How could Europe support web entrepreneurs


Published on

Published in: Business, Economy & Finance
  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

How could Europe support web entrepreneurs

  1. 1. 1How might we support web entrepreneurs in launching andgrowing sustainable global businesses?Hereafter, an open-innovation challenge launched by the European Commission on the OpenIdeoweb-platform. People are invited to propose their ideas to this question:"How might we support web entrepreneurs in launching and growing sustainable globalbusinesses?"Hereafter, my proposition: Co-found your web startup with a Big IT firm !Ari Massoudi / Consultant Strategy of Innovation / /
  2. 2. 2BIG IT firms offer you their engineering resources to bring your web business idea to life! Pitch youridea to Big IT rock-star employees. If they love your idea, they will conceive your web product andpartner with you to launch your web startup.There is more and more people having disruptive and innovative web-based business ideas, but thesepeople do not have IT-Web/Computer Science degree, knowledge or skills (except using the internetof course). It is very difficult for these people to find co-founders expert and skilled in IT (such ascoders/developers, web-designers and web-marketers). Most of IT/Web experts, even young ITgraduates, are a rare resource. Indeed they prefer to be hired and to work for Google, Microsoft,Oracle, HP, Apple or other big IT companies than joining a risky start-up project !Google, Microsoft, Oracle, HP, Apple .... could offer their engineering and business resources to web-entrepreneurs who do not have IT skills.People having a web business idea could submit online their idea pitch to the program. If big IT firmemployees are seduced by the idea, they will work on it, and improve it in collaboration with the ideaholder. Big IT firm employees will design, build and develop the idea to a beta version ready to betested in real.This contribution will be provided in exchange of equity in the future startup company.Every web entrepreneurs would dream to have Google, Microsoft or Apple as CTO co-founder?For example, in exchange of the work done, Big IT firms and their employees will have 20% of theequity of the future startup.Alternatively, if the web product/service could be commercialize directly by the Big IT firm, theentrepreneur will be rewarded by royalties on revenues of future sales.The Proof of ConceptExamples of companies offering their support in design and conception to idea holders:- Quirky: Its a design-driven open-innovation firm for creative products. Submit your idea to theQuirky commnunity, if selected, Quirky will conceive, manufacture and commercialize your producton its e-commerce shop, and you will get royalties on future sales The Junto: The Junto incubator is dedicated to Non-tech entrepreneurs having a web-startup project.Submit your idea, if selected, The Junto team will conceive your beta version. You can entirelyboostrap the project or make it fund it by the crowd / The Junto team work is rewarded by sweatequity or by royalties on future revenues of your startup. The Startup porgram of Astek: Astek is a global IT engineering and consulting firm with 3,200employees and a turn-over of Euro 220M (Headquarter in France). Astek has launched a StartupAri Massoudi / Consultant Strategy of Innovation / /
  3. 3. 3Program: Anyone can submit an e-business idea/project, if Astek managers are seduced and believe inthe business potential, Astek will bring all support in engineering, conception and technicaldevelopment of the web product. This support is provided in exchange of equity (sweat equity). will your concept support web entrepreneurship?What is essential for every entrepreneurs, in web and in any other sector, is the technical resourceneeded to conceive the prototype. With a prototype (or a beta version of a web product/service), theentrepreneur can test the market, and raise funds from investors to sustain all the other resourcesneeded for the development of the startup company. But without a prototype, the idea, even a fantasticone, will remain on the paper even if the paper is a formal business plan written on a strong marketresearch.This concept will enhance the number, the diversity and the quality of web startups.What kinds of resources will be needed to get this concept off the ground and scale it?The European Commission missions will be:- to offer a legal framework for this startup program (term-sheet, sweat equity and shareholderagreement)- to invite all Big IT firms to join the programThe program will be full online (no need to travel) and could be launch as an idea contest twice a year,open to all European citizens. The European Commission will have also to actively promote andcommunicate about the program, and call web entrepreneurs to submit their ideas.How could we get started?This idea is not really complicated to launch, its just a question of willingness! In addition, the proofof concept is already established (see examples above).Question & Answer & Comment:Q: Youre right, Ari, big IT firms could definitely offer more by way of these services. Some offerweb tools but not so much consulting or business incubator-type functions. It sounds like the keyproblem you are looking to solve is that innovators networks do not always contain all of theresources and skills they require. But why should we leave that up to big IT firms to solve? They have a lot on their plate, and perhapsthey know they couldnt possibly support all the demand they would receive. As a result, they wouldcharge a lot to reduce that demand to a reasonable size, and then the innovators would be overpaying.Ari Massoudi / Consultant Strategy of Innovation / /
