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Future Asia Ventures Corporate Accelerators & Booming Startup Sectors - January 2016


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This report provides an overview of the global corporate accelerator landscape, the fintech startup sector and the coworking sector.

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Future Asia Ventures Corporate Accelerators & Booming Startup Sectors - January 2016

  1. 1. Page 1Copyright 2016 Future Asia Ventures Corporate Accelerators & Booming Startup Sectors January 20, 2016
  2. 2. Page 2Copyright 2016 Future Asia Ventures Disclaimer Future Asia Ventures has made every effort to use reliable, up-to-date and comprehensive information and analysis, but all information is provided without warranty of any kind, express or implied. Some of the information used in preparing these materials was obtained from third party and or public sources. Future Asia Ventures and Falguni Desai assume no responsibility for independent verification of such information and Future Asia Ventures has relied on such information being complete and accurate in all material respects. We disclaim any responsibility to update the information or conclusions in this report. Future Asia Ventures and Falguni Desai accept no liability to you or any third party for any loss arising from any action taken or refrained from, or any reliance placed on, or use of, the information herein by you or any third party, howsoever arising, as a result of information contained in this report or any reports or sources of information referred to herein, or for any consequential, special or similar damages even if advised of the possibility of such damages. Opinions expressed herein are current opinions as of the date appearing in this material only and are subject to change without notice. This information is provided with the understanding that with respect to the material provided herein, you will make your own independent decision with respect to any course of action based on your own judgment, and that you are capable of understanding and assessing the merits of a course of action. Neither the information, nor any opinion contained herein, constitute a solicitation or offer by Future Asia Ventures or Falguni Desai to buy or sell any securities, futures, options or other financial instruments or provide any investment advice or service. Future Asia Ventures and Falguni Desai does not purport to, and does not, in any fashion, provide broker/dealer, investment advisory or any financial advisory services. This information has been prepared solely for informational purposes. This report is not investment advice and should not be relied on for such advice or as a substitute for consultation with professional accountants, tax, legal or financial advisers. No part of this document may be reproduced in any manner, in whole or in part, without the prior written permission of Falguni Desai or Future Asia Ventures. By accepting this material, you acknowledge, understand and accept the foregoing.
  3. 3. Page 3Copyright 2016 Future Asia Ventures Media & Distribution Partners We help dealmakers identify valuable opportunities Insights into Payments
  4. 4. Page 4Copyright 2016 Future Asia Ventures Table of Contents • Executive Summary • Global Accelerator Overview • Fintech Startups: The Boom & the Challenges • The Coworking Boom
  5. 5. Page 5Copyright 2016 Future Asia Ventures Executive Summary This report, similar to the prior two reports, contains a global overview of the corporate accelerator landscape. In addition, it also features two startup sectors which are globally experiencing high levels of growth – Fintech and Coworking. Key findings and themes are summarized below: There are 116 corporate accelerators worldwide. Europe leads this count with 54 accelerators, mostly based in the UK and Germany. 2015 was a strong launch year for all regions around the world, with a total of 45 launches. In the coming year, accelerator launches may slow, but corporate innovation will continue. Expect to see companies designing tailored open innovation programs which fit their specific growth strategy and agenda. The fintech startup sector now has over 6,000 startups worldwide. The sector, while gaining popularity in recent years, is decades old. Startups in this sector face unique challenges given the stringent regulation on financial service providers and the risk of cyberattacks on highly sensitive data. Coworking space providers have sprouted in hundreds of cities worldwide. It is estimated that over 7,000 coworking spaces exist in cities around the world. New York, Hong Kong and Singapore have some of the priciest real estate on the planet. Coworking players in these cities are on the forefront of designing new programs, services and business models. The future of coworking will involve more collaboration with corporations.
  6. 6. Page 6Copyright 2016 Future Asia Ventures Global Accelerator Overview
  7. 7. Page 7Copyright 2016 Future Asia Ventures 1 2 12 13 15 26 45 2009 2010 2011 2012 2013 2014 2015 Number of Corporate Accelerators Launched Each Year Source: Company Websites and Florian Heinemann Accelerator website Accelerator Launches May Slow, But Innovation Won’t Corporate accelerator launches have peaked. So far in 2016, 2 new accelerators have launched. Going forward, companies will design tailored open innovation programs and formats to engage and collaborate with startups.
