No venture can grow without talent, and the two basic types of talent needed—strong employers and strong employees—must evolve together.
In recent years, there has been a significant global shift in attitudes towards entrepreneurship in countries around the globe. Words like “startup" or "accelerator” have replaced “disruptive technology” as the reigning entrepreneurship buzzwords. In fact, there's not a country or city anywhere in the world that doesn’t have a plethora of startup programs for early stage companies. Entrepreneurs are paraded as celebrities with television shows and magazines devoted to the loyal followers of the latest big-win investment or startup trend.
Another reflection of this growth is the wild proliferation of “accelerators”—“incubators” that promise to deliver entrepreneurial success to anyone willing to jump on board (and in some cases pay the fare). The unfortunate reality—at least for me—is that these accelerator demo days always feel like a combination of graduation ceremony and pitch contest, with the uncomfortable feel of a grade school spelling bee competition. Other than “I’ll know it when I see it,” there’s no real way for an investor attending Demo Day to assess project maturity or quantify risks. (NOTE: I’ve personally found the only way to get past this feeling is to actually work with companies as a mentor as they go through any program, and I’ve invested in several as a result).
Corporations and universities that run internal incubator or accelerator programs face many of the same selection issues as startup investors. In addition, they must grapple with the issues of integrating new ideas into existing P&L-driven functions or business units, as well as the politics of identifying who is important enough to have their disclosure forwarded to IP development and filing.
From Start-up to Scale-up
Unfortunately, the selection of what constitutes “success” in all of these cases is guided almost exclusively by a narrow conception of product market fit and a concept of entrepreneurship that consists primarily of the pitch to finance an enterprise. Equating entrepreneurship solely with the concepts of financing and getting the business started is a very incomplete picture of what it takes to be a successful entrepreneur.
In a Nov 2012 Harvard Business Review article, Daniel Isenberg made the case that we should also be focused on scale-up, not just start-up. Regarding focusing on just starting a business, rather than scaling it, he said:
It is also problematic because of two flawed implied messages: The first is that the most difficult and important task of the entrepreneur is launching his or her venture. The second is a notion we might call 'the more the merrier'— i.e., the more start-ups, the more successful the program. Quantity of start implicitly trumps quality of scale.
This “more the merrier” concept certainly seems to be the focus of the startup programs I’ve seen, and even worked with. While most of these programs at least give a passing nod to selection of the technologies, even this expanded notion is incomplete. There is a substantial body of evidence to support this theory in the unfortunate history of many good technologies that were backed by management teams not capable of anything more than simply setting up a business. In my opinion, this is arguably the biggest reason for the failure of so many startups with promising technologies.
The Rewards of Building a Strong Team
And where does this failure of management and vision come into play? As Isenberg posits:
Extraordinary value creation cannot occur without growth, and entrepreneurial growth post start-up has numerous challenges which can be an order of magnitude more difficult than simply starting a venture.
Creating an enterprise that has the potential to be fundable absolutely requires a competent management team and a strong technology that, working together, have the potential to create profitable sales of at least $50M in 5 years. Accomplishing this entails being able and willing to integrate others into an organization that can help build powerful sales and marketing teams, gain access to capital, and find and solidify sales and distribution channels—as well as having the intellectual capacity, integrity, and emotional honesty required to govern talented teams.
It also requires a team that has the capacity to truly understand the dynamics of the business—from recruiting the most talented employees, to the supply chain dynamics, to the customers themselves—and how all of these will change with time and new technologies. Most importantly, it requires a team that can solve the myriad problems associated with scaling a business—including gaining and maintaining market share, as well as customer loyalty and confidence.
In this new world of “startup nirvana," I've seen a whole lot of companies that have managed to get their technologies into the pitch competition—and even raise a few hundred thousand dollars in some cases. My fear is that we’ve created a new monster that stimulates venture birth without the skills to focus on and maintain venture growth—which is what successfully scaling a business is all about.
Paradoxically, the success of such programs may create additional challenges for the growth of others—as scarce early-stage seed funds are sucked away. This could leave more mature management teams—those with an understanding of the real market challenges they face—lacking the support they need for their technologies. Unfortunately, they may not have the appeal of the newborn enterprise where the world is still fresh and new, and challenges are all still to be discovered.
What I do know is that the dynamics of startup energy, superior management skills, and company growth (scale-up) are inextricably linked. Without a vibrant “startup community” it’s not possible to get to the point where you have enough new companies and interesting technologies to worry about “scale-up.” In that sense I’m not opposed to the many programs supporting the startup economy and ecosystem.
However, the failure we must correct is the lack of focus on developing true management talent. It seems almost an assumption that anyone who has an idea that might someday be a commercial success inherently has the management talent to execute and grow the business. We need to renew our focus, giving much more attention to enriching the local labor pool—and not through the cliché “mentoring” or “boot camp” programs that go hand-in-hand with the startup ecosystem today.
Instead, we need to focus on developing appropriately skilled managers to both start and scale companies—and the skilled team members that entrepreneurs will need to make their businesses sustainable. No venture can grow without talent, and the two basic types of talent needed—strong employers and strong employees—must evolve together.
The nuviun blog is intended to contribute to discussion and stimulate debate on important issues in global digital health. The views are solely those of the author.