Entrepreneurship and innovation are powerful tools for supercharging economies, but the failure rate among startups can be high. At the recent 2017 New Economy Summit (NEST) in Tokyo, venture capitalists (VCs) gathered to discuss the crucial elements for fostering startups and getting them to critical mass.
Nearly $14 billion went into deals backed by U.S. venture capitalists in the first quarter of 2017, up 15% from the previous quarter, according to PwC. As startups get hotter, the demand for skilled workers increases. Peter Bell, senior adviser at Highland Capital Partners, noted that one of the challenges that startups face is human resources.
“Whether you’re in Japan, Silicon Valley or Europe, every company is competing for the best people,” said Bell, whose firm has backed companies in industries ranging from robotics to eyewear. “We’re really looking to back the entrepreneurs that are talent magnets.”
Digitizing old industries
Bell and other panelists at NEST, however, noted that now is a particularly exciting time for startups because the falling cost of high-tech tools is creating the potential to completely transfer old industries such as hotels, with the likes of AirBnB, and transport, with the likes of Lyft and Uber.
“We’re finally seeing innovation in large industries that have never been touched by software and internet technology before,” said Ashvin Bachireddy, co-founding partner at Geodesic Capital, which has invested in Uber, AirBnB and other U.S. tech firms.
“Many companies and categories that entrepreneurs 10 years ago would not have considered sexy are now the most exciting,” agreed Michael Jaconi, CEO of mobile startup Button. Jaconi cited the case of Managed by Q, a rapidly growing New York startup that manages offices. It does everything from cleaning and window washing to administrative support, catering and even yoga classes – and everything can be ordered via iPad.
“It’s a fascinating example of where you can merge technology, the innovation it’s giving us, with the physical world and its lack of movement or speed,” Jaconi said.
Advice for budding businesses
While there may be many opportunities for tech startups out there, they also need the funds to launch and scale their business. The panelists also had some advice for would-be entrepreneurs, including the all-important challenge of wooing venture capitalists.
“I would encourage entrepreneurs to understand the challenges of their vertical,” said Zafer Younis, a partner at California-based seed accelerator fund 500 Startups. “Understanding the other side also helps you communicate better. The more entrepreneurs learn about how VCs work and make money, the easier it is for them to have meaningful conversations with VCs.”
“You really need to understand these markets at a very deep level, understand the customer problems, try to build solutions that solve them, try to build a business model that you think you can replicate and be profitable over time, and most importantly, have a long-term view,” said Bachireddy.
When dealing with potential investors, Jaconi emphasized the need to create what he called a “fear of missing out”: “If you can create FOMO – make the investor think that they’re going to miss out on a great thing – it will bear well for you.”
“The thing I’m looking for in an entrepreneur is the clarity of their vision,” said Bell. “I decide in the first one to three minutes if it’s exciting – it’s like an Olympic ski run. You really only have one shot, so get it right.”
Read more reports on NEST 2017 here.