2 of 3 – Why Unicorns Eat Dinosaurs for Breakfast
The why and how every established company can engage employees, accelerate innovation and transform culture, to fuel innovation and avoid becoming someone else’s breakfast.
The recent advancement of technology is enabling disruptions across most industries. As Andreessen stated in the Wall Street Journal in August 2011 “an increasing variety of software and services are being delivered in the form of digital code.” Therefore the barriers to entry for almost any industry are lower than ever before and even for manufactured goods you can now ‘rent the means of production’ describes Eric Ries in a McKinsey interview. Eric highlights that entrepreneurship is becoming truly democratized, which means nobody is safe.
The Rise of the Entrepreneur!
Here are 10 Reasons adapted from a Forbes article published at the end of 2013 stating why entrepreneurship is on the rise.
- Valuations of successful startups has hit an all-time high. Already 25-40 statups have hit the $1 billion valuation mark and the New York Times is expecting 100 startups to have achieved this milestone by the end of 2014. View a more current list here: http://graphics.wsj.com/billion-dollar-club/
- Initial Public Offerings are back as an exit strategy. 156 companies went public in 2013 in the US – 65% more IPOs than in 2012 with the highest proceeds raised since 2000.
- Funding for early-stage startups is more available than ever. As startups see their opportunity so do their backers but make no mistake that it is not easy to raise finance – VCs back 1 in 400 requests and Angels about 1 in 40. However, bootstrapping is still a viable option with 90% of successful startups going it alone…
- Cost of entry for startups is at an all-time low. An e-commerce website used to cost a million dollars and today costs almost nothing. An app can be developed for under USD10,000 so who needs an investor?
- Startup Accelerators and Incubators are popping up everywhere. More low cost work space and mentorship (or even investments) than ever before are on offer to help founders over-come their challenges
- The world is now a single market, both homogeneous and heterogeneous. It is easier now to offer solutions across boarders and via the web starting in one location and adapting them quickly to fit local markets, without needing to physically be in that market.
- Social media is a boon for entrepreneurs and startups. With social media today entrepreneurs can tune a product, build a brand and grow a business with very low cost and high interactivity.
- Large corporations have lost their ability to innovate. They face a tarnished public image due to financial woes and poor management making it even harder for them to retain their best and brightest – especially their most entrepreneurial employees
- Women are a growing force as entrepreneurs. A poll by the Telegraph stated that almost 20% of young women now aspire to run their own business today as entrepreneurs (up from 15% in 2008).
- Baby boomers are joining the fun in record numbers. In every one of the last 15 years, Boomers between the ages of 55 and 64 have had a higher rate of entrepreneurial activity than Gen-Y.
Unicorns – The Billion Dollar Startups
There are more entrepreneurs in the US now than at the time of the DOTCOM bubble. It seems that a tide is turning and today more startups than ever before are finding success and disrupting the cash cows of incumbents. Tesla (founded 2003) has been leading the way in disrupting the automobile market with electric cars and now has a market value exceeding Nissan (founded in 1933). It once took HP 20 years to become a billion dollar company, and Microsoft 10 years. Amazon made it within 4 years and Instagram within 2 years. Recently, Slack achieved a billion dollar valuation within 8 months!
Entrepreneurs are using advances in technology to create products that customers want in record time, allowing them to grow quickly and disrupt established companies. They are establishing new blue oceans and creating new markets or finding ways to disrupt existing red oceans, where existing players struggle to react fast enough and suffer their fate.
Accelerator and Incubators
Accelerators and Incubators are popping up everywhere, as suggested by the Forbes list above. Startup communities with meetup groups, pitching events, university entrepreneurship courses, co-working spaces, networking events etc are forming and picking up speed. Essentially, all of this helps entrepreneurs learn the skills and mindset of entrepreneurship, leveraging from past failures as well as successes. For sure, it does not mean all entrepreneurs will now be successful. But well structured programs with a strong curriculum and great mentors can help minimize the failure rates of new ventures.
Take the Founder Institute as an example (where I am a director). We are the world’s largest entrepreneur training and startup launch program, helping entrepreneurs to develop their ideas at a very early stage, mostly whilst still in employment (www.fi.co). As a result of a part-time 4-month program, 1300 companies have been launched in the past 6 years, across 100 cities, with an average survival rate of 87.5% creating 10,000 jobs.
Incubators like Ycombinator and Techstars have been crucial in helping young startups (yet mostly with traction) develop themselves into high growth companies. Dropbox, Scribd, Reddit, Airbnb, Disqus and Heroku all came through Y Combinator, and Flirtbox (acquired by Jive), SendGrid, Romotive, Thinkfuse (acquired by salesforce) are some examples from Techstars, all with multi-million dollar valuations.
Not only is technological change fuelling innovation from startups, but the growing supply of hands on entrepreneurship education is also speeding up the learning cycles and increasing the success rates of startups who take a risk. I believe that corporate teams can also learn and practice how to accelerate innovation, using methods similar to successful startups, which will be further discussed in part 3.
23% of our current revenue is under threat from startups – and those are just the ones we know about”. Rabobank
Recently Rabobank, which is valued at US$750 billion, stated, “23% of our current revenue is under threat from startups – and those are just the ones we know about”. Rabobank is facing the challenge head on and learning how to innovate in order to protect it-self and fight back. Rabobank is not relying on the old cash cows it has developed, but is looking at it’s innovation processes to increase disruptive innovation in order to create new cash cows, before the milk runs out.
So how can corporates benefit from entrepreneurship and lean innovation? Can these methods really be applied? Read part 3 to find out more.