The Information

Do start-up accelerators work?

Take a look inside the Manchester hub of the UK's largest programme, NatWest Enterprise Accelerator.

by Bill Borrows
Last Updated: 13 May 2019
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Just look around and ask yourself, ‘Does this look like a bank?’" Gordon Merrylees is sitting inside a rectangular glass box on the third floor of the RBS Building, having just delivered the keynote speech at the relaunch of the Manchester hub of the NatWest Entrepreneur Accelerator. He’s in an upbeat and reflective mood, directing attention towards the clusters of casually-attired business owners busy networking outside. "Does it even feel like a bank?"

Although it does look bankish – there’s only so much you can do with a corporate colour palette, interlocking desks and office soft furnishings – it doesn’t feel like one. There is little regimentation or obvious hierarchy here, but that is one of the most important aspects of this particular accelerator, and common to the vast majority of the programmes available for the ambitious UK-based entrepreneur. And he or she is spoiled for choice right now.

According to a report prepared for the Department for Business, Energy and Industrial Strategy by Nesta, there were 163 self-identifying accelerator programmes in the UK in April 2017, the oldest of which was Seedcamp launched in 2007 in London, home to more than half of them. The vast majority were created since 2011 and such has been their popularity and success that the number is estimated to now be 200 plus.

They can vary, although it is considered standard practice to provide some form of office space, coaching, mentorship and other support, including direct funding (provided by some 60 per cent of programmes). The model is evolving and being embraced by the public sector and large corporates like Telefónica and Red Bull; the proportion of accelerators created since 2014 that are corporate funded, according to Nesta, stands at 65 per cent, compared to only 29 per cent for those created before 2014.

NatWest’s programme was taken in-house in April 2018 after a successful four-year partnership with Entrepreneurial Spark, an organisation of self-styled ‘mindset enablers’ working with entrepreneurs across 12 hubs throughout the UK. It can now legitimately claim to be the UK’s largest fully-funded business accelerator network and can point to more than 390 jobs created by the entrepreneurs in just under a year and £31.5m investment raised by the businesses in the hubs. It does not charge to join, demand equity (just under half of accelerators do, taking an average of seven per cent) or even require that the nascent businesses bank with it.

"Some would argue that there are fewer people starting in business or growing their business at a time when there is so much uncertainty due to Brexit or whatever, but we have never been busier for applications," says Merrylees, who began his career as a teller with NatWest aged 17 and is now its managing director entrepreneurship. "We had almost 1,900 applications for just under 1,000 places last October. A record."

Spawning ground

The accelerator concept – as opposed to the typically fee-based business incubators of rolling duration that began in earnest in the UK in the 1980s and numbered around 200 in 2017 – is often traced to the founding of the Y Combinator digital start-up accelerator in the US in 2005, recently recognised by Fortune as "a spawning ground for emerging tech giants [such as] Dropbox, Airbnb and Stripe". Former COO Qasar Younis described it as a "rare institution [that] sits between a university and a venture fund" and, while business advice and mentorship for start-ups was certainly a significant factor, the emphasis was perhaps more on seed funding within a particular sector – with incredible results: 40 companies that passed through Y Combinator are now worth $100m with another eight in the $1bn bracket.

Limitless ambition and the desire to start up a unicorn business is still an element in the make-up of many entrepreneurs, particularly in the tech sector. Michael Livingstone, 52, a former restaurant-owner and chef from Manchester, says he is "looking to build a global brand". He signed up to NatWest’s accelerator precisely because he was aware it was a path that a lot of digital businesses had followed. "I thought: ‘Right, Mike, if you want to be successful like these other businesses, you need to get on an accelerator and be around people that are entrepreneurs like you so you can feed off them and they can feed off you.’"

He applied online and was pre-screened before being invited to meet other hopefuls and take part in the seven-minute interview procedure: a one-minute pitch and then a fast-paced, six-minute Q&A session with two coaches from the hub. "It was quite intense but exhilarating as well," he remembers. "My pitch would be completely different now, but that’s something I’ve learnt from being here."

DUSTiD (as in done and dusted) started life, Livingstone admits, as an idea conceived on the toilet five years ago, and has since developed into a tech business with the platform built by "my guys in India" and now field-testing. His concept? Addressless mailing through the use of mobile phone numbers. "You register, your friends register and from that point you just put in their number if you want to send them something… it’s like PayPal for addresses."

Livingstone has been allocated to an entrepreneur acceleration manager, Annabel Gast who, he says, "holds me to account". "That’s been a massive help when I’ve allowed myself to get carried away or started going in the wrong direction."