  8. 8. Page 8Copyright 2016 Future Asia Ventures 2015 Was a Strong Launch Year for All Regions 1 8 2 7 8 12 1 1 3 9 7 13 20 1 2 1 5 13 2009 2010 2011 2012 2013 2014 2015 Americas EMEA APAC Number of Corporate Accelerators Launched Each Year by Region
  9. 9. Page 9Copyright 2016 Future Asia Ventures 39 54 23 Corporate Accelerators by Region 116 Corporate Accelerators Exist Worldwide The global corporate accelerator count stands at 116. Companies are increasingly launching and adding more accelerators in EMEA and Asia Pacific locations. In EMEA, the UK leads with 19 accelerators and Germany follows second with 12. In Asia, Hong Kong, Singapore and Bangalore have 16 of the total 23 accelerators. Around the World
  10. 10. Page 10Copyright 2016 Future Asia Ventures Technology, Financial Services and Telecom Lead the Race Technology, 23 Financial Services, 21 Telecom, 18 Media, 13 Cross Industry, 12 Health, 6 Consumer , 6 Retail, 4 Education, 4 Travel, 3 IoT, 3 Logistics, 1 Energy, 1 Real Estate, 1
  11. 11. Page 11Copyright 2016 Future Asia Ventures Showcase: PwC Accelerator
  12. 12. Page 12Copyright 2016 Future Asia Ventures Showcase: PwC Accelerator
  13. 13. Page 13Copyright 2016 Future Asia Ventures Fintech Startups: The Boom & The Challenges
  14. 14. Page 14Copyright 2016 Future Asia Ventures What is FinTech? The FinTech sector is made up of 8 categories: 1)Marketplace lending platforms 2)Payments & mobile wallet apps 3)Equity crowd funding platforms 4)Robo-Advisor platforms 5)Blockchain enabled software 6)Financial data analytics software 7)Brokerage & trade systems 8)Treasury & financial risk systems FinTech Defined Marketplace Lending Payment & Mobile Wallets Block chain Data Analytics Equity Crowd funding Robo-Advisors Brokerage & Trade Treasury & Financial Risk Consumer Focus Enterprise Focus FinTech Definition: A portmanteau of the words financial and technology used to refer to both enterprise and consumer focused apps and software which are used in financial services transactions, record-keeping and analysis. The term is often used to describe the recent boom in startups focusing on such technologies, however, financial technology has been developed and used by firms and individuals for several decades and continues to evolve.
  15. 15. Page 15Copyright 2016 Future Asia Ventures The Evolution of Fintech 1950s 1960s 1970s 1980s 1990s 2000s Online Crowd funding Mobile wallets & payment apps Robo-advisors Marketplace lending Block chain Online banking Online payments Online stock trading Bank risk management systemsPhone banking Electronic Stock Trading on ExchangesATMsCredit Cards Fintech is a very broad sector with a long history. Most fintech and consumers equate fintech with the latest mobile app or crowdfunding website. But technology has always played a key role in the infrastructure of the financial sector in ways that most people take for granted and might not ever see. Fintech has a long history reaching back 65 years. The recent innovation boom is marked by an increase in retail banking & consumer focused services.
  16. 16. Page 16Copyright 2016 Future Asia Ventures Challenges Faced by Fintech Startups The fintech startup boom is a global phenomenon. From Silicon Valley to New York and from London to Singapore and Hong Kong, more than 6,000 fintech startups are contending to serve the needs of retail banking customers and financial professionals. But the sector also faces some very strong hurdles, making it a uniquely complex space for founders. While fintech startups have certainly innovated new platforms and gained traction among retail banking customers, the scale of their achievement, whether measured by lending or investments is still a small sliver of the retail banking market in developed nations. Banks in developed nations still have a strong branch presence and manage deposit bases that measure in the trillions, making them a central hub for most households who need savings accounts, credit cards, loans and payment services to manage their finances. Until a majority of the deposit base shifts away from banks, they remain fiercly entrenched. Regulation is a barrier for many fintech startups that need to establish themselves globally. Regulatory filings just to establish in one’s home country can be daunting and expensive. Legal fees to file and apply for licenses can be a burden on an early stage startup. The U.S. alone has ten regulating bodies which oversee different parts of the financial sector and additionally each state has its own rules and regulators. As fintech startups gain scale, policymakers may need to reconsider more relevant regulations to account for new business models and technologies. The risk of a cyberattack on fintech startups is an open issue. Startups at a seed or early stage growth may not have the funding to establish the same level of protections that large banks might have in place, but it is a very real risk that grows as more customers join and use a fintech platform. The ideal scenario would be to have a full-time Chief Information Security Officer, but it’s not a realistic proposition. Few early stage startups can afford a dedicated function and staff. There have not yet been attacks on fintech players, but a single point of failure in the fintech ecosystem could threaten the future of this sector. Entrenched Competition Regulation Cyber Threat
