rounded companies that not only have solid technology, but also global exponential business growth."
Startup México (Singapore)
To me, three factors seem to underlie the explosion of interest in Asia's startup acceleration scene between 2014 and 2015. On the plus side there's a growing confidence in the region as we start to get large, locally generated companies achieving impressive exit valuations. That makes investors sit up and take early-stage tech seriously as an asset class, even if it has a very different risk / yield pattern to the traditional shopping malls, oil palm plantations and similar businesses that have underpinned growth here for so long. Secondly, there is of course some froth and hype, as everywhere. It's become fashionable for financial institutions to set up incubators and call them accelerators, or for property investors to attempt to extract rents by 'selling picks and shovels in a gold rush'. So not all of the so-called accelerators have real alignment with entrepreneurs or any rigour in their process. But underlying it all are the economic fundamentals. I personally believe that the 19th century was all about Europe, the 20th America and this century belongs to Asia. Even excluding China and India, there are 600million Asians in a band that stretches from Taiwan to Australia and 60-80 million of them are already middle class, with rising aspirations from those who have not yet made it. The fact that we can now teach entrepreneurship, and systematize innovation, seems to me transformative for this population. Traditionally, if you weren't born into a wealthy family with land or some kind of economic monopoly, your options were limited. But now there is a chance for anyone with access to the web, the blessing of some intelligence and the dedication to work hard to transform their own lives along with that of their family's, city's and nation's fortunes. It's a very exciting time to be here and the best is yet to come.
In short, the answer (rather annoyingly I know) is "it depends". It depends on what you consider an accelerator to be in fact. China is rife with incubators, co-working spaces, innovation labs etc. because they've done what they usually do when they wish to correct a problem and that is to throw mountains of resources at it... However, with the Government publicly making innovation a priority in China in 2015, there has been a 'gold rush' of activity in the space. Once the dust settles and the pioneering costs are paid, China will have the greatest amount of players in the accelerator space in the world. The quality of the programs offered, however, remains to be seen.
Asia and Oceania experienced both strong and continued private sector interest and investment in the startup industry across the entire region. This has fueled the growth of existing accelerators and the launch of new accelerator programs. In total, US$16,667,427 was invested into 1,295 startups by 54 accelerators. Additionally, 11 new accelerators launched in the region in 2015.
The most active startup ecosystems in 2015 were also strong in 2014. Australia and India continue to be the top 2 countries in terms of the amount invested by accelerators into startups. The new entrant into the top five is South Korea, which increased its investment by 1.8x to US$1,960,460.
The Asia and Oceania region is unique because this accelerator model has not been as widely or commonly adopted as compared to other regions. Currently, there are only 54 accelerators present in the region.
We are seeing a shift from the traditional exits-focused model towards a more diversified accelerator business model. Asian and Oceanian accelerators rely heavily on corporate partnerships and/or sponsorships to monetize. 61% and 54% of the accelerators relied on revenues from this channel in the short and long term respectively.
73% more than 2014
36% more than 2014
-11% more than 2014
3 more than 2014
*Hong Kong is included in China
Due to a current lack of consensus on the exact definition of an accelerator, it was important to define as clearly as possible what an accelerator was to compile the report.
We used the following definition from Miller and Bound (2011), who define accelerators as having the following 5 features:
1) An application process that is open to all, yet highly competitive.
2) Provision of pre-seed investment, usually in exchange for equity.
3) A focus on small teams and not individual founders.
4) Time-limited support comprising programmed events and intensive mentoring.
5) Cohorts or ‘classes’ of startups rather than individual companies.
To collect data, we reached out to two or more team members from each organizations. Not all accelerators replied and thus our data is not complete. Organizations contacted were asked to confirm whether they qualify as an accelerator based on the definition above. The data itself was self-reported by the accelerators via an online form. Fundacity and Gust have neither audited the data nor request any supporting documentation.
Hong Kong (China)
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