Start-Up: the book

The Ditchley Foundation is a strange thing for a non-British I assume. I attended in mid-May a workshop on Innovation where gentlemen (and not many women as it is common in technology) discussed about innovation in a beautiful18th century castle!

The discussions were relaxed, friendly but serious and passionate. The main lesson I learnt is that clearly innovation is still seen as a process for established institutions and not really as what start-ups do best. For those interested in a refreshing view on the topic, the synthesis produced by the chairman of Ditchley is of real interest and available online.

Too much organization harms Innovation

These are the title and subtitle of a brilliant paper (inFrench only) by Julien Tarby in the Nouvel Economiste dated June 5, 2008. His article echoes my worries about innovation in Europe. His analysis is really interesting. Among other examples, he quotes:

- Samuel Kortum et Josh Lerner: 1 euro invested in venture capital has a 10x return over 1 euro spent in the traditional R&D of companies

- Pascal Picq, a paleo-anthropologue, who develops the evolution theory applied to the enterprise: start-ups which adapt to survive are Darwinian. “Unfortunately the French education system remains Lamarckian, and considers that organizations improve in a development scheme (administration, big companies). It is the country of the planned projects (planes, trains) and not of disuptions. This culture of the norm does not tolerate variability, trial and error and it induces the development of the [existing] fields of excellence and not the creation of new fields.”

If you read French, and because it is free, you shoud run and download it!

I had the pleasure to be interviewed on the book “Start-Up” by Doris Obermair. The text is available in Spanish as well as in English in the magazine If… La Revista de Innovation : Más pasión y sueños, menos infraestructura y experiencia (english version)

and the video (in English) is available on the web site Infonomia.

Finally, I will attend the Ifest conference on July 10-11 to talk about the topic of my book. Because of the diversity of the attendants, I think it will be a great event.

Is there anything nicer than being interviewed by your Alma Mater. The Stanford School of Engineering asked me why I wrote “Start-Up” and for whom. You will find it on the Stanford SOE web site. I tried to explain that the book is not (only) about the innovation infrastructure which failed in Europe but (mostly) about the need to encourage young individuals in taking more risks. A debate about nature and culture which I develop at length in the book.

Nurturing Science-based Ventures - An International Case Perspective by Seifert, Ralf W., Leleux, Benoît F., Tucci, Christopher L.

A new book about start-ups has recently been published and it is mainly centered on Swiss (including EPFL) ventures. The authors do indeed have a strong knowledge of this environment as they are faculties from IMD or EPFL. What is unique with this book is that it does not describe success stories only, but also failures or not famous firms. Indeed failures are often better lessons than successes. You do not always know why you succeed and it may be easier to understand a failure. The authors have built their book as a process and describe in detail the development of start-ups; they begin with the opportunity recognition (chapter 1), they follow with writing a business plan (chapter2), financing a start-up (chapter 3), growing a company (chapter 4) to finally harvesting value creation (chapter 5). The final chapter is dedicated to corporate entrepreneurship (“Intra-preneurship”). I have not read it yet (it is more than 700 pages!) but the numerous case studies (more than 20) look rich and detailed. It is not the first book on the subject but it might be the first one with such a focus on European start-ups.

I am not the only one complaining about the weakness of Europe in terms of start-ups. Juha Ruohonen compared in his report VICTA (www.tekes.fi/julkaisut/victa.pdf) the situation of Finland and Israel and he reaches similar conclusions to mine: not enough growth companies, a lack of ambition, and too many lifestyle companies.

His comparison table is self-sufficient:

And his analysis of the reasons for problems are:

Finally his conclusions: There is a clear need in Finland:

• To create a viable high-growth ecosystem
• To multiply the number of VC capable growth companies
• To eliminate the waste of resources to lifestyle companies
• To provide a viable platform for fast international growth
• To increase the corporate involvement and the number of corporate spin-offs/-outs
• To better facilitate the transformation from research project into a fast growth start-up.

This can be achieved by:

• shifting focus from quantity into quality
• moving from project-based development to efficient long-term structures
• creating structures to enable success of commercial players
• attracting much more international talent into Finnish early-stage community.

My comment: you can replace Finland by Europe and the analysis is the same. Solutions are complex no doubt but I would add that betting on youth, on risk taking is essential (the “Stay Foolish, Stay Hungry” explained by Jobs, see the July 07 post) and that international exchange must also include discovering what exists abroad.

If anyone had doubts about my views on venture capital in Europe, newspaper Le Temps published a nice article entitled “Le capital-risque européen profitera d’un effet de rareté”. The article claims that there are only 12 major VC funds in Europe following the Internet bubble. The next table also confirms the IRRs have not been brilliant.