  17. 17. Page 17Copyright 2016 Future Asia Ventures Fintech Startup CEOs Share Advice on Raising Seed Capital “With cloud and open source technologies being so easily accessible today, innovation becomes more and more a question of hard work and creativity instead of available resources. Therefore it's important to get a product released as quickly as possible and acquire first users. Raise your first round only after you have first real users.“ CEO, Radoslav Albrecht “Being persistent has proven to be the most crucial lesson I learnt when raising the first round of capital for my startup Spotcap - especially when it comes to pitching. As an entrepreneur, it’s easy to be convinced by your idea. Nevertheless, you have to be aware other people initially may not - you have to address their concerns and persuade them. So, be open to taking feedback on board, refine your pitch and be concise in your presentation. Believe in your vision and always target a wide range of investors .” Cofounder and CEO, Tony Triebel “Think of this as a team sport – successful startups are founded by great people. Bring your co-founder along to pitches and showcase your team whenever possible. You also have a choice, so make the right one. Don't approach just any investor, be patient and choose investors who will help you post- investment with resources, connections, mentorship, and are willing to invest in future rounds. Can you explain your product simply? At the same time, demonstrate a high attention to detail. Don't hide your competition; every smart investor wants to invest in a successful market. Saying there is no competition is the equivalent of saying there is no market.” Jon Medved, Founder & CEO
  18. 18. Page 18Copyright 2016 Future Asia Ventures The Coworking Boom
  19. 19. Page 19Copyright 2016 Future Asia Ventures The Coworking Business Model Value to Customer 1. Simple pricing and easy to execute contract 2. Flexibility to grow or reduce space as needed 3. Community & networking with like-minded and similar size businesses 4. Affordable location in a metro area or downtown city center Customer ExperienceCoworking Space Expenses Space Related Fixed Expenses • 2-10 year lease • Design & fit out • Furniture • Maintenance • Janitorial • Utilities & wifi • Office supplies Program Related Variable Expenses • Event planning • Mentors & coaches • Membership marketing • Food & beverage • Office & reception staff Single Price Point Flexible Rent Terms Deskmag estimates that there are more than 7,000 coworking space providers worldwide. The coworking business model relies on a mix of office space, community focused programming & events and flexible short term rental. Coworking founders bear the risk of committing to a fixed term lease and charging their customers enough to make a profit, while maintaining a competitive price point that is attractive to small businesses and startups.
  20. 20. Page 20Copyright 2016 Future Asia Ventures Office Space Real Estate Dynamics in Three Markets Real Estate Market Singapore Office vacancy 9.5% Office vacancy 3% Office vacancy 6.1% Proj Rental Value Chg +10%-20% Market Conditions 2015 2016 2017 Market Conditions 2015 2016 2017 Market Conditions 2015 2016 2017 Source: JLL Global Market Perspective Q4 2015 Proj Rental Value Chg -10%-20% Proj Rental Value Chg +5%-10% Prime Office Rent Landlord favorable Neutral Tenant favorable $255.50 /Sq Ft $153.00 /Sq Ft $93.25 /Sq Ft Source: Knight Frank Global Cities 2016 # of Coworking Spaces 100 50 60 HongKongNewYork
  21. 21. Page 21Copyright 2016 Future Asia Ventures New York: The 2nd Largest Startup Ecosystem A Growing Workforce New York’s coworking market is growing. The city now has slightly over 100 coworking spaces. Coworking has found a thriving startup ecosystem, a growing number of freelancers and small business owners who are opting for new office space models. According to Angelist, New York has more than 13,000 startups and was recently ranked by Compass as the 2nd largest startup ecosystem in the world. According to a study commissioned by the Freelancers Union and Upwork, New York saw an increase of 700,000 freelancers in 2015. These numbers feed the coworking market with a strong supply of renters. Changing Needs or Unmet Needs? But coworking is not just about growing numbers. According to Shlomo Silber, CEO of COWRKRS, a growing coworking provider in Manhattan and Brooklyn, “The independent workforce is growing and coworking caters to the lifestyle changes and flexibility that today's workforce is continuing to gravitate towards." Silber, who has a background in real estate and construction was drawn to coworking when he himself experienced the energy and friendliness of sharing workspace with other businesses. Coworking provides a stimulating and social atmosphere. Providers actively plan events and provide services which cater to the needs of their renters. Silber believes that this intangible value is something that makes coworking a permanent part of the office space landscape going forward. "Coworking is becoming a