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.