(Stalled) Acceleration Goals

According to leading research organisation Briter Bridges, the number of African hubs (which term includes incubators, accelerators and innovation centres) has grown from 650 in 2019 to more than 1,000 in October 2021. Nigeria has 160 hubs, South Africa has 100 and Kenya has 90. The majority (53 percent) are mainly co-working and community-focused, whilst 45 percent of hubs have formal entrepreneurship support programmes.

In its most recent innovation ecosystem report, AfriLabs provides a useful snapshot of the state of Africa’s hub network: 

• Hub business model - 60 percent receive external funding (usually less than $100,000), which is used to cover operational expenses, especially wages (25 percent+) and facilities, rent and electricity (60 percent cumulatively).

• Key corporate partners include Google, IBM, Microsoft, Facebook, Amazon, Liquid, Standard Bank, Vodacom, BNP Paribas, Orange, MTN, Deloitte and Absa Group. 

• Key donors include UK Aid, USAID, British Council, GIZ, Gates Foundation, MasterCard Foundation and the World Bank. 

• Revenue streams include membership fees (which 53 percent of hubs charge), donor funding (60 percent receive this) and consulting (the largest revenue stream for 40 percent of hubs). Consulting services are usually focused on innovation-related research and programme implementation. 

• Support offered is usually either in-kind (facilities, training, advice) or financial (investment). Most programmes are 3-6 months long (35 percent), with 23 percent offering 6-12 month programmes. 

• Sector focus has traditionally been agnostic, but is becoming more focused, especially in the education, social impact and agriculture verticals. 

• Startup funding is provided by only 40 percent of hubs, with 30 percent of that funding structured as equity investments, and the balance as grants or non-equity, such as debt financing. 

Many of those to whom we spoke have strong views on accelerators, both positive and negative, whilst recognising that there are exceptional outlying accelerators (including Founders Factory Africa, Growth Africa and Grindstone), to which many of these observations and findings have more limited resonance.

“I don't think it's fair to say it’s not working, from my personal experience. Sometimes the barriers to entry are a little high for entrepreneurs. Sometimes they decide to go straight to the funding route without going through the accelerator. But it helps them prepare for things like going in front of investors or addressing their problem correctly or doing that market research.” - interviewee

ANDE’s Global Accelerator Learning Initiative (GALI) released a report in 2021 examining venture growth before and after acceleration, based on data from a sample of 2,600 ventures (36 percent of which were from sub-Saharan Africa) applying to 212 accelerator programmes. The researchers compared the trajectories of those that participated in programmes with those who did not to learn more about changes in revenue and financing over time. The key findings (noting that the Africa data is not disaggregated from the rest of the global data) are as follows.

• Accelerated ventures continue to grow in measurable ways past their acceleration period. On average, accelerated ventures outperform non-accelerated ventures in terms of both revenue growth and financing, and these differences increase over time.

• Accelerated ventures exhibit steadier growth than non-accelerated ventures. While performance during the year of acceleration positively correlates with the subsequent year’s performance for all ventures, the association is stronger among accelerated ventures.

• Most accelerated ventures experience modest growth, with the majority of growth accounted for by ventures that are in the top 25 percent of performers. The median venture participating in an accelerator programme does not experience rapid growth; instead, a small minority of ventures capture most of the benefits of acceleration.

• Even within the group of top performers, accelerated ventures outperform non-accelerated ventures. Among the 25 percent of ventures with the greatest growth, accelerated ventures are over-represented and exhibit faster performance than non-accelerated ventures.

• Top-performing ventures have more financial resources at the time of application than other ventures. The benefits of acceleration are not spread evenly among ventures, with those having more financial resources at the outset showing greater growth.

• High-performing entrepreneurs point to certain aspects of the acceleration experience as being particularly important for driving growth. In particular, peer networking, strategic introductions, support in business model development and pivoting, and signalling effects are perceived to play an important role in propelling ventures forward. 

Benefits accelerators offer depend on factors both internal and external to the entrepreneur: 

• Internal factors include the entrepreneur’s background, including prior knowledge, experience and social capital;

• External factors include the design elements of the programmes, such as the frequency of feedback, the structure of cohort interactions, and the quality of mentors and advisers. 

Importantly, there is some evidence that acceleration particularly benefits entrepreneurs from economically disadvantaged backgrounds. There is also evidence suggesting that hubs provide a safe space that encourages a shift in the mindset of seeing failures as learning opportunities. A growth mindset is critical to entrepreneurial success at an individual level. Improved mindsets are needed to explore new paradigms and shape different directions. 

It is also worth noting that GALI has found no evidence of an overall quality difference between emerging and developed market accelerators. However, clearly investment funds flow less freely in emerging markets, which makes it difficult for ventures to secure investment that is commensurate with their needs, and more challenging for accelerator programme managers to facilitate equity investment during their programmes.