way of life for a vast amount of small businesses and entrepreneurs. Similar to visiting their local lunch spot, gym or grocery, the coworking space is a part of their daily routine and integral to their neighborhood and community.” The growth in small businesses and freelancer is feeding this need. Shared services and networking opportunities are creating a value add and ROI effect for coworking customers. The simple and flexble pricing is now a standard offer, but it’s community that differentiates a player. Employee Engagement The appeal of coworking, the community and the energy that it engenders, create a level of workplace engagement that most companies lack. Year after year, the Gallup Survey has revealed disturbingly low rates of engagement among the U.S. workforce. According to a JLL study, Full Engaged, published this month, larger companies are rethinking and redesigning their workplaces into more open and evocative spaces. Coworking layouts and design are showing larger corporations a way forward. For some large companies, collaborating and sharing space within a coworking arrangement has proven to be effective for certain teams and departments. Strategic Players and Innovators in the Market New York has its “unicorn” coworking provider in WeWork, which was founded in Soho in 2010. The provider now has 19 locations around the city, all of which are below 42nd street, a demarcation line for the startup scene in the city. New players are entering the market across locations in Manhattan and Brooklyn. The coworking boom has affected even the most unlikely places, as at least 5 coworking providers are based in the Financial District, some located directly on Wall Street. The largest concentration of players is along the 23th and 30th street stretch of Broadway, known as Silicon Alley. Coworking entrants are experimenting with different models. For example, The Writer’s Room is for authors and writers who need a quiet space to work. Krash, another provider, is experimenting with a combined coworking & coliving concept. Grind Spaces has partnered with Verizon, to create a coworking space which will include the corporate incubator and corporate ventures team. As coworking begins to mature as a category, operators are building new revenue streams and creatively partnering with shared service providers and corporations.
  22. 22. Page 22Copyright 2016 Future Asia Ventures Hong Kong: Where Topography Reigns “Paperclip has been built to address more than just office space. We are a startup campus. Our workshops, programs, mentoring and partnerships brings a unique mix of services and expertise designed to help entrepreneurs and large corporations.” Deepak Madnani, CEO and Founder, PaperclipHK “The coworking space business is a great one to be in. Although it can get tough as any other business, once you get the model sorted, not only can you make good returns, you can also make great connections and friends through the community you build.” Elaine Tsung, CEO and Founder, Garage Society Founders’ Perspectives A City Around a Hill The Hong Kong Special Administrative Region measures 423 square miles. But Hong Kong Island, where the region’s commercial and political hubs are centered is only 30 square miles. The majority of the island is made up of country park, mountain ranges and hills, with only a perimeter which serves as the habitable area. This important characteristic drives Hong Kong’s prime office rents to $255/ sq ft, $100 more than New York and almost 3x the price of Singapore. Hong Kong has the most expensive office real estate market in the world. Survival of the Fittest New coworking players have been entering the market rapidly over the last two years. Some have specific niche focuses, but given Hong Kong’s pricey market, providers are relying on a diverse mix of renters to mitigate risks. Most spaces charge approximately $1500 to $2000 HKD per month, but the large government owned Cyberport space drives tough competition at only $800 HKD per month. As Hong Kong rents remain high, coworking space owners make thin margins. According to some, only 20-30% of coworking spaces are profitable in this market. Creating Value For those who are finding success as a coworking space provider, maintaining a strong value proposition through prime locations, well designed facilities and high quality events, have been key ingredients. Hong Kong’s entrepreneur class, especially first time entrepreneurs, face the risk and stigma of creating a company, with no stable income and a high chance of failure. Culturally, this is a difficult avenue for employees and founders in the city as family expectations and the city’s high living expenses have steered people into more stable, corporate jobs. Coworking spaces allow those taking the risk to find community with others who face the same pressures. More importantly, coworking providers are realizing that they can play a stronger role in mentoring and educating young founders on how to run their startups while also providing valuable connections to investors and potential customers. When coworking providers demonstrate this value, in addition to their flexible rentals, the package begins to look very reasonable.
