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Archive for the month “January, 2010”

Startup stages

In this post I would like to propose an informal model for distinguishing between startup stages. We often hear of one being startup, but how does some can say for sure if there is no definition? Also understanding of conditions for closing pre-startup stages is important to me as a growth company owner wannabe.

Pre-seed stage

It always starts either with a great idea or with bunch of cool people and of course having high expectations.  I stipulate that to close this stage you are to have at least two of the following:

  • An idea or a market chosen;
  • Bunch of people you could work with;

What is more I believe that you should have answered yourself several important questions. Such as:

  • Why are we going to succeed?
  • What are our strength and weaknesses?
  • What threats should we mitigate and what opportunities to take?

It may be the time for raising money from FFF: friends, family and fools. Being lean and agile, you may start with no money. Nonetheless, each of the teammates or just you, if working alone, has to decide and commit to the minimum number of hours and money he will spend on the project.

Read more…

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What do talented developers need?

My answer for question, what prize is best for a application contest winners:

“Continued program with mentorship from more experienced developer or entrepreneurs. A study and reward program that would help developers, who have won the challenge to develop their application further. Perhaps, that program also should help developers to start their own business based on the software solution they have come up with.”

Survey on Intel Atom developer challenge.

What do you think?

Seed camp in Copenhagen!

To those who missed the great news, it is time to start celebrating the second seed camp foundation in Europe! This summer Startup Bootcamp will host 10 teams in Copenhagen this summer.

Applications are open till April 11
They will host face to face meeting starting March.
Camp is scheduled to start in June and last 3 months.

I updated my list of startup seed camps [In lithuanian].

ArcticStartups article

On symbiosis between startups and growth companies

Startups and growth companies can coexist and successfully cooperate as their share common interest for innovative product creation. Cooperation, knowledge and network sharing between the groups can lead to a synergy effect and foster development of each community.

Firstly, growth company may invest in a startup company if product developed in a startup matches growth company’s market or growth strategy. Also, at later stages, startup should consider acquisition as an possible exit strategy (as Ilja Laurs from Getjar pointed out, acquisition is one of the most popular founder exit goal).

Not only startups lack capital, but they also lack may different business competencies and are limited in their social network. These needs are usually expected to be satisfied by Business Angel. Regretfully, as search for external finance takes on average 38 months in Germany, I would expect it to be even longer in Eastern Europe.

On the other hand, many growth company entrepreneurs are often interested in new ventures. So are the companies managers. As study shows, 40% of UK Business Angels have managerial and not entrepreneurial background. Moreover, starting a OCC Vilnius mentoring initiative I have found that Lithuanian managers also think of becoming Business Angels. Perspective pre-growth startup may find it useful to reach out for consultations and ask for help from a growth company. Not only startup would receive help, but also it would be a step towards a more intimate relationship with prospective investors.

Fragmented Europe challenge startups and growth companies for market knowledge. While  growth companies may already be well connected to foreign countries and posses needed know-how,  it is a huge risk for a startups and most notably pre-growth startups. Again, know-how and network sharing would benefit both communities, as it may stimulate growth of the industry and creation of more interesting, innovative products.

Growth companies and startups share a common need for motivated specialists.  At the same time, modern specialists have positive altitudes towards “startup culture” and may consider different career options. For example, a programmer may lack technical knowledge to be hired by a bigger software house, but still have interesting ideas and engage in a student startup first. Differently an industry celebrity, who have mastered technical skills, may become too costly for his former employer. Instead of just switching the software house he works in, he would consider joining the startup if there are any interesting opportunities. There are already numerous career paths between two communities.

Despite the possibilities for mutual benefit and synergy in Lithuania there are several obstacles to the full featured cooperation.

First to name is communication links that are missing. Growth and pre-growth startups in Lithuania are often operating in stealth mode and are known only to a small number of people. As a result, their are shielded from an eye of investor, potential employee or random partnership. Similar situation holds for growth companies.  Even through some industry champions can advice their friends on interesting employment or cooperation opportunities, information is inaccessible for entrants, (often) startups or outside actors.  Information hiding prevails and news travel only through social networks.

The reason for information non disclosure and stealth action has cultural background. It may be the fear of failure or evil actions used against the successful enterprise. This can be reasonable and may be true in some cases. Also, not only this fear hinders communication, but also it makes opportunities for cooperation seem less attractive. Former cultural values and business ethic is a risk for symbiosis that should be mitigated.

The symbiosis between startups and growth companies should create many possibilities and foster industry development. Although there are some obstacles that should be removed, the perceived value of communication and cooperation is high enough for entrepreneurial startup and high growth company communities to move towards symbiosis.

Startup or a Growth Company?

The discussion of a startup company definition with beta.startups.lt teams motivated me to make a small research on the subject.

There are many variation for growth company definition, most of which impose constraints on company employee number (e.x. more than 20), employee number growth (e.x. more than 20% per year), turnover growth (e.x. 20-80% per year)  and years from founding. Interestingly the later definition is published, the more strict requirements are used. 3 most recent definitions:

  • High growth in staff numbers of at least 15% per year over five years or 20 employees within five  years after founding. [US National Commission on entrepreneurship, 2001]
  • Increase in the turnover of at least 30% or increase in staff numbers of at least 20% in the three preceding years [Kauffman Foundation, 2003]
  • Yearly growth of turnover of at least 80% over three successive years [Barringer/Neubaum/Jones , 2005]

Startup definition is even more fuzzy. It was interesting to find that there is no proper solid definition. Finally I’ve given up and decided to define startup by what it is not. Talking about quantitative criterions, startups can be distinguished from a traditional SME by high growth expectation, but as a company startup may not yet exhibit growth company characteristics.  To my mind, the development of innovative product or service may also be the distinctive feature of a startup.

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