 “Why is a startup going into an accelerator? They're not going to be accelerated. They're going because they want help, which leads them to funding or customers. These are the only reasons why they should be attending. And if it doesn't do that, then they've then damaged their business by wasting time and energy.” - interviewee

It is not only in Africa that negative views exist on the effectiveness of acceleration. Some studies of US accelerators also demonstrate negative impacts of acceleration, indicating perhaps an issue more with the applicability of the prevailing Silicon Valley model, rather than a view on how it is applied in Africa. One VC told us that what is required is to reflect on the underlying principles that resulted in the Silicon Valley model, and then reevaluate the African framework and implementation model in the context of those universal principles. 

Alexandre Lazarow, author of Out-Innovate, claims that applying Silicon Valley’s principles to local African contexts is a recipe for failure. He suggests that Silicon Valley prioritises growth over profitability, which deepens the valley of death into a chasm heightening the absolute need for VC funding for survival. Although it has been the proven paradigm and authority on innovation practices elsewhere, the Silicon Valley mindset - move fast, break things, disrupt in the hope of scaling rapidly - is not suitable in a context where there is a funding shortage, macroeconomic uncertainty, lower tolerance of risk, less acceptance of entrepreneurship as a career, and limited enabling infrastructure. As Founders Factory Africa’s Roger Norton notes, “No matter how good you are, you’re going to struggle to raise locally due to limited and risk-averse capital markets”. 

The authors of Digital Entrepreneurship in Africa: How a Continent is escaping Silicon Valley’s Long Shadow find that although the digital revolution has empowered local entrepreneurs, it does not untether local economies from the continent's structural legacies. They state that no African ecosystem will become like Silicon Valley at any point in the future: although common patterns and issues are discernible, African contexts are on distinct development paths, and comparisons to Silicon Valley “best practice” are, at best, a distraction from efforts to do what works locally.

1. The one-size-fits-all approach doesn’t work for African scale-ups.

   Market dynamics are highly unique in different industries or geographies, and thus it is more useful to give ventures support that is directly related to their specific niche. There is a prevailing view that accelerators must develop customised models of support with local or sector-specific case studies, mentors, and instructors.

2. Staff lack the right skill sets.

   Unlike for incubation processes, effective acceleration requires deep commercial knowledge and experience. Accelerator staff should also have market access and deep market understanding. The lack of experienced staff able to effectively provide value to founders is an increasingly recognised factor preventing accelerators from taking a more central role in setting ventures on a sound path to scale. Another valid issue raised is that too many accelerators are run by foreigners with limited understanding of local realities.

3. Programme design is not focused enough on making the right connections.

   Whilst much of the focus in Western accelerators is on building connections - introducing entrepreneurs to the right people, peers, mentors and advisors - in Africa it is often focused on a specific set curriculum, followed by a demo day at which investors may (or may not) be present. According to a VC to whom we spoke, entrepreneurs usually deem acceleration value to be meeting an investor or acquiring new customers through the process, as opposed to “getting good training”. He says of accelerators, “these organisations run people through the machine and hope something sticks”. Such views are supported by GALI’s findings that emerging market entrepreneurs rarely indicate that connections made during an acceleration programme help grow their networks, and that accelerators in emerging markets are also more likely to report difficulty recruiting mentors and advisors.

4. Business sustainability is only possible with sound business support and development services.

   Otherwise all efforts will continue to underachieve. Scale-ups improve their chances of competing globally if, in addition to funding for expansion, they were also supported to understand their respective markets and how they worked, as well as supported to develop specific skills relevant to their markets.

5. There are consistent gaps in content, especially around governance and investor relations. 

   According to an interviewee, entrepreneurs are leaving accelerators with limited or no knowledge on “term sheets, or boards, or bad deals, deal making, dealing with VC interviews, on deal-flow, on how to do proper growth, on how to manage your balance sheet properly.” These are essential skills for a scaling ventures leadership team.

6. There isn’t enough segmentation.

   Ecosystems are not countries, not even cities, but sectors. A Sahelian agribusiness will have different support needs to a Kenyan e-commerce startup. Segmentation allows acceleration programmes to more quickly identify common challenges and work towards sectoral solutions. Some helpful examples of existing segmented accelerators include South Africa’s edtech accelerator Injini, and gender-based accelerator programmes like Access Bank’s W Initiative in Nigeria. 

7. Mixed cohorts don’t work.

   A typical intake for an African accelerator has a huge variance in the experience, maturity, sector, and team size of the participating scale-ups. Their needs are all vastly different. Experts suggest programme content is not usually adjusted to the stage of the business, limiting utility for more mature ventures.

8. Post-programme support is lacking.

   Entrepreneurs are often left hanging after they leave an acceleration programme. Ongoing support will not only improve the prospects of scaling success for these entrepreneurs, but also encourage their engagement as mentors and advisors to other participants. Founders Factory Africa recently adjusted its model to ensure that support to accelerator participants continues until exit.

