These are hard times to be setting up a new company, and now more than ever early-stage technology businesses need to apply the lessons learnt from successful companies. SETsquared, which supports new businesses spinning out of the universities of Bath, Bristol, Exeter, Southampton and Surrey in the UK, has been fostering the development of technology start-ups for more than ten years, and we’ve learnt some important lessons from this experience.
The basics matter
Firstly, anyone working with technology start-ups needs to be selective. Is there a genuine innovation? Does that open up a clear and sizeable commercial opportunity? If the answer to either question is no, this raises the fundamental question of whether the company has the right foundations to succeed. In some cases, deciding to call a halt early – before burning through too much cash – may be the right course of action for all involved.
Secondly, the business plan is vital. It needs to be thoroughly examined and interrogated by people outside the start-up, and any problems corrected. SETsquared’s process for honing business plans includes a business review panel. In this process, the start-up presents its business plan to a panel that includes people with a broad range of expertise. The feedback ensures that all angles are covered, and that the plan has the best chance of being workable.
A robust shakedown
There are many different strategies a particular start-up might adopt, and an external incubator or mentor may not be able to advise exactly which one is best. The choice depends on the entrepreneur’s personal preference, and his or her attitude to risk and growth. But a good advisor will be able to help eliminate all those strategies that simply aren’t going to be effective.
A robust shakedown process such as that carried out by our business review panel allows strategic flaws to be picked out and eliminated. In contrast, people from the more general start-up community often start throwing their effort behind business plans that won’t work.
It is also essential to review the management team, to ensure the right people are in place, or if there are gaps, to fill these by recruiting. However good the business plan, a balanced team is needed to deliver it effectively, and any individual person will have strengths and weaknesses.
Comparison with the US start-up culture
SETsquared has strong connections in the US, particularly over the last five years with GlobalCONNECT, the University of San Diego’s programme for forming high-tech, high-growth companies. It’s been instructive to compare their approach with our own, and to look for differences between the UK and US start-up cultures.
According to Greg Horowitt at GlobalCONNECT, there are three key things that companies need: access to markets, talent and capital – and they fail if they can’t get them quickly enough. GlobalCONNECT focuses its programme on these aspects.
Horowitt sees differences between the UK and US in terms of the climate for early-stage companies. He says that the UK is a permission-based culture that tends to move in hierarchies, whereas the US entrepreneurial culture allows companies to take more managed risks. The fear of failure is mitigated by peer attitudes, and US laws make it easier for people to start again if one business flops.
Do simple things well
Overall, there is no magic answer to building a successful company. It’s about doing simple things, but doing them well – being disciplined, drawing up the right business plan, getting the management team in place, and finding good external people to help.
Simon Bond is Head of Bath Ventures, the technology transfer and commercialisation unit of Bath University in the UK and SETsquared Centre Director. SETsquared is a collaboration between the universities of Bath, Bristol, Exeter, Southampton and Surrey, supporting the formation and growth and of companies and promoting new business opportunities, through spin-outs, licensing and incubation. The partnership also works with industry through research collaboration and consultancy.
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