The reason why we are here is that the University of Bologna recently with its new strategy Alma2021 has decided to invest a lot in everything related to innovation and entrepreneurship so university has two main objectives That are The first education, the second is research The third is what is called the “third mission” that is the improvement of the local economic system and the university does this through activities such as StartUp Day which was created 5 years ago and through the activities of Almacube since last year Almacube collaborates with StartUp Day In fact Almacube in this year has enlarged its activities How many of you know Almacube?
How many of you know what is an incubator of startup? ok We can say that Almacube was born about twenty years ago and it has always worked with spinoffs so those projects that are created in the research laboratories of the university and that want to become real companies The incubator has been expanded since last year offering a service to even all the other entrepreneurial projects So those which need less research And so the Business Unit startup was born together with another business unit more focused on offering services to most mature companies I work in the Startup Business Unit its main activity is working at the incubation program the Call for Ideas for this program is StartUp Day So for those who will arrive at startup day will enter in the incubation program and will have all the incubator’s services such as mentoring, meetings for business development, rooms, financing and other services that will help young entrepreneurs to move the first steps.
In particular, what is my job in Almacube? I help the new young entrepreneurs through weekly meetings to clarify their goals help them in solving their problems and after about 150 meetings I have noticed that the majority of problems are the same So today I will talk on the basis of my experience in these last years, hoping to help you avoiding some usual initial problems and that would make you lose a lot of time As you can see I divided this meeting into three parts Two main parts, the first to understand why we are talking about startup and the second part to talk about real examples Then at the end there will be time for a Q&A session but feel free to stop me whenever you have questions or doubts First of all, why we are here Three main reasons firstly, because with respect to twenty-five or thirty years ago the world is completely different today each of us with few money and few time can start running a business for example can sell on eBay from tomorrow what he or she produces or he can start creating a fan base on YouTube in order to sell later its products This was not possible before internet and even because of the laws and bureaucracy it was really difficult and for few people So, since it was an activity for just 1% or 2% of population university did not teach entrepreneurship there was no need to do that Thanks to internet we can with few money and time start our company but most important, internet gives us the possibility to access to a lot of information that before we could not have At the same time we can work with people who are far away from us, ask them what they think about our idea, ask them for advice This was impossible too.
Moreover, the most important thing Internet opens a period of exponential change thanks to internet a new industry was born for example the e-commerce or social networking, IoT which in turn create new industries the more they are created, the more they create And this continuous change and this continuous dynamism they make sense to create startups in 2018 and in the next few years or maybe it will became the best way to create a business So start new businesses quickly and in an efficient way, later we will talk about this and later we well see in particular what is a startup Second reason why we are here today It is the fact that a startup is not as maybe people can think, a little version of a bigger company, they are completely different A big company knows very well its customers knows very well the legal problems, the laws it knows its markets It has employees and it knows how to sell its products A startup at the beginning has only the idea but it has no idea of how to develop it practically in the real world There are two definitions of startup that I really like The first one of Paul Graham, the founder of Y Combinator Go and have a look at what is Y Combinator It is the centre of the startup world It is in the Silicon Valley Paul Graham says that a startup is a company designed to grow fast This is the first definition.
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The second one it does not change so much but it is the way to achieve to create a company that grows really fast It is from Steve Blank He says that the startup is a temporary organization whose objective is to look for a business model that can be profitable and scalable For what concern the first definition In order to create a startup able to grow really fast we need two things The first: a potential market really big and secondly, have potentially the possibilities to serve all the markets. Let me explain For example a barber, an electrician or a restaurant, they have a potential very big market However, they do not have the potentiality to serve all the market Potentially everybody in the world eat, but if I have my restaurant in Bologna I cannot offer the service to everybody in the world It is different instead if I have a franchising like McDonald I am able to structure it in order that it grows faster and then maybe I will be able to serve all the market Many believe that if I create softwares or apps it is the same thing of creating a startup It is not true Because if for example I create a software to teach Tibetan I will offer a service to few people So in this way I can potentially reach all the interested people everywhere they live but I will have a very little and limited potential market so I will have problems in growing fast it will not be easy it won’t be convenient.
