Start-ups, Spinouts and Stimulating Innovation Ecosystems
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This document discusses startups and spinouts, and whether they are worth pursuing. It notes that while startups are often touted as job creators, research shows only a small percentage of high-growth firms are responsible for new job creation. Successful startups tend to have proprietary technology, network effects, economies of scale, and strong branding. University spinouts in particular help commercialize new technologies and can stimulate innovation and enterprise ecosystems. While most startups fail, taking more risks through early-stage funding could help identify the high-growth firms of the future. Creating a lean startup process may help startups test ideas faster and fail early.
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Start-ups, Spinouts and Stimulating Innovation Ecosystems
- 1. Start-ups and Spinouts: the Fuzzy Front-End & the Hard Yards⊠is it worth it? âŠconfessions of a Start-up junkieâŠ
- 6. PlaceâŠ
- 7. Angel Deals By Region (2013/14)
- 8. Not every region suffered a decline. Deals were up 100% in the North East
- 9. Context: Northern Ireland economy ⊠Lag in growth ⊠Dependence on public sector âŠ
- 10. Low levels of start-ups âŠ
- 11. Belfast bottom of the league ⊠Low levels of start-ups ⊠Centre for Cities
- 12. Northern Ireland bottom of the league ⊠Knowledge Economy Index Low levels of Knowledge based start-ups âŠ
- 13. âŠcorrelation does not = causation - right!
- 14. âŠcorrelation does not = causation - right!
- 15. Does a weak economy leads to low rate of startup âŠor do low startup rates lead to weak economy? i.e. do we make any difference?
- 16. Director of Innovation Queenâs University Belfast Now Brian McCaul
- 17. Queenâââčs Number 1 for IP Income (2014-15)
- 18. Performance Area UK Ranking IP Income (equity and license) 1st Sale of spinout shares 1st Current spinouts turnover 5th Current Spinouts Active 8th Performance compared for all UK Universities
- 19. not a âone-off flukeââŠ
- 24. âŠbut is it worth the candle?
- 25. So should we strive to create more? Why? Whoâs we? What is a Start-up or Spinout? How do we do it?
- 26. Because they create jobs⊠âsystematic empirical case that virtually all net job creation was in fact due to younger firmsâ (Davis, Haltiwanger, and Shuh, 1996) Younger firms grow quicker and provide most jobs...
- 29. â[neither]  SMEs and the startups⊠are .. particularly valuable to the economy - whether measured by jobs, productivity or innovationâ. British government spends ⊠£8 billion PA on SMEs - more than .. on the police and close to the amount it spends on universities. Research at the University of Cambridge (Hughes 2008) suggests that the No they donât create jobs..!
- 31. So what is a Startup? âA startup is a temporary organisation used to search for a repeatable and scalable business modelâ Steve Blank âA startup is a human institution designed to deliver a new product or service under conditions of extreme uncertaintyâ Eric Ries âThe typical startup isn't innovative, doesn't intend to challenge existing companies, lacks a single competitive adverting, and is not intend to growâ Scott A Shane
- 34. They are more productiveâŠ
- 35. And they export moreâŠ
- 36. We should drop the term âSMEââŠobvs! Policies that treat all firms as equally candidates for growth are likely to expect âtoo muchâ  from the vast majority of firms with relatively low growth potentialâŠ
- 37. So if not all âStartupsâ are the same ⊠What do we call those that have growth potential? > Scale-ups > High Growth Firms > Gazelles or > Knowledge Economy-based Startups⊠What - crucially - are the characteristics that differential them?
- 38. MIT Jorge Guzman & Scott Stern Thiel Peter Scale-ups Coutu Lean Start-up Blank Registration Propriety Tech Ambition Product- Market Fit Ambition Brand Effective Management Channels Not Eponymous Scaleable Economics Partnerships Key Resources Protection Network Effects Competencies Customer Acquisition Early-stage âdigital signaturesâ of high-quality ventures?
- 40. what can be done to inïŹuence Growth?
- 41. Great ⊠but you canât drive looking through the rear-view mirror âŠ
- 42. MIT Jorge Guzman & Scott Stern Thiel Peter Scale-ups Coutu Lean Start-up Blank Registration Propriety Tech Ambition Product- Market Fit Ambition Brand Effective Management Channels Not Eponymous Scaleable Economics Partnerships Key Resources Protection Network Effects Competencies Customer Acquisition Early-stage âdigital signaturesâ of high-quality ventures?
- 43. all about shots on goal? âTheproblemisthatitisverydifficult,if notimpossible,to knowatthetimeoffoundingwhetheror notfirmsarelikelytosurviveand/orgrow.â (Hathaway and Litan, 2014b)
- 44. Can we imprint those digital signatures..? If startups are really just ultimately experiments⊠Canwebakegrowthintothecompanywhen designingthatexperiment..?
- 45. Preferably with Social and Economic Impact..!
- 47. âMonopoly is the condition of any every successful businessâ âEvery monopoly is unique, but they usually share some combination of the following characteristics: proprietary technology, network effects economics of scale and brandingâ Â Peter Thiel - Zero to One
- 48. âProprietary Technology is the most substantive advantage because it make you produce difficult or impossible to replicateâ Â âProperly understand any new way of doing things is a technologyâ
- 49. A complex combination of proprietary technology Serious scale cost advantages. Ecosystem provides the network effects to lock people in. Apple has all these things.
