Think big but start small: the process of a startup | with Cranfield University
Have you ever thought about starting a startup? Dr Oksana Koryak offers an insight into the routes to take, pitfalls to avoid and why so many ventures fail
Participants
In order of first appearance:
- Emily Slade - podcast producer and host, Prospects
- Dr Oksana Koryak - programme director, MSc in Management and Entrepreneurship, Cranfield University
Transcript
Emily Slade: Hello and welcome to Future You, the podcast brought to you by graduate careers experts Prospects. I'm your host, Emily Slade and in this episode...Have you ever thought about starting a startup? Dr Oksana Koryak offers an insight into the routes to take, pitfalls to avoid and why so many ventures fail.
Dr Oksana Koryak: My name is Oksana Koryak. I'm a lecturer at the Bettany Center for Entrepreneurship at Cranfield University, and I'm also a program director for the Management and Entrepreneurship MSc. I generally teach entrepreneurship related subjects, and so today I'm here to talk about startups and how to help them succeed.
Emily Slade: Amazing. So when we say the word startup, what are we talking about? What do you mean by a startup?
Dr Oksana Koryak: As any word it has a multitude of definitions, but people generally think about young and small businesses with high growth ambitions, so those that are motivated to be making a change in the world, presenting a product that is unique and would solve a problem of a significant group of customers. The problem, of course, is that the team may have capability and the vision but might not initially have enough resources to fulfill it. And therein lies a problem that it's hard to prove what you want to achieve, without having sufficient resources. That leads to the fact that as we know, colloquially about eight or nine startups perish. And even, you know, looking at the overall demographic of businesses across countries, many do not survive beyond the first sort of three to five years. Only about 40% of companies survive for five years or more. And yeah, so we here to talk about some of the reasons for the failure and some of the approaches that could be taken to help young businesses survive.
Emily Slade: To begin with...the current state of the world, as it were...Is now a good time to start a startup? Or is there no good time? Or is it always a good time? As long as you follow the right path.
Dr Oksana Koryak: I would actually agree with you on the latter. I think sometimes it is more challenging to start up your business, it is sometimes more challenging to get the right resources that you need. But I think a compelling opportunities always will attract both the funding and the team and backers, partners, that would elevate the the initial idea into a very compelling proposition. So I wouldn't be deterred by the state of the market. We've seen some of the businesses really take flight as a result of the pandemic. I mean, I think Zoom is one of the prime examples there. And there are so many others, and some individuals decided to become accidental intrapreneurs as a result of the pandemic, and then they had done unexpectedly. Well. So in terms of timing, I think it is a secondary consideration. I think it is really trying to, to understand to be conscious of the way that founders bridge their big vision with the initial execution steps to make sure that they can survive enough to make a mark in the world.
Emily Slade: You gave us this statistics, really, of how many ventures do fail? Why is that? Why does so many ventures fail?
Dr Oksana Koryak: There are a number of reason. But they could basically be summarised by the fact that whatever it is that they wanting to offer to their customers, is not compelling enough. So we have this expression, there is a lack of product market. So there isn't sufficient demand a stable demand or product or set of services that a company wants to offer. And therefore they're not able to deploy the resources they have, effectively. They don't have enough revenues coming in. They eventually overspend on trying to convince customers to join on board, they might struggle to raise external funding and run out of resources, that also leads to the fact that they may not be able to secure the partnerships and the employees that they really need to scale their proposition. So I think that's that kind of summary. So where do you start? So this is a really interesting question. If we cast our mind back to where some of the large companies have started, they looked very, very different to what we know them for today. So if we look at for instance, Amazon is started as a as a company that was selling books online before they've expanded into offering everything to everyone. If we look at Facebook, it had started as a social media network for Harvard, and other Ivy League students and alumni. If we look at Airbnb, those were just a couple of mattresses on the founders loft. The the starting point was always very focused on something that wouldn't be able to communicate to the customers the value proposition that the company wanted to deliver. And it was something very manageable, it was a slice of a market that could easily conquer and make themselves known for. And that then led to the founders being able to demonstrate that magical traction that all the partners and investors are looking for is some sort of a progress, some sort of a sign that the customers would be interested in what the company has to offer. So the interesting point here is to focus on on that niche, have a market that is easy to conquer, and dominate, before moving into other niches that are very, very similar to the one where the company had started. And that allows them company to accumulate resources to generate potentially some revenues to get on board, additional partners that would elevate its overall credibility. And that process then goes in an iterative fashion until the company becomes big for what we know, that could be contrasted to some other approaches. Some other companies that have not really gone via that focused approach that so called beachhead market. So we know a company called we work there been a number of a number of reasons for its sad demise, as of late is one of those reasons, of course, included a pandemic. But essentially, the company had been able to secure enough funding to be able to have very costly leases before it could generate enough demand for those workspaces that they wanted to create. So in fact, they've funded the ambition funded their great vision without having enough progress to demonstrate that that solution is indeed viable. Well,
Emily Slade: While we're on the subject of funding, how does that work? Do you have to come into this with your own pot of money? Or are there other options? Sort of? Is it accessible to everyone?