Instead, famous companies such as Google or Gopro and PayPal They have all the features to be considered startups. Now they are not startups anymore but in the past they have been startups They had a very big potential market when I say “potential” it does not mean that it has to be used from everybody now When Google started, few people used Internet its market was really limited but potentialli Internet would become an instrument used by a lot of people Gopro as well it has understood that in order to grow faster it should sell in a new way and so it started selling online and using communicative channels such as youtube and so it was able to grow really fast. PayPal has the same story they started from few people and then they expanded to everybody who is interested in buying online and has an email Disclaim as I had already said It is not necessary to have a very large market now because if it is already very big, probably there will be already many companies that are already working there This does not mean that you do not have to try but it is better to start from a smaller market that would potentially grow in the next years So, we have seen the first definition now the second definition that is only the way to achieve the status of company that grows really fast presents three or four key words 1.
Temporary organization 2. search 3. business model 4. scalable So let’s see why he talks about temporary organization the main goal of a startup is not to remain a startup potentially, if we are working well we want to become a mature company as for example Google nowadays A startup is characterized by a growth curve at a certain point it is very high in fact it grows really fast for a certain time then the growth becomes less extreme because we are filling the market so it is temporary and not our final goal The second word is research so a team of people with the aim of researching a business model that can be profitable and scalable this is the most important part to understand why a startup differs from a mature company as I said before let’s think about a company of our local territory such as Ima To whom does not know this company it is one of the top company in the world for packaging machines and it is from Bologna This company knows well its business so if it wants to launch a new product it won’t have any problems it knows its customers, its profits, its costs of production and so on the way in which it acts it is the classical one used by all the biggest firms Instead startups start from question marks they don’t know who can be their potential customer they don’t know what problem they want to solve practically they don’t know how much this will cost to them what could be the legal aspects to face they don’t know how to reach customers, what channels use and the main goal of the research team is to transform these question marks in practical actions and in knowledge and here please take attention this kind of work is really similar to that done by researchers and not so much to the work done by a mature company So by testing our ideas and by learning from our failures little by little we will improve and change our idea in order to adapt it to the market and to reach what people want.
And we will see it when people will use our products and will come to ask for more Third thing: profitable business model what is a business model this is the image of the business model canvas it is usually used to talk about business model Do you already know it? It is also inside the application for StartUp Day The business model is the description of the functioning of our business so what is our offer to the market what is the problem I want to solve what is my competitive advantage what are the costs, the customers what are my profits, my partnerships it becomes profitable when for each cost I have to face, at the end I have bigger profits Finally, scalable it is quite difficult to define this concept in the classical economy, a scalable business is that one that the more I do the more I will get in the end in this case I don’t have any frictionless growth For example I have a barber shop I will have more problems in growing than a digital company such as Amazon or Google Because in order to offer my service to more customers I would need to open a new shop that would cost me much more it is important to understand how to have a profitable growth of our business Briefly, this is the Startup Lifecycle the typical life of a startup from zero to success At the beginning we have the idea so we have identified a problem we have understood what could be the possible solution to this problem and we think that we could earn money by solving this problem to people We easily test our idea without years of research and development so for example by using questionnaires or surveys or by presenting our idea to companies in order to listen to their feedbacks and in the meantime I start improving my project I keep on testing my idea until someone tells me “ok let’s do it”, maybe someone asks for a pre-order So I see that I have understood what could be the solution to the problem So now I start producing a first solution that can be practically and concretely used I give people the solution to their problems then even now I will learn more things for example the design is not so good maybe I have to improve my communication and I need to learn how to communicate my product I will need to understand who are the best partners After some failures and improvements I will arrive to the so called “traction” and from here the growth will start because at that point I will have a scalable business model a scalable, profitable and repeatable business model and then I will go and ask for money to investors and I will start growing Now, the most important and difficult part is arriving at this point When you understand how to reach that point, it is not difficult to collect money and grow the majority of startups fails before What is in your opinion the percentage of startups that fail? For what concerns the first phase in order to give you some key technical words, usually a startup or a new entrepreneur goes to an incubator and this is the incubator work it gives you training, space, network in order to test you idea and move the first steps into the market few funds to create the prototypes and do the first models After this first phase, the startup goes to an accelerator it is similar to the incubator but its objective is to take your startup at that point in which the growth rate changes rapidly When it will be time to “scale” it is important to go to the “ventures capital” whose job is investing in startups these are risky operations in which they invest in for example 100 projects and about 20 will go quite well about 10 will make good results and only 1 of 100 will give me back all the money I invested in all the others that failed To sum up: why are we here First of all because we are in a new industrial revolution in which the socio-economic system is completely different from that one of the past Second reason, because startup is a total different concept from that one of big and mature companies so this is why when a startup is successfull and the phase of the exponential growth is ended Very often the company hires someone good in launching a firm in the stock exchange in order to try to expand globally they are two worlds totally different with two totally different strategies But there is also a third reason that is summarized in this quote by Clayton Christensen He is very important for the literature about innovation and entrepreneurship He says that the only reason why startups have a possibility to success is that in reality, the successful startups start all from a very little market usually less than 1% It is so small that big companies are not interested in it Think about Apple at the beginning people who needed a personal computer were few and they were all in the Silicon Valley, and they started from there one of the two founders had already understood that the personal computer would become essential for many more people in the next years, so the concept of potential market we have discussed before Maybe in the next fifteen years many jobs will be substitute by artificial intelligence, or other completely new jobs will be created and needed So this is the third reason for today’s meeting and why it makes sense to talk about startups nowadays it will be a central topic in our world We can start with the second part of the meeting Real examples Zappos It is a sort of Amazon, an e-commerce that at the beginning sold only shoes then it was bought by Amazon why it is a good example of which is the best approach in creating a startup they have optimized the time time is the most important variable when we are dealing with a startup In the 1999 the founder had the idea of selling shoes on the web Few people were using Internet Very few were buying through Internet He wanted to avoid risky operations so he just made a test he created a website and he went in local shops next to his house and took pictures of the shoes put the photos in his website, proposed a price and look for customers when people chose the pair of shoes he went to the shops to buy them and he sent them to the customers.