  4. 4. 4Why not find a way to connect innovators to those individuals who are qualified to work at a big ITcompany but dont? If you find individuals who are passionate about what youre doing, they will bewilling to contribute more to your cause than someone who doesnt care about it and just wants yourmoney.Ari: Yes, you are right. Based on my experience as entrepreneur and startup mentor, one of the majorreason of failure of seed projects is the lack of technical resource, more precisely the lack of a skilledtech co-founder(s) (engineer). The tech resource is essential to bring the idea into a prototype (or abeta for a website, software, apps). And without a prototype, all other resources (business, marketing,project management ...) remain theoretical and therefore useless.Startup incubators or accelerators are very efficient to motivate entrepreneurs, they are very efficientto bring business and project management mentorship to entrepreneurs. But they can not provide techresources as a service, because tech skills are rare and expensive. And most of incubators/acceleratorsworks for free (or nearly for free), with the help of voluntaries. The best they can do is to favor theteam-building of complementary co-founders (tech + non-tech skills) by organizing networkingevents. But once again, tech profiles are rare, and based on my experience, in such startup events,teams have already been built outside of the incubator/accelerator (at their business or engineeringschool, or just people knew each others before). Therefore, it is very difficult for a single personwithout tech skills (the majority of people having business idea) to launch a tech-based startup (in ITor any other sector).Concerning the second point: Why big IT firms?Big global companies aspire all the wealth and resources of the planet. Its time for big globalcompany to accept the fact that they have a social responsibility, and taking part of a such program isa way to share their knowledge, know-how and skills with individuals. Offering their support toentrepreneurs is not charity, but a unique opportunity to do something good, to innovate and createwealth together.Q: And exactly for this reason EC DA (European Commission Digital Agenda) can fullfill animportant complementary role; For example the Netherlands; there are many ideas, market reach andseed capital. Though currently a lot dont startup because of the lack of tech talent. The freelancers areoverbooked and too expensive to pay for grassroots startup. So having great links betweenRussia/Ukraine/Egypt/Romania would sprout many more EU startups with potential.Ari: We are on the same wavelength! Tech talents, engineering facilities and prototyping are the keyof startup success.Ari Massoudi / Consultant Strategy of Innovation / /
  5. 5. 5Q: I agree 100% Ari. The only thing I would add is that we have to have a way to educate the non-tech idea people as to the concepts behind the different CMS or other software or programming thetech people might want to use. And, on the other side, make sure the people with the ideas cancommunicate clearly. Tech people and idea people tend to think in different ways. For instance, takingit out of tech speak, theres a "pump." That "pump" can only work if there are "pipes" and "switches"attached to it. A non-tech, idea person might say, "Fix the pump" and then be surprised later that the"pipe" broke. The tech person will say, "You didnt say to fix the pipe." To the idea guy, the wholeapparatus is a "pump" since it can only work when everything works together. To programmers, onlythe "pump" is the "pump." We have to develop ways to translate between them.Q: True Carrie, the gap is huge in understanding eachother. It is hard to find the tech guy who thinkswith you on the whole thing. But when you found one, make him co-owner, you dont want to lethim/her go!Ari: Yes, you have raised an important point: the communication between non-tech web-entrepreneursand tech co-founders.When a non-tech explains his idea to a coder/developer, usually the tech says: "humm, what languagesdo you want to use? PHP, RoR, Python, CSS, .... ?" ... This is like an Alien language for the non-tech!Of course, you are right to say that non-tech should learn some vocabulary in the IT. But its timeconsuming and difficult. Another way is to find an intermediate space of communication, nor tech,nor business. This intermediate space will be a "design-driven communication space". People, techand non-tech have to talk to each others having this in mind. As example, you know the acronymWYGIWYS (what you get is what you see). It is exactly how tech and non-tech should discusstogether, having the "what you see at the end" in mind, and whatever the tech solution that the techco-founder will choose.If non-tech explains his idea with drawings and ppt slides of what he imagines, of what he would liketo see or use the service/product, then the tech could contribute with the same language, by saying:this is technically possible, this is not, .... here another features that could works and give the same"what you want to see" .... ect.Q: Love this thread. Having worked in big (IT) companies before, I know that one of the "restrictions"is that employees generally arent allowed to work for anyone else. If the company is involved, that ofcourse gives techies permission to be involved with web start-ups. And a great avenue for exposingboth the company and the techies to new business ideas.How might we extend this further to allow employees to contribute to web start-ups without formalcompany sponsorship? Even allowing employees to volunteer in their own time would be a big stepfor big companies.Ari: "How might we extend ths further to allow employees to contribute to web startups ...."Ari Massoudi / Consultant Strategy of Innovation / /