Dr Oksana Koryak: This is an interesting question. It's a great learning experience. But in order to be able to secure the initial funding, the eventual needs to demonstrate that it can create something valuable for a large enough chunk of customers paying customers to make sure that whatever investment they may be able to raise actually will generate return to all the investors. So it does require a certain amount of work, just because somebody might have a great idea doesn't necessarily mean that there would be others willing to back it up. And by idea, I mean, just just the initial sort of, wouldn't it be great to create something type of scenario, what you really need to have is some work that needs to be invested into demonstrating that what you'd like to offer actually has demand that you have customers willing to pay for it, that you have learned from those initial customers, enough to be able to shape your product in such a way that even more customers would want it. So and that you have progressively by getting these early signs of traction, that you're actually able to attract interest from partners that you need to deliver your product or service, or you would be able to then attract employees of sufficient caliber, that would make you attractive to investors. So there's a number of different moving parts. And generally, it's a very dynamic puzzle. But by making small and very concerted and focus steps, in improving your credibility as a team, and as a venture, you would be able to secure funding, again, too little proviso on this statement, because even those companies that secure initial funding, still do go through so called valley of death after their initial fundraising effort, because getting the money to prove that you have sufficiently that you have a solution that customers might want to consider doesn't necessarily mean that you're able to scale your idea successfully.
Emily Slade: Do you have to keep in mind the future when seeking out this early on? What if your product becomes outdated or even unnecessary? Do you have to keep that in mind? And will funders keep that in mind?
Dr Oksana Koryak: Oh, certainly. And I think that goes not only for startups, but also for large corporates, for listed companies, for family businesses, all kinds of businesses, really, you need to always have a future in mind. Generally speaking, that is one of the greatest challenge that companies across all sorts of demographic, demographics face. They need to continue to deliver on the It obligations that they already have with the products and services that they have already offered to their existing customers. But they need to continuously look out for new growth opportunities. Because if they don't step in to those new growth spaces, their competitors will you need to be ambidextrous in that sort of way, taking care of your existing business, but always creating a new one. And obviously, to create new business, sometimes you just need to decide what not to do, because companies do have no matter how big they are a limited set of resources, a limited set of talent, and they need to put it to the best possible use. So sometimes you do need to step away, I do feel that this is an interesting question that you raise Emily, sometimes early stage teams underestimate their competitors, because what they look at is maybe that early stage footprint product market footprint that they're seeing that their competitor is occupying, whereas then might not see their greater vision. So they don't think, Alright, okay, well, if Facebook is only offering their services to Ivy League students and alumni, clearly, there is enough opportunity to tap into the other demographics as well without realising that the initial competitor may have a small footprint, but they do have the capability to grow large. And that is what they will going to do, though, given a chance. So it is important to understand not only your own set of steps to grow, but also to anticipate what competitors might be doing next, and where they might step into if the if that particular product market space is proven to be quite lucrative.
Emily Slade: How do you do that? Or is that the impossible question?
Dr Oksana Koryak: Um, well, I think, you know, if you're looking at your own early footprint and where to go, next, you try to expand from the target segment where you've already positioned yourself well into those that are similar so that you could use the same kind of sales force and you understand the habits and the buying patterns of that next demographic, you could do that, or you could, or because you understand your current demographic, maybe you can expand your product, services portfolio that you might be offering to them. So you're trying to grow, bearing in mind that into something where you could already have a little bit of an edge based on your current understanding of the market, rather than going for something completely, completely different. So this is for startups in the early stages of their development. And I think if you put yourself in the shoes of the competitor and try to see where who have they hired, where they've got the capability, what is the current outline of their product, so to try to to understand where you might be go, where they might be going next? I think none of those estimations are perfect. But it's it is the process of considering reflecting planning, that really does prepare teams to be more able to withstand the future, and take advantage of it.
Emily Slade: So what advice would you give for someone that's thinking about starting a startup?
