How can an entrepreneur — whose growth is synonymous with survival — not develop schizophrenia?
What can an entrepreneur do to bridge the chasm when his/her burn rate risks to explode just at the time that his/her chances for market traction are on the horizon? This is what we call “entrepreneur’ schizophrenia or the innovator’s dilemma” in the ICT economy. Entrepreneurs create their businesses out of the deep conviction that they are the only ones to have the vision. Yet, their survival depends on their ability to admit, in the concise term, that they are not the only ones and worse — at least in their minds — that they must share this idea, vision.
There is actually another way to look at this:
From the pure combinatorial point of view, the probability of two entrepreneurs creating the same startup at a European Scale is a priori close to zero. Let us examine, however, the probability that two engineers from two of the 27 main European universities have the same idea of using technology, the same mastery of this technology, the same financial support, and the same examples of iconic entrepreneurs … etc. It is then clear that this probability is close to one. Having coached European startups for five years in the EIT Digital Program (2011-2015), I can now state that I have empirically verified this hypothesis.
The Aggregator 2020
So, what is really new? The Compression of Time!
Since 2014, the number of entrepreneurial companies is growing exponentially. Simultaneously, the conditions necessary for survival presuppose greater pressure to expand quickly into new markets, internationalize as soon as possible, and reach a size sufficient to gain ground and compete are becoming harder and harder. This ”scaling up” is no longer possible with simple measures of organic growth. Is not fast enough. Moreover, a simple change in the variable ‘time versus money’, consisting of injecting investment from venture capital or financial institutions, is 1) not a sure bet, and 2) puts the entrepreneur into a situation where he/she very often loses control.
New Entrepreneurial Mind-Set for growth, costs, and early-stage support
During this last decade, the number of accelerators and tools dedicated to the growth of startups (Startup weekend, Hackathon, booster camp …) has exploded. With these accelerators and incubators, hardware and software costs related to development environments have drastically sunk. Consequently, the entrepreneurial mindset is evolving from the notion of a startup as an “a brilliant idea in the head of an enterprising geek” to “a company looking for a business model that allows for fast and profitable growth! ” (Steve Blank).
What has not changed….?
At the same time, the fundamental rules of running a business remain unchanged. The need for financing (cash flow) and investment (R & D) to keep the competitive edge are more than ever necessary in this race for survival. At the end of the rainbow of the entrepreneurial, innovative economy, the pot of gold has continued to fascinate and inspire new generations of entrepreneurs for more than twenty years now!
A new model compatible with this contemporary Compression of Time and Space In his book “Zero to One,” Peter Thiel is obvious that in the world of digital startups, you either remain in a monopoly position or you disappear. There are two strategies — either a viral growth
one such as YouTube, Instagram or by creating platforms P2P, Airbnb, Uber; or (non-exclusive) you can convince a GAFAM to buy you such as YouTube ($ 1.6B Google 2005), Nest Labs ($ 3.2B Google 2010), ChainSpace ($ 4B FaceBook 2017), noting that if the checks are impressive this concerns only a tiny part of the startups.
The problem for today’s entrepreneurs is, therefore simple, how do they preserve their competitive edge and high barrier to entry in a fragmented environment (Europe, for example) where it is unlikely that they are the only ones?
What challenges do these entrepreneurs face?
- Accelerate growth in a non-organic way
- Geographic Expansion
- Keep entry barriers high with an “unfair advantage of 10:1
- Attract investors
If the first three challenges have been met, then the fourth one of attracting investors becomes one of paramount importance.
Let us take BlaBlaCar as a Use-Case. BlaBlaCar had a shallow barrier to entry. That resulted in a very high probability of finding clones in nearby countries. They convinced other clones to form a single company. By so doing, they accelerated their growth, expanded geographically, raised their low barrier entry to a high barrier entry, and together succeeded in attracting venture capital investment
from around the world!
With the use case of BlaBla Car above, I have just defined molecular growth. It is an aggregation of companies without financial flows, I.e., external growth, whose products and services are compatible or equivalent and address the same market in the sense of their client’s profiles.
Conclusion: “Molecular Growth – A counter-intuitive alliance?”
As you may notice, behind the obvious simplicity of the scheme, there is the true difficulty of the model whose character and complexity are linked to the fact that it is not about economic, technical, geographical, ethical constraints, but rather one of human nature. One can indeed argue that in the DNA of the entrepreneur, the sharing of his company in the growth phase may be counter-intuitive to the entrepreneur’s nature. Still, there is sufficient evidence to show that the molecular growth model may indeed be a way forward for entrepreneurs in the highly competitive landscape they are working in.