- 53. So what does this all have to do with spinouts?
- 54. University spin-offs transform technological inventions developed from university research that are likely to remain unexploited otherwise.
- 55. A research spin-off is a company that falls into at least one of the four following categories: Companies that have an Equity investment from a national library or university Companies that license technology from a public research institute or university Companies that consider a university or public sector employee to have been a founder Companies that have been established by a public research institution
- 56. âProprietary Technology is the most substantive advantage because it make you produce difficult or impossible to replicateâ Â âProperly understand any new way of doing things is a technologyâ
- 60. Recent NI IPOs 50% 50% Qubis Not-Qubis Kainos Andor UTV First Derivatives
- 61. Feeders ⊠and Leaders It will be led by entrepreneurs âŠ
- 62. Spinouts can contribute to the 6% and can create the game changers
- 63. Because spinouts can be critical for ecosystem development âŠ
- 65. âyou cannot create something out of nothing ⊠entrepreneurial ecosystems are based on pre- existing assetsâ not one size fits all âAre US Spinout processes really better than those of UK Universitiesâ - Dr K Ku & Dr L Nelsen - for HEFCE
- 66. Spinouts can play a role in stimulating the Innovation ecosystem ⊠What I believe should be emphasised is not startups or entrepreneurs in and of themselves, but the innovation ecosystems within which they operate and which they depend on if they are to become what does matter: high growth innovative firms (of any size) within that system.
- 67. Spinouts can play a role in stimulating the Enterprise ecosystemâŠ
- 69. Because they are critical for innovation âŠ
- 70. I wouldn't start from here if I were you⊠Innovation
- 71. THE ANTIBODIES TO INNOVATION ARE STRONG IN MOST ORGANIZATIONS Big companies with a few exceptions (fewer than 5) are not equipped to experiment at this volume. âą Process - Structure to identify & develop experiments doesnât exist âą Culture - These experiments will mostly fail. That is not often easy to do in large organizations âą Resources - Large volume of experiments require big money âą Ideas - Big companies are not always well-suited to develop these experimental ideas. Thinking of them is not easy. CBInsights
- 72. Moving from the periphery to the centre⊠From selling Beanie Babies then ultimately moved up into cars and art CBInsights
- 73. As the life cycle of a corporate drops - and as the cost of a start-up dropâŠ
- 74. Even if most do failâŠ
- 76. CBInsights
- 80. So yes it is worth the candle Yes it can help seed the Innovation and Entrepreneurial eco-system SO what more can we do?
- 81. Research Development Tech transfer Commercialisation Market Entry Valley of Death Profit/Loss time Funding is difficult to access in most start-up eco-systems
- 82. There is no product - never mind product market-fit Requires lots of experimentation engagement without revenue case to supportâŠ
- 83. MIT Jorge Guzman & Scott Stern Thiel Peter Scale-ups Coutu Lean Start-up Blank Registration Propriety Tech Ambition Product- Market Fit Ambition Brand Effective Management Channels Not Eponymous Scaleable Economics Partnerships Key Resources Protection Network Effects Competencies Customer Acquisition Early-stage âdigital signaturesâ of high-quality ventures?
- 85. Early Validation & Fast Failure LeanStartupApproachandLaunchpadwithUlster.
- 89. What is a Startup? Not smaller versions of large companies Large companies execute Known Business Models Startups search for Unknown Business Models Startups Fail because they Confuse Search with Execute Startups are a temporary organisation designed to search for a repeatable and scalable business model
- 90. Northern Ireland Lean Launchpad â
- 91. Northern Ireland Lean Launchpad â Hypothesis - Test driven Entrepreneur Led Market Focused Team Dependent (using Post Docs)
- 92. Creating a pool of credible ârowersâ to power start-ups
- 95. Observation 5 - it needs to be selective
- 96. Observation 2 - make it easy!
- 98. âbecause innovation is so uncertain (most will fail), it is fundamental to consider the risk-reward relationship in innovation⊠Indeed, the state should âŠ.spending also, for example, on seed finance which private venture capital (VC) has proved too risk-averse to fundâ âMake it Less RiskyâŠâ
- 99. âSilicon Valleyâs latest hero, Elon Musk, launched Tesla, a successful maker of electric cars, with a $500m guaranteed government loanâ.
- 100. Not every region suffered a decline. Deals were up 100% in the North East
- 103. The Seed Market In 2013, angel networks were replaced by government-backed funds, followed by crowd funders, as the top funders More than the next 2 togetherâŠ
- 107. This is - at the *moment* an early stage phenomena âŠbut thatâââčs what we tend to do!
- 109. BetterTerms CompletedRound AgileValuation De-risked Hittargetin48hours!
- 110. Testing Valuations - Pre-IPO�
- 111. Technology from MMU Over-raised ÂŁ700,000 from 37 angel investors
- 112. MindlïŹood
- 113. Double deal flow - make more âsmall betsâ Better validate early opportunities Pool a community of tested entrepreneurs Make the process Simple, Lean & Scalable Better map the funding landscape Mix grant to equity finance Exploit emergent investment markets In Summary: