Startups, all the steps to avoid falling into the Silicon Valley Bank trap
The author of the post, Silvano Joly, boomer from Turin, he is a manager who has worked with Innovation Leaders such as PTC, Reply, Sap, Dassault Systemes, Centric Software, Syncron and with pre-IPO companies, startups. Contributor at various Italian Universities, he is a pro-bono mentor of high-tech startups and has always been a friend of the Piccola Casa della Provvidenza (Cottolengo), the oldest institute dedicated to assisting people with serious disabilities –
There’s a lot of talk about it but do we know exactly what a startup is?
The best way to discover and understand it is certainly to visit the website of Steve Blank, the now legendary Californian entrepreneur, to whom the coinage and the best definition of the term:
A startup is a temporary organization that aims to seek a scalable and repeatable business model.
In the industry, it is believed that drafting this definition of “startup” took Steve Blank at least ten years of study and work, even though the term had existed for years and had probably already inspired the icon and “Start” button on computers.
But the validity of Steve Blank’s lemma lies in the terms temporary, scalable and repeatable which differentiate the startup from the “small business”, which has mistakenly become a synonym almost always used inappropriately: how many times have we heard presentations start with the phrase “We are a startup founded in the early 2000s…”
In fact, it was precisely at the end of the 90s with the infamous dot-com bubble that the term spread throughout the world. In this way, information technology has influenced the economy and languages, giving the term startup the meaning of a product (sometimes service) company that does business mainly on the Web or with the Web. This era, calledNew Economy, has rapidly evolved into the Digital Transformation, which we are still experiencing today, where increasingly advanced technologies have made business processes previously carried out by hand or with IT tools for individual productivity (e.g. word or excel), culminating today in the concept of Digital Twin which is becoming established to define non-material worlds but in fact identical to real ones.
In that era we witnessed an exponential growth in IPOs and listings, primarily in Silicon Valley (where today the troubles of a bank can reverberate on an entire ecosystem of businesses), supported by low rates, which saw the NASDAQ index reaching its highs and then collapsing, with many failed startups but also consolidating incredible companies such as Google, Amazon, eBay and many other more technical and technological ones.
Startups, the 5 categories according to Steve Blank
But if we go back to Steve Blank, we can read on his website that a startup does not have to be web-based or technological and rather belongs to five categories:
– small business, innovative but not scalable, underlying “organic” growth
– from acquisition, i.e. with an exit plan linked to being bought by a larger company;
– scalable, with a patent or a repeatable and scalable business model based on investment and therefore seeking capital;
– spin off, created by “splitting” from a large company with a new product and other/new customers;
– social startups, with benefit purposes or which aspire to make the planet better.
In these twenty years and a little more recently in Italy too, startups have become de facto a professional alternative, a profession, a lifestyle choice. Who doesn’t know young people who founded one, boomers who lost their jobs or resigned to create their next big think? On the other hand, incubators, accelerators of banks, universities and companies, venture capital have become common elements in the working, professional and economic scenario.
How to create a startup
But how to create a startup? Also on this topic Steve Blank tells us that this is the second question. The first should be done to ourselves: Do you really want to create one? And it continues, in a video lesson that is absolutely view:A startup is not the small version of a larger company, it is something completely different and cannot be done in your free time. Creating a startup requires passion, commitment, dedication, determination and a lot of hard work. Just having a great business idea is not enough… A startup is a calling. And if you’re not called, if you can’t get that idea out of your head… forget it… It’s an all-encompassing experience that could give you great satisfaction. As well as, why not, that of changing the world”.
Steve Blank, inventor of the method Lean Startup
This is certainly the case, the idea is the starting point for creating a startup, but given that, as they say, Better to fire ideas than people, it is appropriate to admit that the first idea is just one of many to be evaluated in the continuous search for a repeatable and scalable business model. The canonical steps are quite well known and described in the well-known Canvas model, created by Alexander Osterwalder , which divides the elements necessary for launching a new business into 9 blocks: Customer Segments, Value Proposition, Sales Channels, Customer Relationships, Revenue Streams, Key Resources, Key Activities, Key Partners, Cost Structure.
But besides good reading, sites and lessons, who can help us if we want to give substance to our idea and dedicate ourselves to creating a startup? What advice, protections and actions should be taken? As is my habit, I asked some colleagues and friends who are specialized and experts in a specific area.
Learn to protect the idea
I’ll start with the lawyer Filippo Imberti of the Studio Laforgia, Bruni & Partners who explained to me that “An idea is born to be new, creative and offer innovative products or services, which bring a benefit that is possibly new or greater than what is already known. Regardless of whether it is a private individual, a startup or a large company that gives birth to the new idea, it is always advisable to find a tool to protect the efforts and investments made, both economic and intellectual. This includes the system of legal principles that aim to protect the fruits of human inventiveness and ingenuity through instruments for the protection of Intellectual Property”.
“We are essentially talking about the invention patent which protects technological product and process innovations (mechanical, chemical, electronic), about the design which protects the aesthetic and external appearance of a product, about the trademark which creates an exclusivity on a name or distinctive sign, of the Copyright that protects the works subject to copyright (including Software and Apps) and the related contracts (licensing, confidentiality, technology transfer, etc.).
“The Inventor, the Start-up and the large Company create a competitive advantage, legally protected from counterfeiting, in which to invest and grow. Furthermore, Intellectual Property is one of the requirements required to set up as an innovative company or startup and open up to a variety of subsidized finance measures provided at European and national level to support innovation, Research & Development and internationalisation. To avoid making mistakes and being robbed of your ideas, to be followed in the registration of one or more of these protection instruments, it is advisable to always rely on a professional registered in the Register of Industrial Property Consultants, avoiding or limiting the phases of primary analysis is do-it-yourself which could prove to be very dangerous and compromise the success of an entrepreneurial adventure”.
A key figure: The Business Angel
Another very important figure in the conception and definition of the Business Plan and in the aforementioned canvas model is that of the Business Angel, a modern figure who inherits some characteristics of the mentor, but has a very clear operational definition: he is an informal investor who offers capital and knowledge to startups that have good development prospects, from an economic point of view and with technical assistance and strategic direction.
Being a professional with managerial or entrepreneurial experience, the Business Angel becomes a zero-cost expert in the crucial start-up phases of the startup and ensures a good investment by becoming part of the company itself.
Angelo Italiano is a manager with 30 years of experience in Accenture. Since 2014 he has dedicated himself to investing in startups and local entrepreneurial initiatives with the ambition of international growth. In 2016 he was awarded as Best Business Angel in Italy by StartupItalia. I asked him for the three pieces of advice he would give to the founder of a startup, before presenting himself to a Business Angel or to an organization such as the Club degli Investitori of which he is a member: “I will answer first In a simple and concise way:
1) Arrive at the meeting prepared
2) Try to evaluate your proposal from the investor’s point of view
3) Without the Product you can’t start, without Go2Market you can’t do business.
Exactly what does arriving prepared mean?
“And I can also articulate it better: the motivations and professional history of the business angels (BA) you will find in front of you are different. And there are a thousand ways to have at least an idea – from browsing Linkedin to networking with friends and acquaintances. Arriving prepared means knowing experiences and skills, making communication simpler and more direct. A fundamental factor in preparation is in fact time management, to cover all the qualifying aspects of your business in a short time, leaving room for questions and arousing interest (I have heard it said in this regard “a good speech should be like a woman’s skirt: long enough to cover the subject and short enough to create interest”)”.
“Furthermore, when managing time the founders will have to consider that a BA sees dozens of projects: the level of attention therefore tends to rapidly reduce: and in the useful window you must leave what is needed to leave the general impression of enthusiasm and professionalism – rather than go into small technical details that are very unlikely to trigger an investment decision.”
The business angel’s passion is not philanthropy
“Regarding the investor’s point of view: the BA, however expert and prepared, will directly invest his time and money – more out of “passion” than for a structured and codified process typical of a venture capital (VC). The fundamental parameter is therefore the entrepreneur, his “tiger’s eye”, his ability to get involved and work as a team. Presenting a project with part-time entrepreneurs, perhaps even with an immediate salary, means not believing in the success of the startup – if the founders don’t believe in it, why should a third party invest money?”.
“Be careful not to confuse the BA’s “passion” with a form of philanthropy or gullibility: the BA knows and accepts the risk (“no business without risks”), even more so in the presence of an investment in a startup – but as always in investments: greater risk must correspond to greater return. Therefore propose rational evaluations, which you would be the first to accept (not the updated cash flow of a business plan straight from the world of fairy tales). And if your startup aspires to pay salaries and little more without “scaling” volumes, it is better to look for a business partner or a bank, not a BA”.