  6. 6. 6I think we could interest big IT firms by offering a % of equity of future startups in exchange of thework done by their employees. The equity stocks should be fairly shared between the Big IT firm andits employees. If its only the big IT firm that owns the % of equtiy offered, this will demotivateemployees, and if its only the employees that own the % of equtiy offered, the big IT firm will notaccept to allow its employees to take part of the program. For example, the program can establish thisrule: 20% of the equity of a future startup will be offered in exchange of work done by a Big IT firm,and the equity offered will be shared 50/50 between the big IT firm and the employees who workedon the project. The agreement will indicate that the 20% sweat equity will have to cover the conception, design anddevelopment of the web product/service, before and after the incorporation of the startup, from theseed stage (idea to prototype) to the early-stage (from prototype to a market ready product/service).Then, it is the job of the CEO (the entrepreneur who brought the idea) to make the startup live, tobuild a team and to develop the business. Of course, as shareholder the Big IT could also bring itsbusiness support to the startup (but this is not mandatory).Even if some big IT employees decide to leave the Big IT firm and to join the startup, its not aproblem, because a part of the startup is owned by the big IT. So there will be a shareholder andstakeholder interest between the big and the small which is finally a spin-off company (with thepeculiarity that the origin of the idea came from outside the firm and not from inside.The equity offering is the key to interest big firms in such programs.Q: have the passionate startup renting a room in the big IT building. They get a public wall/windowin the building to visualize/mindmap their thoughts etc.The big IT boss probably became big because he/she gave space to great coders. He/she should whenbeing big still dare to do that.More things like NDA/background knowledge need to be tackled but maybe somebody else hassuggestion for that? when the public wall mindmap is growing, people during walking/coffeebreaks,maybe once a week timeslot to come at a table and brain about the technical sides would encouragebig IT firm coders to engage.Q: Very interesting concept and in particular interesting discussions in both threads. Having beenaround since before Microsoft swallowed RBase and Visio I ambivalent about partnering with thelarge IT firms. However my other questions are: In "what" does a start-up offer equity to a technically competent partner? If the answer is in theintellectual property in the idea - at what point and utilising what resources does theentrepreneur/startup secure the rights to that property?Ari: The startup will offer a part of the corporate equity to the big IT firm and employees as soon asthe startup is incorporated and has legal existence. This equity (example 20%) will be offered inAri Massoudi / Consultant Strategy of Innovation / /
  7. 7. 7exchange of the work done by the big IT firm (and employees) to conceive, develop and improve theproduct. Therefore, the deal is shares in exchange of work, instead of cash in exchange of work. Theintellectual-industrial property property will be fully owned by the startup company and the co-founder CEO. We can imagine a lower percentage of equity (example 10%) but the big IT and itsemployees could be aslo co-owners of the IP with the CEO. But I think its not a good deal, becausethe CEO will not be free to develop his company as he wants. The CEO should remain the CEO.Q: we have been in this situation when involved in a Eurostars project where the startup with the freshideas had to let the work being done by a huge IT firm.At Eurostars when applying you need to fully detail out background knowledge you bring in withoutclaiming IP after/while using it for the new product. So in a way the skills and method of working bybig IT person is given to the new venture, giving breath to the little CEO and overview for the bigCEO on what he puts in for the shares.IP is a tricky thing with big firms, but this is the only way I know about at the moment to have a bigfish swim hungry next to a small fish.Ari: The program proposed should be designed in favor of entrepreneurship, creativity, innovation andbusiness development, not to satisfy the greed of big firms. Therefore the deal has to be Win-Win orthere will be no program!Q: Last night I heard a brief interview with CEO of Microsoft Worldwide (from France) who wastalking vaguely about start-ups growing under the Microsoft umbrella, then went on to talk aboutSkype as an example, but Skype is now wholly owned by Microsoft.Immediately after that was another article about two very different attitudes to undertakingentrepreneurial activity:1 - fast prototyping, development and iteration with a view to a quick return on sale of the enterprise;and2 - building a solid foundation with a focus on long term profitability.It seems that the first is more common than the second.Keep up the good work in this area Ari - I shall watch developments with interest.Ari: This is an excellent idea and an excellent thread. Its closely related to one of my concepts. Ari,below you write:"Based on my experience as entrepreneur and startup mentor, one of the major reason of failure ofseed projects is the lack of technical resource, more precisely the lack of a skilled tech co-founder(s)(engineer)"This is exactly my (bitter!) personal experience too, having started a company without a tech co-founder. The company has been successful to a degree but ultimately failed to scale because of itsAri Massoudi / Consultant Strategy of Innovation / /
