Southeast Asia’s flagbearer is the Joyful Frog Digital Incubator (JFDI). The accelerator has accepted 38 teams so far, and over 60 percent of its teams from the first batch went on to raise an average of US$550,000 within six months of the program ending.
But not long ago, JFDI was just another idea percolating in the minds of two guys: Hugh Mason, a Briton from the broadcast media world, and Meng Weng Wong, an eccentric geek with a string of startups to his name.
They did not hop right in. Hackerspace.sg, a coworking space and enclave for geeks started by Wong and a few other guys, served as a sort of proof-of-concept and nurturing ground for JFDI.
Wong believed that Singapore’s tech community cannot grow to a critical mass without a physical space for engineers to mingle and collaborate.
“The conversations we had and the fantastic friends we made [at Hackerspace] were hugely important in giving us the courage to try doing an accelerator,” writes Mason in JFDI’s discussion forum. The duo incorporated JFDI as a company in January 2010.
Accelerator? What’s that?
The pair struggled with fundraising from the onset. Few people knew what an accelerator was, and Asian examples weren’t forthcoming. Call it a classic case of bringing a Western business model to the Eastern frontier, with all the usual worries about supply and demand (are there enough quality startup teams?), timing (is the market ready for an accelerator?), and localization (would a Techstars model work in Asia?).
Yet scaling an accelerator poses challenges. While software startups have little marginal cost for every copy of an app produced, shaping a group of naive dreamers into startup warriors is bone-crushing and labor-intensive work.
“Investors were rightly cynical about an unproven, complicated model – they could see that it had a hell of a lot more moving parts than just bunging some startups in a shitty old space and throwing in pizza once a week with a speaker,” says Mason.
Other challenges threatened to torpedo the idea. Mason and Wong were unsure if they could “match world-class mentors with great local teams and to create enough engagement to make that worthwhile for both sides”.
Identifying mentors is easy, but figuring out if enough potentially great entrepreneurs exist in Asia is harder. Given Singapore’s tiny population of six million, the duo made JFDI a regional play from day one. But Asia is a big, mysterious land. Mason says:
There was no data, research, and no blogs covering the whole region at that time. Just local people meeting up for beer and peanuts in lots of cities. The geek grapevine proved invaluable in connecting us to them across the region as we went to barcamps and the like and made a lot of friends.
The trips failed to surface a clear answer. Talking to geeks proved entertaining, but placing them in an intense, simulated startup environment could give more insight.
|Some JFDI startups that got follow-on funding|
More unannounced funding rounds are on the horizon, but here are the ones that are public knowledge:
OurHealthMate, electronic health record (EMR) system for doctors: US$440,000
Collabspot, customer relationship management (CRM) tool: US$64,000
TribeHired, social network job recruitment: US$560,000
ShopSpot, consumer-to-consumer mobile marketplace: US$630,000
FetchPlus, helps brand franchises rapidly deploy brand-compliant Facebook Brand Page apps for local franchisees: US$567,000
Flocations, travel discovery: US$573,000
So in 2011, JFDI co-organized Startup Weekend events in six cities with local partners and sponsorship from SingTel Innov8, the venture capital arm of Singapore’s largest telco. They fundraised at the same time.
The Startup Weekend events, where teams gather for a few days to conceptualize, code, and pitch startup ideas, convinced JFDI of two things. One, Asia’s startup communities possess energy and a strong desire to congregate in physical spaces and meetups. Two, casual hackathons aren’t designed to feed accelerators with startup talent.
“Just because someone goes to a Startup Weekend doesn’t mean they necessarily want to be an entrepreneur, just as going on an art weekend doesn’t mean you want to be a professional artist,” Mason writes.
Yet the experiences convinced JFDI that Asia had enough talent. But they’ll still need to develop a mechanism to uncover them.
David Cohen, founder of pioneering accelerator Techstars, served as a behind-the-scenes supporter. In 2009, he made a rare visit outside of the United States to Singapore and met with the duo, encouraging them to learn from Techstars and give JFDI a go.
Mason and Wong got another boost when Cohen invited JFDI to be one of the first members at the Techstars Network, now called Global Accelerator Network (GAN). It’s a knowledge-sharing entity for partner accelerators around the world. The connection made sense: while Y-Combinator, another famous accelerator, launched in Silicon Valley, Techstars took root in Boulder, Colorado, a city that is as ordinary as any around the world.
By 2012, all the necessary pieces came in. The funding, which included money from Innov8 and angel investors, arrived. Successful local mentors – founders of tenCube and JobsCentral – hopped on board. The inaugural bootcamp started in January, and Mason marked the occasion with his first vlog.
After the program ended in May, the team spent the rest of the year raising more money and ruminating. “We realized that it’s one thing to cobble together the resources to do year one but following through consistently is much harder, especially as the competition for talent around us started heating up,” Mason recalls.
Before JFDI unveiled its first batch of startups, Chinaccelerator, also a member of GAN, had a two-year headstart. Then accelerators emerged everywhere as the year drew to a close. Korea’s SparkLabs began in August, Philippines’ Launchgarage and India’s GSF Accelerator commerced in October, and AcceleratorHK from Hong Kong (now defunct) opened doors in November.