9. Alignment of expectations will increase retention.

   There is evidence that mismatched entrepreneur expectations and accelerator service offerings contribute to high drop-out rates. Better up-front communication can address this.

10. More honest reporting on failures and lessons learned.

    Network organisations like AfriLabs and accelerator donors do not sufficiently acknowledge failures and develop lessons learnt. The ecosystem will benefit from more honest and public reflection in this regard. Lessons can be learnt from the approach of impact investor MercyCorps Ventures, which candidly details its failures (as well as successes) in its latest annual report.

11. Insufficient focus on well-being and mental health.

    African entrepreneurs are highly resilient. As one of the founders we spoke to explained to us, “My entire village depends on me succeeding, so I have to do it for them. I cannot give up. Many mouths to feed, medical bills, education bills. In other places, your parents support you, the government too. There's a safety net for you to develop your own potential. In Africa, you have to take care of everybody. That's where the resilience comes from.” However, by celebrating high levels of resilience, we detract attention from the corollary impact: the negative effects on mental health. We have seen little evidence of psychosocial support for entrepreneurs in acceleration programmes, despite multiple stakeholders identifying the issue as a priority.

“The thing I keep telling people is that if you're a little bit suicidal, a little bit bipolar, emotionally, physically, spiritually, and destroyed all of your relationships, and gone completely bankrupt: Welcome to your first five seconds of being an entrepreneur. It's not this beautiful, lovely rose-coloured thing.” - interviewee

Government policy inconsistencies have led to inadequate government support for hubs generally, especially funding. Indications point to accelerators spending time that should be allocated to excellent service delivery on chasing funding from donors and corporates. Research points to vicious cycles in ecosystem development, with lower tier systems getting stuck at nascent levels; in such cases, hubs and innovation competitions are not advancing ecosystems as much as many hope, because they themselves depend on other resources. This systemic failure on the part of governments to financially support the ecosystem (and the wider innovation infrastructural environment) is no doubt a contributory factor resulting in limited accelerator effectiveness.

Too frequently acceleration is advanced as the optimal solution to solve Africa's economic development needs. The law of the instrument, otherwise known as Maslow’s hammer, is a cognitive bias that involves an over-reliance on a familiar tool. As Abraham Maslow said over half a century ago, “I suppose it is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail.” Concerningly, the evidence of acceleration success remains rather limited, which begs the question why there is a perpetual reliance on it as the solution of (donor) choice.

Another challenge is limited monitoring and evaluation (M&E) knowledge and execution. In some respects, this is because accelerators lack appropriate capacity and/or resources. But the issue is broader: it is hard to measure and track nuance. It is hard to pinpoint the exact reasons a scale-up stalls or succeeds, because each operates in a different contextual reality, with multiple variables at play. It is not only ecosystem support organisations that struggle with M&E, researchers also experience similar challenges.

The African ecosystem can certainly improve how programmes are evaluated. Some efforts have been initiated to service this obvious gap: ANDE has constructed an Impact Measurement Learning Lab which serves as a community of practice for intermediaries in South Africa to share best practices and discuss issues relating to impact measurement and management (IMM) through peer-to-peer knowledge sharing. 

The AfriLabs website provides no detailed information on their approach or tools, although advisory consultancy services are offered and a future work pillar is research and M&E, including evaluating the impact of their hubs members. Thankfully toolkits which offer business development providers and funders information to guide evidence-based practices are publicly available through the support of the Argidius Foundation. We acknowledge the complexities and nuances associated with evaluation metrics. As a venture matures, commercial metrics become ever more important, and must be properly assessed. We also note various helpful tools exist to help ventures and investors navigate the IMM journey.

It has been suggested that we need to develop new ways of doing monitoring and evaluation that are coherent with the complex nature of the challenges facing the world today. To this end, some systems-lens considerations worth noting include:

• Need to learn and adapt: Because we don’t know up front how to best help solve complex problems, such as transitioning our economy to a circular model, we need to continuously learn and adapt what we do based on learning.

• Adopt longer time-horizons: We need to better deal with the fact that it takes a long time for substantive change (higher-level results) to materialise, and that we do not necessarily know up-front what such change will look like. This makes it difficult to know if we are on track, and whether we should do anything differently.

• Capture impact in the aggregate: We cannot evaluate individual interventions in isolation because we usually tackle systems challenges through portfolios of interconnected interventions.

• Focus on contribution over attribution: We should focus on capturing our contribution to bigger change processes rather than seek to directly attribute change to our own work. In reality, contribution is not singular and additive; instead multiple interacting causes make an effect more likely. Recognising this, we should shift the lens from the “amount” of contribution a single actor makes to an understanding of the typologies of the different actors and how they combine to contribute to change.