Michael Livingstone, CEO of DUSTiD

Gast, an academic in a previous life, understands entrepreneurs. "My father was an entrepreneur," she says. "My Masters thesis was on entrepreneurship and my PhD was on immigrant entrepreneurs." 

So what, in her opinion, makes a good one? "A certain risk appetite. You need to trust that it will work out for you. What excites me about a lot of entrepreneurs is that they are genuinely curious people. They wouldn’t be entrepreneurs if they didn’t challenge the status quo, if they just accepted everything I said and didn’t try to find a way around it. Sometimes what can be seen as difficult is also what makes them exciting to work with. The other thing I look for is resilience, you can’t just throw in the towel when things go wrong. It’s about having a vision and realising what is important for you."

Early adopter

The man behind social media agency Social Republic, 32-year-old Rob Illidge, can identify with that – he’s had a vision since he became one of a select few Britons to be on Facebook in early 2006. "I was in the States at Central Connecticut University when you could only get on Facebook if you had a university email address. It was good then," he laughs. "But I didn’t realise then that that platform being public would help the growth of my business."

He does now, and his familiarity with the space as an early adopter dictated that while working in-house "making a lot of other people money," he used the time to gain connections and further understand the industry. "I launched the business but joined the accelerator to grow," he says. "I could see that growth was possible, but felt that if I did everything on my own, I wasn’t going to get there. The biggest thing I have got out of it is rubbing shoulders with people who, if you have got an issue, have already dealt with it and vice-versa."

Investment is a perfect example. "You have to create an investment one-pager to give to your investors. It is a snapshot of your business idea and from that you go to pitching to investors, creating a pitch desk and the financials – what to include, what to leave out – but I didn’t have a clue beforehand. You come in here and there are five or six other businesses who have done it."

Rob Illidge "joined the accelerator to grow"

Another millennial entrepreneur, Jonny Fuller, the F in BFT Drinks (the others being co-founders Andrew Bell and Liam Tyler), and three desks down from Social Republic, can relate to that. BFT Drinks is the company behind Yusa – a new energy tea made from the leaves of the Ecuadorian guayusa plant and launched at health-conscious consumers in the market intersection between health and energy drinks last year. Fuller talks of Yusa with evangelical zeal and is passionately wedded to a social and environmental agenda – what Gast called having a vision and realising what is important for you.

BFT’s ambitious aim is to eventually take on Red Bull and other market leaders (guayusa drinks already outsell Red Bull 3:1 in parts of the States where they have been on the market for five years) but the plan, he believes, is grounded in feasibility. Originally attracted by the prospect of office space to bring the three founders together under one roof, the opportunity for networking proved simultaneously irresistible and rewarding. "None of us are from the drinks industry," he explains. "We were just three idiots who had no idea what was going on but we got really lucky.

"There was a guy that had been in the Manchester hub for 18 months with a caffeine-based drink called Cool Cold Brew. He had been through the journey and gave us advice. He is quite far ahead of us on the sales side and is getting into retail, but that is good for us. We have had a lot of conversations already with Asda, Sainsbury’s and Waitrose, but we’re not ready to get over the line yet, so we’re looking at early 2020, maybe."

The company has been self-funded from savings to date ("How are we living? Barely…") but has so far raised £80,000 investment of a required initial tranche of £180,000. On an initial production of 10,000 units, they have sold over 4,000 in three months. It is against metrics like these that the businesses are measured for acceptance and retention after three months. "We are not ‘advising’ as such because we don’t know their business as well as they do," explains scale up acceleration manager Daniel Burton. "As coaches, however, we can ask some questions and then they unravel the answers for themselves. They set their own actions and we hold them accountable and track turnover, investment, funding for growth and staff to make sure they are actually growing the business.

"This is obviously an accelerator by name and therefore by nature," he continues, "so we don’t want people to come in who have a business but don’t have the ambition or will to grow, because we want them to be able to scale up quickly. A key element of this programme is the one-to-one coaching that you don’t get in most other accelerators, so we also need to know if they are coachable as individuals. They need the willingness to put the hard yards into it to get the return."

Abigail Irozuru knows all about hard yards. The 29-year-old is a Team GB long-jump champion and a UCL Law graduate who joined the hub to grow her Manchester Tutors agency, which connects "high quality, well-trained tutors" with learners from 11-plus onwards in homes, schools and academies.

Abigail Irozuru, founder Manchester Tutors

"I started it in 2016 because I took a step back from athletics after rupturing my Achilles tendon but, at the same time, had been tutoring and working in schools privately and providing education for different organisations for over 10 years," she says. "There was a lot of demand and I was getting over-subscribed so it was just a natural progression." She currently splits her time between running her business with 50-plus tutors and one member of staff to look after the admin side of things, and double training sessions at nearby Sport City by night.