  8. 8. 8inability to iterate fast enough and because it burned through investors money too quickly byoutsourcing APIs and rebuilds. Even when you are safely past the prototype stage and have built aworking product, the need to iterate never goes away- if anything it intensifies as you get morecustomer feedback.Our ideas are different approaches to the same problem- how to avoid burning through cash by payingfor specialist expertise, especially in the case of non-tech entrepreneurs.One reflection on this type of entrepreneur- they are often experienced thirty and forty-somethingswho know their market very well and have terrific customer insight, which young developers simplydont have. They also have family commitments that make taking the plunge and leaving their job avery high risk prospect. Many of these people often never become entrepreneurs or when they do takethe plunge, suffer from a very short runway.This is not a brain drain, more of a brain blockage that needs to be freed. Should we try to mitigate therisk for these mature entrepreneurs and help them incubate their product ideas before they have to giveup their day job? Especially given the fact that few VCs or Angels will consider giving money tosomeone who hasnt got the self belief to back their idea full time themselves.Ari: Thanks for sharing your experiences and thoughts! We are on the same wavelength! I agree withall you wrote above.Just to paraphrase further:Tech talents, engineering facilities, prototyping and ..... iteration, iteration and iteration are the key ofstartup success. Iteration is essential to continuously improve a new product and enhance its value forusers/consumers. And iterations need to be done in a very reactive manner, and having tech talentsinside of the startup (as co-founders and/or employees) can allow this reactivity.Alternatively, due to the paucity of tech talents, the other solution will be to have a tech resourceoutside of the satrtup, not as service supplier (client-consumer relation) but as shareholder-partnerwho will be fully involved in the success of the startup in a long-term view.Your "vouchers for equity" based solution is very interesting and offers more liberty to entrepreneursto customize the resources they need. :Q: Comments in this thread are equally fascinating - in particular the insights about barriers to tkinginitial steps. At 61 I have had a non-web based idea on the drawing board for 10 years for a nichemarket of several million consumers but so far I have not protected my idea because the capital cost ofsecuring IP rights is prohibitive and also because my research indicates the manufactured cost ispresently too great for the market.Q: I really like this idea too. Mainly because I think it has the potential to address, what I believe (andhave seen documented in many studies) is an EVEN BIGGER constraint for tech start-ups thantechnically-skilled people. Namely, it has the potential, through key partnerships with large tech-companies, to address the problem of discovering innovative distribution channels.Ari Massoudi / Consultant Strategy of Innovation / /
  9. 9. 9As far as I can see, even the most innovative technology fails, if it cant find its market quick enoughto generate revenue to support growth or iterate, etc. We hear success stories all the time aboutcompanies that received VC or Angel funds, developed amazing platforms, sustained themselves foryears generating very little revenue, before becoming profitable (if they ever did.) But this is SORARE (like 1 in 100,000) mainly because it is not a sustainable model. Most start-ups need to bemarket-minded and should be generating revenue to sustain growth as quickly as possible. Thisrequires innovation in technology, AS WELL AS innovation in distribution channels and revenuestreams. For better or worse, the big IT companies, essentially own distribution channels on the web(in that they have amazing amounts of data around them, as well as control - think Google Ad Works)- so most start-ups could definitely benefit from their data and expertise in this area. Hopefully anentrepreneur might add some creative insight into how to exploit niches or opportunities that bigcompanies totally missed.Q: Hi Ari, some IT firms are already doing this as you mentioned under their own brand and umbrella.Do you expect to bring all this into one place or do you expect to "standardize" a little bit their serviceto make sure, entrepeneurs can compare them?Ari: Yes the idea is to organize this startup program under the umbrella of the European Commissionwith a standard (but flexible) legal structure (term sheet, partnership/shareholder agreement ...). Theterm sheet, shareholder agreement could be very standard, but the services provided by big IT firmscould be different ("propose what you want") therefore, there will be some competition between thebig firms (and at the end they will all propose the more ... engineering and product development andimprovement/iterations, web-design, e-marketing, or even off-line marketing and other businesssupport).Ari Massoudi / Consultant Strategy of Innovation / /