Startups are a hazardous journey and, most early stage ventures end in some form of failure.
With such high levels of uncertainty surrounding the development of real business models in conjunction with new technologies, the topic of how to ‘strengthen’ Australia’s startup eco-system and assist founders in creating global value is a popular one.
The recent PwC report commissioned by Google highlighted the potential of a $109 billion addition to the Australian economy, or 4 per cent GDP by 2033 if we take advantage of startups and their potential to create value.
This was a profound insight, and along with the consultation to the Entrepreneurs Infrastructure Program, (Submissions close today, 19 June) perhaps something can be done by the eco-system at large to truly take advantage of this opportunity.
But, this won’t be without its many challenges.
A separate report from the Grattan Institutes’ Ben Brooks, with the contribution of numerous stakeholders in the startup eco-system focused on among other things, incubators, accelerators, co-working spaces and the role they play within the startup environment.
A particular are of interest for me was the fourth section, which related to gaps in the startup lifecycle.
Ben, in conjunction with numerous contributors highlighted five key gaps he believed existed;
- Neglected: research-intensive startups
- Neglected: young startups, older founders and small cities
- Neglected: hardware startups and their unique challenges
- Is the accelerator model appropriate for Australia
- The funding gap
I don’t think Brooks is alone in his sentiments.
The actual lifecycle of a startup, regardless of the purpose of the business, the problem it aims to solve, the age of the founders or the method of delivery, comprises of two distinct components: exploration and execution.
Exploration requires founders to incubate and explore ideas, problems, business models and their customers with the clear intent of finding a business model that can be delivered at scale.
Execution then implies founders take what they’ve learned about their business model and deliver it at maximum scale.
The incubation or ‘exploration’ phase typically take a lot longer than people think and it’s pretty clear for those who have tried that building a sustainable, scalable and potentially defensible business model isn’t easy.
Trying to find the right business model will also likely cost a lot more than you expect and this is where the numerous phases of investment become critical to a startups survival.
But, rather than comment specifically on the gaps, or focus on how hard it is to build a viable business, let’s looks at what we might be able to do to solve some of the problems that currently exist.
The notion of evidence-based entrepreneurship is moving to the mainstream and is beginning to power not only how we build startups, but also how we teach entrepreneurship, how we invest in startups, and how we commercialise innovation in education, corporate and Government environments.
I believe that the support of evidence-based entrepreneurship among all key stakeholders in the startup ecosystem (founders, incubator and accelerators, Angel investors, Venture Capitalists, University’s, Corporations and Government) will significantly strengthen the environment at large.
This notion will reduce the risk of a business models failure, increase investor confidence by validating how ready a startup is for investment, and provide the means to educate a generation of highly skilled, technical and non-technical entrepreneurs that can incubate ideas and business models locally, and proceed to execute them at global scale.
The specific focus of validating business models and the investment readiness level of a startup or new technology is working all around the world. Even within large Government organisations like the National Science Foundation (NSF).
Perhaps it’s time we jumped on board and really take advantage of the $109 billion opportunity we’ve been presented.
(Image source: Brian Gratwicke)