Initially, the office space was seen as a perk but, like her fellow entrepreneurs, it is the community she has come to value the most. The monthly meetings with an entrepreneur acceleration manager have proved to be hugely helpful. "It is amazing to know that on this date I need to come up and say I have achieved these three goals that we planned, but then receive feedback and ideas. I’ll be honest, there have been times when I have gone into a session in tears because I have been so frustrated by things in the business, but to come out of there knowing that I have got solutions has been really powerful."

Irozuru also works as a motivational speaker and has another business, Amplify Learning (that was on the NatWest Pre-Accelerator programme), so the flexibility of the arrangement is a massive plus as she seeks to employ a full-time agency manager. That is her scale up. BFT Drinks has target sales of 80,000 units for year one and about one million for year two – a shift that will demand a marketing push, that will in turn require venture capital investment. Rob Illidge has just opened a New York office for Social Republic and, while working with clients such as eBay and Pioneer, is seeking investment in his bid to position his business as "the world’s biggest small agency".

Michael Livingstone is similarly ambitious about establishing his global brand and is grateful for the steer he was given by one of the hub’s managers about an investor showcase event for "data-driven tech companies seeking funding from seed to series A [round financing]" in April. The coaching and support goes hand-in-hand with the environment, but an under-reported aspect is the customer base and supply chain provided by an international financial institution. It was this combination of factors, plus the next stage development of her business, that attracted a senior member of the team behind Boris Johnson’s run for Mayor of London in 2012, Christine Chau, to apply to the accelerator.

Isn't this just CSR for NatWest?

As a partly tax-payer-owned enterprise, the Royal Bank of Scotland (and therefore NatWest), has a duty to convince shareholders that, post-crash, there has been some kind of attitudinal shift on behalf of the financial institutions. But it hasn’t become, as Gordon Merrylees puts it, "happy clappy".

"This is not a corporate social responsibility project," he says of the NatWest Entrepreneur Accelerator. "This is grounded in commerciality as well… and there are all sorts of ways you can measure investment." These include making the accelerator work for the bank from a brand and attribution perspective, earning a reputation as the go-to bank for entrepreneurs, but also in terms of the learning curve and opportunities for cultural change within the bank.

That a significant number of the 6,432 entrepreneurs supported through the accelerator have voluntarily switched accounts might be unsurprising, but the volume and quality of the various cohorts has provided an opportunity to work with businesses that can directly improve the bank.

"I have my teams scout, identify and evaluate," Merrylees explains. "I can then escalate a worthwhile evaluation to the executive steering committee. There were 79 elevated to that level last year, 10 went to pilot and we’ve signed commercial contracts with five of them. It’s a win-win because it’s also a game-changer for the entrepreneur to work with the bank."

On top of this, in 2016 the bank created an Entrepreneurial Development Academy to teach staff the same things as they teach each cohort on the programme. The scheme is voluntary and from a global bank population of c. 65,000 people it achieved a sign-up rate of almost 20 per cent in three years.

"Banks can offer products and services that give them an edge," Merrylees says. "But they only last for a short window before they’re copied. What serves to differentiate you from competition is your people. That is what we are investing in here."

The 45-year-old is co-owner with her sister Jenny of Charley Chau, a business selling "beautiful bedding for dogs" to customers in over 60 countries and, as winner of the Family Business of the Year and two other awards at the 2018 NatWest Great British Entrepreneur Awards, something of an exemplar for the accelerator despite the fact that she claims to be "not typical" of entrepreneurs.

"We didn’t set out to run a business," she points out. "I just needed to buy a new dog bed. All the ones I’d bought up to that point had ended up in the bin so my sister and I just literally made a bed for my own dog." Chau posted a picture on Facebook and was inundated with requests.

That was in 2010. Two years later, the business was losing money but turning over £24,000. The sisters left their long-term careers and financial security behind and moved back into the family home to cut down on expenditure while growing the business until it got to the stage where they could take a salary.

"We joined the accelerator because we were unsure how to run a business on the scale that we have now and, while we weren’t losing confidence, we were asking ourselves questions: how do we keep growing it? How do we avoid making some monumental errors because our numbers are much bigger than when we started out? We didn’t want to mess that up. We have four staff now and we feel that responsibility." The target now is to grow the business four-fold over the next five years and turnover in excess of £2m by 2023.

Everybody has a favourite inspirational quote in Accelerator Land, whether it be from Bloomberg, Bezos or Branson, but the one that would seem to unite all the businesses on the third floor of the RBS building in Spinningfields Manchester comes from Chau. "We have different issues to deal with now," she says, "but we’re in absolutely the right place to find someone to help us work out what we need to do. And that is priceless."

Images: Rob Whitrow


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