InnoGraph is an innovation trend explained through visual graphs.
The business world is in search of unicorns. Or is it? Startups are created throughout the world as a way to challenge existing business models and bring disruption as a market changer to develop growth. Because they showcase personal success stories grown in an accelerated environment, made of a financially hyperactive ecosystem and tech savvy connected consumers, startups have become a live framework where ideas meet technology and talents to build inspiring innovation. But that is only one part of the story. There is a darker one. Highlighting the risk of a financial bubble, the need to diversify ecosystems as well as prepare individuals to lead in tough market conditions, innovation experts and analysts describe the dynamics leading startups on the frontline of change.
Startups by the people
Startups are personal stories, they open paths which are specific to personalities. As Jay Jay French writes for INC, “Often, when building a company from scratch, personality differences in the founders will dictate which path – which leadership style – they’ll take.”
Startup owners are therefore personally engaged, and talk with emotions about the thrill of leading this specific type of companies. That’s one of the reasons why Janine Popick “is diving into a new startup”. In an article for INC, the CEO explains how “there’s a real satisfaction that emerges out of building something from scratch, watching customers buy or use what you’ve built and listening to what they like and what they don’t. It’s something that’s in my veins and I suppose always will be.”
In fact, startups place their objectives beyond financial and personal successes. What matters is the impact they have, and the success story they build around it. As Kevin Laws from HBR remarks, “What drives the most successful start-ups isn’t the money, it’s the mission. The founders who go on to create the greatest value for themselves and their investors are those with a vision of changing the world in some way.”
This engagement and ambitious goal create a burdensome pressure that startup leaders need to be prepared to. In reality, many of them are not, and the level of commitment they tend to demand themselves may well have mental health consequences. As Biz Carson analyses for INC, “More surprising was the incidence of mental health in the families of entrepreneurs: 72 percent said they either had mental-health problems themselves or in their immediate family.”
The economic success story
Yet startups keep bringing such an intense financial activity, underlined by the hope that they, as an innovation frontline, enable new models to emerge. Economic magazines such as Challenges in France keep listing the most successful French start-ups to invest in.
Other lists come from a variety of sector, food being part of it. For this sector as well, articles mention how startups are “creating the future”, as Maya Kosoff found out for Business Insider. In her view, “We’re seeing new ingredients, like insects, and new means of production, including 3D printers. Investors are taking notice. In 2013 VCs invested $146 million in the food and beverage industry, according to a report from CB Insights.”
As a specific part of business, startups apparently have their own vocabulary. Alex Wilhelm and Jason Rowley from TechCrunch volunteer to teach you “how to speak startup”.
Startups also attract their own talents. The “unicorns” success stories emerging on all parts of the globe create a unique enthusiasm that appeals to young investors and entrepreneurs. In the Philippines, for example, Oliver Segovia from HBR explains how “alongside the skill, there’s the shift in mindset among younger workers in the industry. Traditionally, business process outsourcing was associated with high-volume, low-price work. Today, the mainstream appeal of Silicon Valley is turning young Filipino workers who might have been satisfied with a call center job a decade ago into a creative and entrepreneurial class seeking a deeper connection with innovation-driven and mission-focused companies.
As a result, startups provide an innovation framework for business models, as well as organizational models. Some of them have experienced “self-management”, as Jeff Haden found out for INC. In his interview with the author, Leo Widrich, Buffer co-founder, explains: “Self-management builds on the foundation of transparency. I don’t think self-management works without being transparent to some extent. It’s simple: if you want everyone in the company to be able to make great decisions, then everyone needs to have access to all the information.”
As a result also, startups have great stories to share. This is the case for Smiirl, a French IoT startup that Steve O’Hear introduces for TechCrunch. As the article shows, “French hardware and IoT startup Smiirl hit on pretty early the concept of a mechanical Internet of Things-styled ‘Like’ counter for Facebook that bridges the digital and physical worlds. (…) Now, two years on, the company has closed a modest €400,000 seed round to help it bring new products to market with the addition of Twitter and Instagram counters in the same vien as Smiirl’s original Facebook version. ”
The learning ecosystem
All great stories do not have great endings, as reminds The Economist. As the article explains, “The enormous, disruptive creativity of Silicon Valley is unlike anything since the genius of the great 19th-century inventors. Its triumph is to be celebrated. But the accumulation of so much wealth so fast comes with risks. The 1990s saw a financial bubble that ended in a spectacular bust. This time the danger is insularity. The geeks live in a bubble that seals off their empire from the world they are doing so much to change.”
