Digital Startup: Decline or Turnaround?

February 28, 2018

“We live in a new world now, and it favors the big, not the small. The pendulum has already begun to swing back. Big businesses and executives, rather than startups and entrepreneurs, will own the next decade; today’s graduates are much more likely to work for Mark Zuckerberg than follow in his footsteps,” says the writer and journalist Jon Evans, talking about the recent decline of the startups. According to Evans, the Big Five (Alphabet, Amazon, Apple, Facebook, and Microsoft), are very close to the complete conquest of the digital territory, while the new disruptive technologies, including the artificial intelligence, require advanced skills still within the reach of a few. The times when from the garages of all-around the world came multimillion-dollar businesses, seem now gone. Internet has lowered the barriers to entry into many markets, while the startups have marked, for more than a decade, the redemption and a promise of a working future for a whole generation of young entrepreneurs. Are we really at the slope now or we have only reached the saturation point, where is the quality to win over the quantity?

 

According to a research carried out by the CGIA of Mestre, in Italy the 55.2% of new businesses close their doors within the first 5 years of activity, with the provinces of Bolzano and Trento (respectively 45.8% and 49.3% of closures) between the most virtuous and Campania (56%) to act as the rear light. According to Paolo Zabeo, the Coordinator of the Study Office, to curb the run of new entrepreneurs would be the fiscal pressure, a biting bureaucracy and the chronic lack of funds. The latter, moreover, would push the Italian companies to move abroad, where the invested risk capital is significantly higher: 7.8 billion in England, 2.7 in France and 1.6 in Germany, compared to the 180 millions of euros invested in favor of Italian startups in 2016.

 

The data, however, highlight a further aspect not less important in order to understand the current trends related to the life cycle of startups. Already in 2004, in Italy, their general mortality rate within the 5 years stood at 45.4% and it is also true that the companies that had to pay the highest price in the years to come were those in the field of construction (62.7%) and trade (54.7%), ie the sectors already severely hit by the economic crisis. The same crisis that pushed many new entrepreneurs to make a leap in the dark without the preparation and the right tools to face a competitive global market. Furthermore, although there is a downturn in the total number of newly-opened companies, startups in the non-artisan sector are still growing, among which those dedicated to digital and tech stand out.

 

Even at the European level, according to a Eurostat survey of 2017, on average less than half of the startups survive and the number of those that cease their activity is directly proportional to the new openings. A careful analysis of the data makes us understand how, although the startups are objectively less likely to make a long-term path, this is not necessarily due to a change in global trends, but to a natural selection of the market dealing with many business proposals that are too often the result of the need to combat unemployment and improvisation. Moreover, along with the object, the geographies of investments also change and, while Silicon Valley records a 40% drop from 2015 to today, Paris opens the world’s biggest incubator, Station F.

 

It is becoming increasingly clear that the attention of investors and business angels is shifting towards industry 4.0 and deep tech, leaving less and less room for startups unable to compete with the right preparation in the promotion of an equally strong idea. All companies, but startups in particular, are called to intercept the needs of the market and to integrate them with their own innovation proposal. According to Luca GiordanoHead of Territorial Coordination of Intesa Sanpaolo of the Emilia-Romagna, Marche, Abruzzo and Molise Regional Administration, present at the BBS StartUp Ecosystem Day  as an investor, explains that a clear idea right from the beginning is an essential feature to achieve success. “Some successful startup examples, that we have been fortunate to meet and help in the initial stages, have had a really distinctive feature that can be a technology or business idea around which the whole project has developed. When this seed has no strong distinctiveness, a startup can have a very complicated life. We evaluate different aspects, including the quality of the project, which goes together with the quality of the team, the concreteness of the business plan and of the product to be developed.”.

 

The decrease in the cost of technology and the ability to access marketing through social media have long given the illusion that creating a digital startup was within the reach of anyone with a good idea and time to develop it. The truth is that it is no longer enough to propose the digitally evolved version of something that already exists, but it requires an authentic idea capable of positively influencing the technological innovation of its entrepreneurial ecosystem. In the next step, the idea should be translated into a product with expertise and technical knowledge that does not allow for improvisations, but which at the same time include the flexibility necessary to face the changes in progress. Before going in search of capital it is then necessary to validate your idea and know how to evaluate it financially. Acquiring a complete knowledge of the strategies and techniques of investment and evaluation of business innovation models is of fundamental importance to make your own innovation project attractive.

 

Bologna Business School supports startups and entrepreneurs with programs focused on the main needs of those who manage innovation. The Open Program in Digital Startup is aimed at all those who deal with open innovation: managers, entrepreneurs, professionals, consultants and operators in the banking/finance and public administration sectors. The Executive Master in Entrepreneurship, on the other hand, combines the formation of a business school with the impact of an accelerator of ideas, developing a personalized study plan focused on the entrepreneurial project of the individual entrepreneur. The Executive Master in Digital Business is dedicated to managers, professionals and consultants who want to guide companies in the process of digital transformation, by bringing innovation at the center of decisions concerning the business and the creation of value for the brand.

 

Fail fast, fail better, fail forward is the mantra of the startuppers. But in today’s world, is there still time to learn by making wrong choices?

 



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