There is no startup without a product that someone will buy
“Finally, the Go2Market. Inevitably a startup is born and focuses around a product, a service, a solution, a technology; the attention is focused on the technical or even scientific aspects (just think of Life Sciences startups), postponing the “commercial” connotation to later times. But there is no excellent product if no one is willing to buy it – and this combination (“willingness to pay”) must be verified as soon as possible, certainly before presenting the startup to an audience of investors”.
“Of course, it is useless to ask a startup that has yet to design its own “business model” whether it will open the Chinese market in 2038 with a distributor or its own sales network; but it is instead a fundamental part of the startup project to think “who is my first customer?”, to discuss with those who will have to decide whether/how to purchase, to clearly define what are the distinctive factors compared to the existing solutions on the market (and perhaps those that in the meantime they are arriving). In short, we need to move away from the romantic idea that with a good idea you will make a fortune, an approach closer to the lottery than to investment; instead, to do business you need commitment, continuity, ability to execute (“Execution is the strategy”)”.
Incubators and accelerators
We talked about incubators and accelerators and I cannot fail to mention Piemonte Innova, the center of attraction for companies, research centers and private individuals who develop solutions. In 2006 it was still called Torino Wireless and it was a real revolution conceived by professor Rodolfo Zich to relaunch ICT, I passed you by a gap year taking my first steps in the start up and VC world and learned a lot. Today there are a plethora of public and private organizations to incubate or accelerate startups, but I believe that Startupbootcamp, has unique characteristics. It is in fact made up of not one but a global network of accelerators, each specialized and focused on a sector, which support start-up founders in the early stage to help them scale their companies by providing direct access to an international network of mentors, most relevant partners and investors in their sector.
I also collaborate pro bono with Startupbootcamp, as a mentor for FashionTech, the unit dedicated to the Fashion industry which every year selects 10 startups around the world admitting them to a 3-month acceleration program that exposes them to partners and investors. Their goal is to become the future industry-leading FashionTech companies. At the end of the program, all startups present their innovative ideas in front of hundreds of investors, partners and mentors in our grand finale: the Demo Day.
Five rules for startups according to Naza
I spoke about it with Nazzareno Mengoni, young Italian entrepreneur, founder and Manager Director of Startupbootcamp Italia, a truly volcanic personality and in innovation and business development. I asked “Naza”, who was also President of the Young Entrepreneurs of FederlegnoArredo and is an active investor in the world of DeFi (Decentralized Finance), to share his experiences to suggest to those who are embarking on a new adventure with a non-profit startup only advice but also caveats and don’ts: “From my experience with startups I suggest 5 fundamental points:
1, Underline the importance of the product/service: it is important that the startup has a product or service that solves a specific problem and that has significant market potential.
2, Create a competent group: the startup must have a group of highly competent professionals who can collaborate effectively to achieve the company’s objectives.
3, Plan carefully and see the potential exit right away: the startup must have a detailed business plan that covers aspects such as marketing, finances and operations.
4, Identify the competition: It is important that the startup has a complete understanding of the competition and their positioning in the market.
5, Be resilient and manage liquidity carefully: Startups must be ready to adapt to changing market conditions and make changes to their product, service or business strategy. This is also FashionTech’s vision: creating a successful ecosystem! We are convinced that only through a collaborative approach and common commitment can we create a better future for innovation and economic development.”
A concrete experience: Must Had
I conclude this analysis by talking about a startup: Must Had, which is building a digital ecosystem made up of supply and demand for and of waste textile material ( mainly returned, unsold and defective products) with the aim of reducing the environmental and social impacts generated by the textile and fashion sector.
To manage this process, the Must Had platform makes use of specific technological assets that facilitate the analysis of the waste textile material available and the match with the ideal circular solution, a blockchain system for tracking the end-use supply chain. of-life and a system for measuring environmental and social impacts.
A whirlwind of emotions
“Starting up is a whirlwind of emotions, it feels like being on a roller coaster. Every day is never the same as another, especially when you are taking your first steps. We started about 2 years ago without previous startup experience and this certainly slowed us down in the first months because we had to combine two very important activities for a native company which I would summarize like this: “we learned how to do”. It was a very intense period which, however, allowed us to better understand the market in which we operate today and understand its needs”.
“Of course, it wasn’t all sunshine and rainbows. But, honestly, one way or another we would do almost everything again. In any case, looking back at our path, it would have been really convenient for us to entrust ourselves from the beginning of the startup’s journey (“the famous 0 to 1”) to some body that supports startups in their growth path through work or passion. In fact, we think that it is essential to count on the support of those who have “already been there”. And that it can contribute to accelerating the growth process because timing is a key factor.”