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.

1. Start-ups and Spinouts:
the Fuzzy Front-End & the Hard Yards…
is it worth it?
…confessions of a Start-up junkie…

2. and Spin-outs, but…

6. Place…

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 …

10. Low levels of start-ups …

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 …

13. …correlation does not = causation - right!

14. …correlation does not = causation - right!

15. Does a weak economy leads to low rate of startup
…or do low startup rates lead to weak economy?
i.e. do we make any difference?

16. Director of Innovation
Queen’s University Belfast
Now
Brian McCaul

17. Queen’”⁹s 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 ‘one-off fluke’…

24. …but is it worth the candle?

25. So should we strive to create more?
Why?
Who’s we?
What is a Start-up or Spinout?
How do we do it?

26. Because they create jobs…
“systematic empirical case that virtually all net job
creation was in fact due to younger firms” (Davis,
Haltiwanger, and Shuh, 1996)
Younger firms grow quicker and provide most jobs...

29. “[neither]
SMEs and the startups… are ..
particularly valuable to the economy -
whether measured by jobs, productivity or
innovation”.
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 don’t create jobs..!

31. So what is a Startup?
“A startup is a temporary organisation used to search for a
repeatable and scalable business model”
Steve Blank
“A startup is a human institution designed to deliver a new
product or service under conditions of extreme uncertainty”
Eric Ries
“The typical startup isn't innovative, doesn't intend to
challenge existing companies, lacks a single competitive
adverting, and is not intend to grow”
Scott A Shane

32. “sixpercent
of businesseswiththe
highestgrowthrates
generatedhalfofthenew
jobscreatedbyexisting
businessesbetween2002
and2008.”

33. They pay better…

34. They are more productive…

35. And they export more…

36. We should drop the
term ‘SME’…obvs!
Policies that treat all firms as equally candidates for growth are likely to expect
“too much”
from the vast majority of firms with relatively low growth
potential…

37. So if not all ‘Startups’ 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 “digital signatures” of high-quality ventures?

40. what can be done to influence Growth?

41. Great … but you can’t drive looking through the rear-view mirror …

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 “digital signatures” of high-quality ventures?

43. all about shots on goal?
“Theproblemisthatitisverydifficult,if
notimpossible,to
knowatthetimeoffoundingwhetheror
notfirmsarelikelytosurviveand/orgrow.”
(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. “Monopoly is the condition of any
every successful business”
“Every monopoly is unique, but they usually
share some combination of the following
characteristics:
proprietary technology,
network effects
economics of scale
and branding”
Peter Thiel - Zero to One

48. “Proprietary Technology is the most
substantive advantage because it make you
produce difficult or impossible to replicate”
“Properly understand any new way of doing things
is a technology”

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. “Proprietary Technology is the most
substantive advantage because it make you
produce difficult or impossible to replicate”
“Properly understand any new way of doing things
is a technology”

60. Recent NI IPOs
50% 50%
Qubis
Not-Qubis
Kainos
Andor
UTV
First
Derivatives

61. Feeders … and Leaders
It will be led by entrepreneurs …

62. Spinouts can contribute to the 6%
and can create the game changers

63. Because spinouts can be critical
for ecosystem development …

65. “you cannot create something out of nothing …
entrepreneurial ecosystems are based on pre-
existing assets”
not one size fits all
“Are US Spinout processes really better than those of UK
Universities” - 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
ecosystem…

69. Because they are critical for
innovation …

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.
• Process - Structure to identify & develop experiments doesn’t exist
• Culture - These experiments will mostly fail. That is not often easy
to do in large organizations
• Resources - Large volume of experiments require big money
• 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 drop…

74. Even if most do fail…

76. CBInsights

78. Theyshortcutpainstakingcorporateplanning
cycle
That’sinherentlybiasedtowardincremental
improvements
Andnurturedisruptivetechnologies&radical
businessmodels

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 support…

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 “digital signatures” 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
≈

91. Northern Ireland Lean Launchpad
≈
Hypothesis - Test driven
Entrepreneur Led
Market Focused
Team Dependent
(using Post Docs)

92. Creating a pool of credible ‘rowers’ to power
start-ups

93. https://vimeo.com/109811495

95. Observation 5 - it needs to be selective

96. Observation 2 - make it easy!

98. “because innovation is so uncertain (most will fail), it is
fundamental to consider the risk-reward relationship in
innovation… Indeed, the state should ….spending also, for
example, on seed finance which private venture capital (VC)
has proved too risk-averse to fund”
“Make it Less Risky…”

99. “Silicon Valley’s latest hero, Elon Musk, launched Tesla, a
successful maker of electric cars, with a $500m guaranteed
government loan”.

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 together…

107. This is - at the *moment* an early stage phenomena
…but that’”⁹s what we tend to do!

109. BetterTerms CompletedRound AgileValuation De-risked
Hittargetin48hours!

110. Testing Valuations - Pre-IPO…?

111. Technology from
MMU Over-raised
£700,000 from 37
angel investors

112. Mindlflood

113. Double deal flow - make more ‘small bets’
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: