Tech Start UP Day- 'growing pains ?

TECH START UP DAY- 'GROWING PAINS ?'

PROF. HANS CRIJNS, VLERICK PARTNER

© Vlerick Business School

IN THE E.U.

New companies represent the most important source of new employment: they create more than 4 million new jobs every year in Europe.

Moreover, when new enterprises are founded, they grow more slowly8 in the EU than in the USA or emerging countries

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“Every morning in Africa, a gazelle wakes up.

It knows it must run faster than the fastest lion or it will be killed.

Every morning a lion wakes up.

It knows it must run faster than the slowest gazelle or it will starve to death.

It doesn’t matter whether you are a lion or a gazelle.

When the sun comes up, you better start running”.

- Thomas L. Friedman (in “The World Is Flat”)-

© Vlerick Business School4

“DEATH VALLEY”

$

Time

EBIT 2

EBIT 3

“Start and seed” Upcoming growth

EBIT 1

GROWTH : HOW ? WHEN ? WHO ?


WHEN ? ENTREPRENEURIAL PROCESS

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PersonalAchievementLocus of controlAmbiguity

toleranceRisk takingPersonal valuesEducationExperience

PersonalRisk takingJobdissatisfactionJob lossEducationAgeCommitment

SociologicalNetworksTeamsParentsFamilyRole models

PersonalEntrepreneurLeaderManagerCommitmentVision

OrganizationalTeamStrategyStructureCultureProducts

Innovation Triggering event Implementation Growth

EnvironmentOpportunitiesRole modelsCreativity

EnvironmentCompetitionResourcesIncubatorGovernment policy

EnvironmentCompetitorsCustomersSuppliersInvestorsBankersLawyersResourcesGovernment policy

Source: Based on Carol Moore’s model, presented in “Understanding Entrepreneurial Behavior”.


THE ENTREPRENEUR : WHO ?

6 Source: EFER, Europe’s 500

Life style

StaticStatus Quo

LocalLimited

Internal resources

Self employedDefends against competition

Risk Averse

Survival

Value oriented

GrowingVision opportunistic

GlobalExpanding

External resources

Professional teamSeeks competition

Risk taking and sharing

Success


FAILURE AND GROWTH

Overall in EU – start-ups :

+/- 30 % start ups disappear after 1 year

> 50 % start ups leave the stage within 5 year period

+/- 10 % is a “gazelle” (1 % a real)

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GROWING COMPANIES FINANCIAL PROFILE

produce higher added value per capita (more productive,

but employ personnel with a higher cost per capita,

are clearly more profitable in all aspects,

have more debt financing,

have a lower liquidity

and have a higher risk, have a higher chance for failure MT

Growing co’s (gazelles) vs non growing co’s


THE NEVER ENDING GAME?

AG - The Entrepreneurial Manager

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OPPORTUNITY TEAM

RESOURCES


GROWING PAINS ?

The unexpected Operations Customers etc…

“Death valley”

Working Capital

“A plan” with a “B team”

“Management experience”

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CAUSES OF FAILURES

1. Causes due to personal characteristics of the management.

Mistakes concerning management (61%)

Indirect causes (6%):- Death of the entrepreneur- Team/family problems

2. Causes due to financial structure of the company (25%)

3. Exceptional exogenous causes (9%)

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GROWING PAINS ?

1. Recognizing Growing Pains and Assessing the Need for Change

2. Structuring ? Strategic Planning/Business model/ Organizational Structure/ Management and Leadership/ Organizational Control/ Performance Management/Corporate Culture

3. Financing growth ? Cash management/working capital needs/Bank loans vs Equity (risk capital)

4. Close to the customers / …market/ competitors/suppliers/…

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ENTREPRENEURSHIP AND MANAGEMENT

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EN

TR

EPR

EN

EU

RS

HIP M

AN

AG

EM

EN

T

Initialdiscovery

Opportunityrefinement

Marketmaking

Resourceacquisition

(New) co-ordination of(new) resources

Co-ordinationof oldresources/on-going activity

Discovery process

Exploitation process


“NOTHING CAN START

WITHOUT VISION AND ENTHOUSIASM,

NOTHING CAN LAST

WITHOUT SYSTEMS AND METHODS”

“FIRST THERE WAS ENTREPRENEURSHIP, THEN CAME MANAGEMENT”

Documents

Tech Start UP Day- 'growing pains ?