Dr Oksana Koryak: I think it is an amazing adventure and a great learning process. One thing to start off with is to think that any individual is bigger than just their first startup. It's it's a learning process. I think, in some jurisdiction, there's some countries there is more stigma attached to failure than in others. But I think globally, we all move in into the domain where, you know, learning from starting a business is always encouraged and positively looked at even if the particular startup did not survive. So related to that, it's important to bear in mind that your initial idea with which you started is not going to be likely to to survive that learning process. IE, you might actually arrive at a very successful business, by learning from your customer by learning from your competitors, understanding your partner's understanding the whole industrial and competitive landscape, and you will create something great, and that's another beauty behind the entrepreneurship that every interaction that you have with the outside world is really resulting in in learning that needs to be applied. I think a good advice to start is to think where is the lowest hanging fruit where's that so called beachhead market? If you're not aware of the concept, it's really quite needed. It goes back to the end of World War Two Where allied forces landed on the beaches of Normandy in such a way that allowed them to build their defenses to bring the reinforcement and and reconquer the area that was captured by the Nazi Germany. So it refers to starting a business in the best possible target market in a way to allow expansion to a much wider product market footprint. So the first step would be to understand, where's the good place to start? How am I going to generate interest from my customers? And how can I offer my product possibly improved in the process of understanding my customers to other demographics that would allow my company to grow. So I think that idea of establishing the starting point is very important. And another underpinning concept is continuous learning that iterative learning from every interaction that the team behind the venture has.
Emily Slade: Mentioning a team my next question was going to be, is a startup a lonely venture? Is it something that you have to undertake a loan? Or is there support out there for you,
Dr Oksana Koryak: I think there's this very common saying that entrepreneurship is a team sport. And I think it relates to the fact that even though an individual could be very capable, there isn't enough time in the world to be able to address all the areas of building a business equally, it is crucially important to have a team on board that on one hand does have complementary skills that would would enable the development of a venture. So you might need to have somebody with a financial background, somebody who is very well versed in marketing and sales, maybe somebody who's focused on new product development, you do have to have complementary skills on board. So that allows for much more creative solutions that are being offered to the market. But also, I think, in the eyes of the potential investors, partners, employees, not all eggs in one basket, and there is greater resilience as a result in certainly in younger and smaller ventures to start off with. So yes, I think in most cases, although, although we know of Mark Zuckerberg, for instance, as a founder of Facebook, or Jeff passes as the person behind the company, there's, in most cases, it's best to have a very capable team. Another aspect of team behind the startup is that it needs to be a team that is willing to question decisions and willing to kind of combat the groupthink that might occur, but also willing to support each other because startup journey is full of bumps on the road, and amazing highs and amazing lows. And I think it's good to have a little bit of a safety net, in terms of your teammates, to be able to succeed.
Emily Slade: The people that you've mentioned, there just now made me think, what's the difference between entrepreneurship and a startup? Or are they just different points on the same journey?
Dr Oksana Koryak: So entrepreneurship, to me is a much wider concept than just starting your new venture and working for a startup and trying to scale it. So startups typically refer, going back to your first question to young small businesses. And we tend to think of them as something to do with a digital space or a new business model that has been kind of introduced. But inevitably, there is an element of digitalisation in there. You also have large corporates that do encourage their own incubated and intrapreneurial efforts, the development of new products, they work with startups as well to bring in the technology to augment the capabilities that they have. So they would cooperate with startups for a number of strategic reasons, but also financial reasons as a as a lucrative investment. And to diversify its own technology portfolio, you need to have that intrapreneurial mindset there as well, increasingly, what we call small and medium sized enterprises that have reached certain maturity bids, you know, family based firms or even social businesses, they too are always on the lookout for new growth opportunities. So in a way, you'd need to apply that intrapreneurial mindset in those settings as well, or at least somebody within the the top management team needs to do so. I'll just summarise that I think Think entrepreneurship could be in whatever context it is, could be an exceptionally rewarding journey. It's nice to see ideas start small and then by purposeful action, grow and really make a tangible changes in the world. I think intrapreneurial mindset is almost universally applicable across all the contexts. So I would encourage many people to try to understand to learn more about entrepreneurship and try their hand at it. It is invaluable experience and great life skill. We we certainly devote quite a lot of attention to how to build and grow ventures across different types of businesses in our MSc in management and entrepreneurship program. And so anybody who is interested in knowing more would be more than welcome to connect with us to have a chat and potentially apply.
Emily Slade: Fantastic. Well, thank you so much for your time today.
Dr Oksana Koryak: Thank you, Emily.
Emily Slade: Thanks again Thanks again to Dr Oksana for their time. If you want to find out more about the Management and Entrepreneurship MSc, you can click the link in the description. Make sure you give us a follow wherever you get your podcasts. If you want to get in touch you can email at podcast@prospects.ac.uk or find us on Instagram and TikTok, all the links are in the description. Thanks very much for listening and we’ll see you next time.
Note on transcripts
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