Forget about startups.
I am sure when Messrs Arnold and Son in 1881 invented “The Desideratum Combined Knife and Fork”, they were seen as innovative and themselves thought that big money was smiling at them. During the Victorian age inventing became a popular activity as laws allowing ideas to be copyrighted quickly and cheaply were introduced in 1843. Almost none of these inventions were realised apart from increasing paper use and space to keep them catalogued. Entrepreneurial deception is nothing new.
When I listen to mentors and investors, also corporates, the word innovation is never far. It is like a middle name for a startup. While there is surely importance, there is more needed for startups to be successful. It is a complex and ever-changing environment that is important for success. From legislation to the economic situation, education level, available talent, and I can go on. It is also easy to go to worldwide trends, you can prove anything in pro or contra but I do see objective figures that indicate that startups can only thrive in a positive context on all the above. Please do not mention exceptions, keep them as they are, exceptions. When I look at Türkiye I see the funds struggling to convince LPs, I see the government institutions entering the VC market, what is still a bit weird as it is a lottery game in many ways. The number of startups that make sense, just take problem/solution/market as a benchmark, is in decline and if a good one comes up they move abroad. I was also surprised, working closely to Estonia E-Residency Program, that the numbers of E-residents are in decline. Still, it is a great solution for startups that want to enter the European market. This confirms a global decline in the number of startups founded, a decline in investments etc. So forget about startups.
On the other hand, we see the SMEs struggling but surviving in difficult times. They might not have an exit plan or great multipliers in the future, they create employment, pay taxes and push themselves towards digital transformation. Slow yes, undercapitalized yes, but they are with thousands and thousands. Startups are just a few hundreds, talking about Türkiye. They are mostly just the founders with little employment and no taxes and just burning capital. I have been an SME for many years and it is a hard battle. For money, you need to go to banks, pay interest and full return of money in 5 to 10 years. This means making a profit so an SME is always problem and customer-focused. Not as sexy as the startups of course with their multiplier indicators. At least that is how it looks.
So forget about Startups old style but look at the hybrids. We need startups that think of making money faster like SMEs do, focus on customer need and create value that the market wants to pay for. I remember in my village in Flanders that only a few people drove with big cars, apart from the egos with big loans car owners. The butcher, the baker, the mini-supermarket owner, the undertaker, the jewellery shop owner, the notary and the doctor. I am not saying we need to go back in time, I am a romantic but not in business. There is one thing that will not change in the capitalistic system. It is a free market where government involvement is minimal on the business level and where the price is decided by the market. Let us always keep this in mind. No demand is no sales and scarcity might mean high-profit margins. We have already seen quite some flavours of capitalism and time will tell whether it is sustainable.
At the end of 2019, I got flowers from the Car4Future team for our support and I was very lucky to meet Duckt in Tallinn. Two startups I truly like a lot. Customer-driven, sales-oriented, good hardworking teams and no BS. You might think I turn my back towards startups but I will never do that. All I want to point out is that we need a context where startups can develop themselves towards success. No mentors that take equity and investors that add value and not just invest and wait. We need a hybrid between SMEs and Startups as an attitude and an environment that doesn't make you move towards the known, successful btw, cities like London or Berlin. So forget about Startups if we can not provide the minimum setup.
Patrick Bosteels
patrick@stage-co.com
cofounder Stage-Co; UrlaCoworking; hiGİ NGO
