THEME FROM IDEA TO INDUSTRY
HELPING BREAKTHROUGH STARTUPS ACROSS THE VALLEY OF DEATH Because they renew the regional industrial tissue and spawn new OEMs, startups that bravely develop new advanced technology should be cherished the most. However, their very nature makes them most susceptible to failure. Former startup entrepreneur Henk Zeegers offers advice on how to increase their chances. Henk Zeegers
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n 2013, I, along with several partners, Eindhoven University of Technology (TUE) and health insurance provider CZ, started the company Rose. It was founded to provide remote care robot services to the elderly and people with physical limitations. In April 2015, we were only left with enough money to carry on for two more months. Shortly after, management and shareholders concluded that it was no use to go on and decided to discontinue the company. In early 2016, Rose was deregistered with the Chamber of Commerce: the end of a promising adventure. Many startups end up in bankruptcy or are forced to terminate. Startups are very special companies: they have to survive a long time without any operational income. During this period, they depend on private investors and public funding. If this funding is interrupted for whatever reason, their backs are against the wall: they get stuck in the infamous valley of death. Breakthrough startups, which focus on developing a completely new advanced technology, are most vulnerable. The question is: can we help them overcome the valley of death?
Explorers and appliers
What exactly are startups? Financial institutions tend to emphasize company growth and business model scalability. The economic bureau of ING Bank defines a startup as “an organization looking for a globally scalable business model.” However, scalability and growth could apply to many new companies. What sets startups apart is that they either apply a new busi38
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Five types of startups
ness model or base themselves on a new technology. Therefore, a better definition would be: “Startups are new companies that use new globally scalable business models or new technologies or both.” That’s not all: to qualify as a startup, the new technologies that new companies concern themselves with must be cutting-edge. This advanced technology may be deployed both in an exploratory and applicational way. I like to call startups that explore and develop new advanced technologies “breakthrough startups”, and those that apply them “start-apps”. Rose and another TUE spinoff like Xeltis – which develops a biodegradable heart valve prosthesis – are examples of breakthrough startups, as were Google and Tesla in their early years. Airbnb, Uber and Netflix are examples of start-apps, as are the many, many developers of software apps. Yet another type of startup applies existing technology to a new business model – examples are Ryan Air and Starbucks. All in all, there are five types of startups – the new companies that do not use new business models or new technologies are copycats.
The general public doesn’t see the difference between startups that explore a new technology and those that apply it. To them, they’re all “tech startups”. However, these ‘explorers’ and ‘appliers’ are very different from one another, and the differences determine the challenges they meet. These differences are significant when it comes to increasing their chances of success.
Eras of ferment and incremental change
What exactly is the valley of death? To fully comprehend this problematic period, we must go back to the technology cycle as proposed by Anderson and Tushman. They divide this cycle in the “era of ferment” and the “era of incremental change”. In the era of ferment, new technologies are elaborated on and designs for new products emerge. In this era, there’s not yet competition on markets, there’s competition on the dominant design. The dominant design is the biggest in terms of the number of implementations; sometimes it’s called the “standard”. The coming about of the dominant design