Mason sees the trend as a hype bubble. Countries dished out money to startups without building a strong support system for talent. “Worn-out” incubators and academic teaching programs rebranded themselves as accelerators.
Everyone jumped onto the bandwagon, including “dubious operators” like “landlords with crappy spaces they couldn’t rent, exploitative fund managers looking to rip off gullible young people, [and] corporations with crazy ideas that the world would come flocking to them if they put their brand on a dodgy scheme with no substance.” Many of these initiatives are falling apart, so expect a crunch soon, says Mason.
Here’s the lesson: accelerators can’t exist in a vacuum. They thrive in communities where successful founders give back by quickly investing in the next generation of startups. In Asia, that instinct competes against filial piety and risk adversity, where a founder may feel pressured to put money into a family trust fund or invest in safer assets like shopping malls and oil palm plantations.
Applying the lean startup methodology in Asia presents pitfalls. According to Mason, people in parts of Southeast Asia get offended when startups ask about their problems in the direct manner typical of American-style customer discovery interviews. People don’t respond well to cold calls.
Here’s a better approach: startup teams can get local contacts to introduce friends who might be potential customers. And instead of doing it one-to-one, a contact can accompany the potential customer to the interview.
The culture shock caused by accelerators applies to investors as well. Investors in India want majority ownership of a startup, beginning from the seed round. Mentors in Malaysia ask for payment. Fear of failure grips the region. So if Y Combinator brings its program wholesale into Asia, it might fail since the cultural gap may be too wide.
The startup world moves at a double quick pace, and today’s trend quickly becomes tomorrow’s fad. Accelerators as we know it today existed for less a decade, and they’ve been around in Asia for less than five years.
JFDI just barely sprinted off the starting block. It mentored two more batches of startups in 2013, introduced more rigor into its selection and acceleration, and exchanged metrics with other accelerators in GAN.
JFDI wants to cast its nets farther and wider. In 2014, it raised S$2.7 million (US$2.1 million) in a round led by Infocomm Investments, a Singapore government-linked investment firm, and will run three bootcamps supporting 30 to 40 startups. It plans to scale further and mentor 40 to 60 teams in the year after.
It introduced an online pre-accelerator program called JFDI Discovery that takes teams through the process of discovering a customer problem worth solving. Once teams feel ready, they apply for Accelerate, JFDI’s 100-day bootcamp. The experience of running past programs informs JFDI about flaws that can destroy a team, and actions that can increase a startup’s chances of success.
It plans to run in the other direction too and serve seed-funded startups that need help getting venture capital money. Wong says they’ll need to invest US$100,000 per startup to make it work, though they’ll need to fundraise more to make it happen.
JFDI eyes a deeper presence outside Singapore. Now, startups in the acceleration program must stay in the country for three months. That works for teams with global products, but it’s impractical for non-Singapore-based founders developing solutions for their own markets, because they need to walk the ground and talk to customers. Being in Singapore could be a distraction.
Finally, it could explore expanding across verticals. More accelerators are now focusing on specific verticals. Chinaccelerator has a spin-off program in Shenzhen called HAXLR8R, which focuses only on hardware startups. Techstars, meanwhile, runs an edtech-focused accelerator in New York City.
“Universities scale horizontally with medical schools, law schools, architecture schools, and public policy…if we are to grow JFDI, it makes sense to scale that way, with faculties of this and that, expressed as different programs,” says Wong.
All the talk about growth shouldn’t distract from the fact that the acceleration business is a numbers game. JFDI answers to stakeholders, which means it must make sizable investment returns through exits.
That hasn’t happened, though it’s still early days. Y Combinator and Techstars possessed one major advantage over JFDI: when they launched in 2005, the US venture capital industry, along with exit opportunities, were already well-established. Billion dollar exits occurred regularly, and that’s unheard of in Southeast Asia.
JFDI must adapt its business model to the nascent startup scene. Mason calls the accelerator a 20-year project, and while a young ecosystem might pose problems, its higher barrier to entry could give JFDI an edge.
On the cost side, the accelerator resembles 500 Startups and Techstars. But while these accelerators can expect to foot its bill for an entire class using a single exit from the batch which happens within 18 months, JFDI must seek other revenue sources to account for the less exciting M&A landscape in the region.
For example, it took page from Plug and Play Tech Center by hosting startups which visit Singapore on government-sponsored trips to understand Southeast Asia. JFDI has closed two deals so far: it hosted 10 startups from Korea in 2013, and it will support visiting startups from Norway in September.
JFDI has a decent shot at becoming a sustainable, profitable business. But it serves a far larger purpose. Even if Southeast Asia takes off, there’s the existential question of exactly how much would JFDI contribute to the region’s success.
“Of the big success stories of recent years, how many are attributable to an accelerator, and how many were indie startups which did it their way? That’s the billion-dollar question – the ‘emperor’s new clothes’,” says Wong.