Revolutionary Measures

From startup to scale-up economy?

In previous blogs I’ve talked at length about the UK’s inability to turn a high enough percentage of tech startups into market leaders, compared to countries such as the USA. This may be changing, according to a new report from the Startup Europe Partnership (SEP). This identifies around 400 tech ‘scale-ups’ – essentially startups that have raised more than $1 million over the last three years. 70% of these received funding of between $1-$9 million, with 15 raising over $100m.

English: Map of Europe, indicating continental...

Taken at face value this looks like great news – investment is up and the UK is leading Europe when it comes to building viable, long term businesses. However dig a bit deeper into the data and some issues emerge. SEP is upfront that its research just covers what it calls ‘ICT’, and misses out biotech, cleantech and what it calls hard-tech (and there was me thinking all tech was hard).

So the lists of companies named are dominated by companies that essentially use the internet as a platform for their business – such as Wonga, Truphone, Funding Circle and white goods retailer AO World. All, with the exception of Wonga, solid companies that are expanding rapidly, but not really what I’d class as technology companies. The problem is that they tend to attract more capital, and consequently elbow the likes of Ubisense (which raised $14.5 million through its IPO in 2011) from the front page of the pretty graphs. And if you grow organically, without needing additional investment, you don’t show up at all.

Is this an issue? I think it is from both a perception and a valuation point of view. The general public ends up thinking of a startup as being something like Spotify or Just Eat, rather than a company that provides clever technology that may operate invisibly to them, supporting the wider digital economy. This can have a knock-on effect on press coverage, recruitment and ultimately the type of startups that are founded. Additionally investors are motivated by returns, and if they see that the payback is better with less technical, more consumer-focused businesses they are likely to invest accordingly.

It would be rude of me to sound like I’m completely knocking SEP. They are shining a light on the European tech sector and at the same time lobbying to increase the support that startups get, in particular by connecting the fragmented European tech economy. But, if we are to present the tech sector in the best possible light, we need to widen the discussion away from the flashier end of the market and embrace the difficult hardtech area. After all these are the ideas and companies that have the potential power to really change the way we live, work and play, and consequently deliver the biggest benefits to Europe as a whole. We need more ARMs, and fewer Wongas, and to start, more rigorous definitions of what a tech startup – or scale-up – actually is.

November 26, 2014 Posted by | Cambridge, Startup | , , , , , , , , , , , | 1 Comment

Standing out from the Crowd (funding)

Turning your brilliant idea into a world-beating product requires a lot of things – drive, commitment, flexibility and often a large slice of luck. But one element it can’t really do without is money – whether to develop prototypes, employ staff or simply pay your own bills.

Finding funding has never been easy, but the range of potential sources does seem to be growing. As well as traditional sources such as VCs, banks, angels and friends and family, there are a range of government grants and multiple competitions that can potentially help startups take a step forward. I’m not saying this necessarily makes gaining investment easy, but it does give more options.The Pebble iOS Smartwatch

And another option that is expanding rapidly is crowdfundingsharing your idea with the world and getting them to back it before you start the expensive business of actually producing anything. If you don’t attract the pre-orders then it should probably act as a wake-up call – are you producing the right product that people actually want?

There’s been a run of successful, over-subscribed launches on sites like KickStarter. The company behind the Pebble smart watch raised over $10m and will start shipping real products this month. On a smaller scale, projects like photography book I Drink Lead Paint hit its target of £10,000, unleashing the thoughts and images of Mr Flibble onto the world. And B2B versions like Funding Circle have attracted government backing, making £20m available to British businesses over the next 12-24 months.

With growth like this, it is no wonder that Deloitte predicts that crowdfunding will double in 2013, raising £1.9 billion globally this year. Not huge in the scheme of overall investment, but potentially opening up funding options to smaller scale projects in a simple way.

But, with more and more projects out there looking for crowdfunding, how do entrepreneurs get people to view what they are doing – and potentially part with their cash? Kickstarter’s own stats show that just over 40% of projects hit their funding targets, showing it isn’t as simple as launching and waiting for the money to roll in.

This is where an enormous opportunity arises for the marketing and PR industries to get involved. Crowdfunding projects need marketing in the same way as any other product, identifying target audiences and demonstrating the benefits your new wonder widget brings to them. And then you’ve got to reach them, using both social and traditional media to identify the influencers that are likely to help you spread the word and convincing them and the world at large. Obviously the downside is that projects don’t tend to have any ready cash, but for anyone brave enough to go for payment by results the business is out there. At a time when the PR industry is suffering financially, creating smart, all-in-one services that help you get crowdfunding or launch your new iPhone app are just what it needs to be developing to recapture growth and build relationships with the next generation of smart businesses.

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January 23, 2013 Posted by | Cambridge, Marketing, PR, Startup | , , , , , , , , , , , | Leave a comment