Startups show what it is to learn, and they come-up with interesting go-to-market truths from their accelerated environment. As Quora explains for INC, “But sales, just like every other important role in a startup, is more about long-tail activities that help the company and customers get what they need than hitting some arbitrary goal.”
Yet startups around the world tend to follow a Silicon Valley driven model. As Bérénice Magistretti writes for l’Atelier, “Because of its US based community, Armenian entrepreneurs usually follow the same path: they target the US market and use Armenia as a test area. As soon as the startup goes live, it moves to the startup promised land: Silicon Valley.”
Because of the huge expectations they generate, startups have become the heart of an ecosystem some consider as counter-productive for startups themselves. As Arthur Atwell writes for The Next Web, “Lured by the lights, we spend valuable hours crafting slide decks, jumping on planes, giving presentations and filling out entry forms, almost always so that someone can sell tickets to the show. I worked it hard, and I didn’t see the return. I want that time back for my business.”
Being at the heart of an ecosystem also enables startups to see the dysfunctions and attempt to fix them. As Cameron Adams explains in below video, one of the issue he has spotted out is the fact that design cannot only be the “varnish” effect at the end of the process but in fact, needs to be core at every step of the process.
Some of these changes might also include a diversification of startup “paradises” as new cities want to compete with Silicon Valley as startup ecosystems. As Richard Florida explains for CityLab about the recent 2015 edition of the Startup Genome project from Compass, “we can also see the rise of significant startup ecosystems in cities around the world. Tel Aviv is fifth, London sixth, Berlin ninth, and Singapore 10th. Three Canadian cities make the top 20—Toronto comes in at number 17, Vancouver at 18, and Montreal at 20.”
In fact, this specific positioning as the heart of an ecosystem allows startups to share a precious knowledge. They manage to get their specificities through the complex economic maze between them and their markets. There are learnings to share with the ecosystem. As Imaginatik explains, “There are three key elements for making entrepreneurship real within firms: 1) opportunity/permission, 2) resources (including guidance and mentorship), and 3) above all, ownership. Instead of having employees put their energy into thinking of the venture they want to start, why don’t companies put forward a corporate incubator in which promising and vetted projects can spin off, giving the “founding” team a stake in its startup? So what if the venture fails? Let them come back wiser and more seasoned.”
The bright reality ahead
Startups have a bright future ahead of them. According to Elsa Conesa from Les Echos, part of it could lay in the B2B payments in the US. As she explains in her article, “the market potential is gigantic for banks and new entrants on the FinTech market: on a global point of the, the market reaches an estimated $500 billion, which nearly equals the market potential of consumer payments market ($590 billion).”
Yet business experts remind that beyond the stories and the lessons lays a hard reality for startups. As Matt Palmquist writes for Strategy & Business, “On an individual level, startups seem destined for a bumpy ride — much of their contribution to the economy depends on cannibalizing other emerging firms. For example, 65 percent of the jobs created by startups in year five are offset by the number of positions eliminated at other new ventures, removing some of the sheen attached to the idea that fledgling companies propel the economy. The same is true, to a lesser extent, of financial growth: About 34 percent of the revenue generated by new firms in year five comes at the expense of their competitors.”
Meanwhile, in Europe, Vlad Savov from The Verge says the continent misses historical success stories to learn from. So far, this advantage is only given to Silicon Valley. In his own words, “Europe today finds itself in need of exactly this sort of young, vibrant businesses, but it lacks the ecosystem of established leaders that’s crucial to their proliferation. One of the reasons Silicon Valley keeps producing profitable new startups is because the profitable old guard is already there — and what better way to learn about the gaps in a given market than to work at the market leader?”
But haven’t we said that startups were personal stories? What if ecosystems could work with their own personalities as well? As Jason Fell writes for Entrepreneur, “Today, Berlin’s 3.5 million residents are creating a bright, new history for their city — and business is often at the heart of it. “Because Berlin was cut off during the decades of the Cold War, it is a capital again, but not with the usual infrastructure around it,” explains Nicole Simon, a startup mentor and head of publisher sales and blogger relations at Berlin-based blogfoster.com. “The city itself is a startup.”