Startups are an Experiment

The most interesting technology startups, in my experience, are those who are trying to do something new.

In Europe, prior to the Enlightenment, one group of people who tried to do something new were the alchemists. Classically stereotyped as people who sought to create gold from base metal, they were lampooned by Tim McInnerny as Lord Percy Percy with his nugget of purest Green. His depiction was of a group of people who attempted, seemingly at random, to apply treatments and actions in order to create change.

Picture of an alchemist

The alchemists were swept away, in part, by the propagation of the scientific method throughout Europe. The scientific methods remains with us today, informing the approaches we take to discovery – and arguably creating innovation cycles that are faster than any could have imagined a thousand years ago.

Do you want to be an alchemist or a scientist? I subscribe to the latter approach over the former – and I believe that those establishing startups should view them through the lens of a scientist, treating them as an experiment

What does this mean? To me it means following an ordered process in order to best understand what you observe and maximise your chances of proving your hypothesis.

Think back to school – hypothesis, methodology, results, conclusion (no, I cannot forget!) – and take the same approach. With reference to startups, I would summarise the scientific method as follows:

  • Question – how can consumers and/or businesses most effectively complete an activity?
  • Observe – what do they currently do, what are the deficiencies to the approach?  Coupons in magazines in 2008 – why?
  • Hypothesise – we believe that businesses / consumers would use coupons more if they were online, promoted on single days
  • Create a methodology – build a site, and promote it for those interested in saving money via coupons; get businesses to provide aggressively priced coupon deals on a daily basis
  • Analyse the results – are people using my coupon site?  Is the promotion right, are the coupons offering deals in the right industries?
  • Interpret – yes, people really like daily coupon sites
  • Create a new hypothesis – people are willing to pay a monthly subscription of £15 to access my daily coupon site

New businesses are created by inquisitive minds who ask questions and observe deficiencies. However, just having a great idea (or a hypothesis) does not mean automatic success.

Consider your business – are you sitting in a candle lit room in a pointy hat, creating nuggets of purest green? Or are you a scientist in a laboratory conducting a series of experiments to prove or disprove hypotheses about businesses and consumers? I know which I’d rather be.

Current trends in the startup world

Over the past few weeks, I had the chance to research some interesting topics including recent developments in startups. I was really intrigued by some of the trends that are circulating within the area and I have decided to highlight a few in this post:

Global startup funding is on the up

Globally, more than 400 companies received funding in Q2 2011. Although the US has traditionally been stronger in the amount of funding it provides and the number of companies it provides this to, Europe is growing both in terms of funding and startups. Over $1 billion was invested in European startups alone in the last few months. 

Investors are pouring their money into social media, IT and energy

Looking at the Calibre One Index review released this week, a large amount of investor funding was awarded to companies in the social media, IT and energy sectors. The group of companies within the social media sector consisted not only of consumer-focused services, but also many B2B products and services. In particular, these B2B companies focused on using social media-based platforms to track customer sentiment, to increase ad exposure and maintain its integrity, and to make use of social media channels more efficient for marketing purposes. Other funded B2B companies also provided cloud computing and related systems management solutions. Additionally, a significant amount of funding was given to many companies based in alternative and efficient energy technologies.

Startups can help reduce the current unemployment crisis

Companies had a variety of purposes for the funding that they secured. Among these are:

  • Improving existing products or services
  • Creating new product lines
  • Expanding sales locally and/or in a foreign market
  • Growing the business by building up their team

The last point is particularly interesting as the majority of companies that recently secured funding stated that they are hiring more people in order to expand their operation. This includes candidates with experience in technical expertise, sales, marketing and other divisions. Furthermore, these companies and their growth plans ranged in sizes. Some were companies with less than 10 people looking to double their workforce by the end of the year. Others were more medium-sized companies that already had been successful in one local area and were looking to open one or more offices in other cities.

Despite the recent negative news about the lack of prospective growth in the global economies, there is real potential within the startup market. More startups are securing funding, and they are providing strong opportunities for job creation that will only have a knock-on effect in other areas of business.

On a personal note as an entrepreneur, it is exciting to see that the possibilities are looking up.