  23. 23. Page 23Copyright 2016 Future Asia Ventures Showcase: blueprint by Swire Properties
  24. 24. Page 24Copyright 2016 Future Asia Ventures Singapore: A Competitive Coworking Market “Coworking takes a balance of both left brain business logic and right brain creative engagement in almost equal measures.” Jonathan O’Byrne, Founder, Collective Works A Vibrant Startup Scene While many Singaporeans are bankers and technology professionals at large multinational companies, entrepreneurs make up a vibrant ecosystem which has grown with government support. According to statistics from the SPRING Singapore program, there are more than 5,600 startups employing over 33,000 people. In a city known for its high rents, coworking spaces that offer flexibility and amenities have become a key component in the ecosystem. A Transient Market Coworking in Singapore has had a very steep growth curve. There are now 60 providers on the island, with most being based in the Central Business District and surrounding areas. While there is a strong supply of startups, the market is competitive and coworking remains a tough business. Singapore’s high expat population means that there is a seasonal aspect to coworking revenue streams when these workers go on extended holidays. Dips in revenue are expected in December, January and certain summer months. Adding to that is the very expensive cost of rent in Singapore. Between revenue variability and a high fixed cost, coworking providers need to make sure they have forecasted accurately while also creatively differentiating their offering in a crowded playing field. Potential Oversupply Recent entrants and some older players are expanding their spaces. Collective Works in the CBD has an 8 story building in the CBD. The Hub has expanded it space to a new larger location and The Working Capitol has combined five shop houses into 33,000 square feet of office and event space. With several expanding players, competition will be fierce and discounting may drive smaller players out of the market. "Coworking is an awesome game-changer for women. Too often, women, and especially working mothers, are stuck working out of their kitchen or only having the time and space to get their work done late at night, after they have taken care of their family. Coworking can address the need for a separate space for women and help with the gender equality struggles women face." Michaela Anchan, CEO Woolf Works "The coworking boom is real in Singapore and has grown from 6 to 60 spaces in the last 4 years. At Hub Singapore, we have become the living room not only for startups but also forward-thinking corporates and government. For spaces who get it right, it's never just a real estate game - it is the home of a global collaborative movement." Grace Sai, CEO & Founder, The Hub Singapore Founders’ Perspectives
  25. 25. Page 25Copyright 2016 Future Asia Ventures The Future of Coworking More spaces targeted to specific sectors, demographic groups, professional groups will continue to grow. This will enhance community building and create affinity towards providers. Niche Target Markets Coworking spaces will increase their mentoring, advisory and educational curriculums to help startup founders. Programs may mimic or partner with accelerators. Tailored Advisory Programs Coworking providers and corporations will partner on programming and space initiatives. Corporations will become a key component in stablizing revenue for coworking spaces. Corporate Partnerships Several coworking providers will expanding into multiple locations, nationally and internationally. Membership style services across locations will enhance loyalty and branding. Multiple Chain Locations Coworking providers will expand their current spaces to generate more event based revenue and accommodate growth. Larger spaces will enable coworkng providers to negotiate more effectively with building owners. Larger Spaces Innovative new models will offer renters services which are non work related (concierge, discounts, etc). Offering may mimic “hacker house” style arrangements for young startup employees. Beyond Work 1 2 3 4 5 6
  26. 26. Page 26Copyright 2016 Future Asia Ventures Past Reports by Future Asia Ventures Published August 31, 2015 CLICK HERE FOR DOWNLOAD Published December 1, 2015 CLICK HERE FOR DOWNLOAD Corporate Accelerators 2016 Outlook December 1, 2015 Corporate Accelerators: A Growing Force August 31, 2015 About the Author – Falguni Desai Falguni Desai has over 18 years of corporate strategy, innovation and M&A experience. She has worked with business leaders at global firms in the financial, media and technology sectors to foster growth & expansion. She holds a BS in Economics from The Wharton School of the University of Pennsylvania.
  27. 27. Page 27Copyright 2016 Future Asia Ventures About Us Working with corporations, private investor groups and foundations globally to design & launch incubator, accelerator and innovation programs that implement new ideas and deliver growth. We select our clients and only work with firms which demonstrate an authentic commitment to innovation and bold ideas. Our services include: Custom Research Startup Business Advisory Accelerators & Innovation Labs Cross-Border Innovation Media & Business Inquiries: Falguni Desai Managing Director