The process took about one week or two the time to process the orders was less than having a warehouse, looking for suppliers and so on In few months he understood how its project worked He understood what customers wanted and how to run the business properly and how to transform his idea into a concrete business “Get out of the building”, Steve Blak’s mantra is summed up in this example Do not hesitate too much Just test your idea Ask people what they want, if they think it can be useful and try to understand customers’ needs Another example: Amazon Its founders had a great capacity of vision but also pragmatism and focus on most important things and this means testing the problem and most important test the solution for that problem quickly The founder of Amazon wanted to have an e-commerce that would be able to sell everything This was the main idea and starting from this point was quite difficult it took years much money So he decided to start from just one thing, but done properly He chose books Because he noticed that a book was a sort of standard product with customers interested in an e-commerce of books because for example they lived far away from libraries and book shops So he went to them and asked them if they wanted to try the service he offered So he started from a very small point and nowadays Amazon is what we know This is one difficult concept to learn because it is the opposite that is taught to entrepreneurs so starting from one little point to develop the project But doing the opposite won’t take you to success but to failure.
I always see this fact in my job it is very difficult These two things: target and focus are really important PayPal Now they sell to everybody and this is what they tried to do at the beginning this was the first product they have imagined to guarantee long-distance payments without using bank transfers They though to give people this product to do payments It does not work. Or the problem was not perceived as a problem by people Or they failed in finding people interested in their solution Until they focused on ebay sellers (ebay was a very small market at that time) they did not start growing They did not select the right target at the beginning Then they managed From ebay sellers they reached also the buyers An Italian example “Friendz” None of you knows it It is an app that allows you to earn money by using your selfie So for example I take a selfie after I have found out in the app which are the advertising campaigns of the customers of Friendz, such as CocaCola or other brands I take a selfie for example with a CocaCola in my hands and based on the interactions followers and likes I earn money The app was born two years ago in Rome now it has about 20,000 users it has collected more than 18$million this year It is going really well The two founders were 25, they took part in an incubation program they invented this app and before this they created a Facebook group to test their idea the other possibility was costly so find a group of researchers, build a prototype find customers and then I start all the process But they chose the way that allowed them to optimize time and money With the Facebook group they started from their friends then with the friends of their friends and so on then they invented a campaign and told their customers that they would give them 1euro in amazon card for each picture published At the beginning it doesn’t work so they changed communication strategy They understood the need of the users they have two different kinds of users the user and the customer who pays after some failures and improvements they managed their users started accepting euros in amazon card for posting pictures promoting brands Then they tried to understand the side of the customers So for example CocaCola, would want to collaborate with them? CocalCola would want to publish pictures of unknowns? Since they didn’t know, they went to ask They presented their idea to different companies Many companies rejected their idea so they tried to find another solution this is typical of the job as entrepreneur, your ideas will be rejected many times but every problem has its solution In this case the solution was a check of each picture a check done by at least ten people before being published at this moment they don’t have any software so they modified their communication strategy and their solution they started again the presentations to the companies and after many meetings they found a company that told them yes, let’s collaborate this company invested in their project it bought their first campaign with this certificate they went to an investor that invested 60,000 euros on their project with which they developed the first platform This is an example of how is it possible to create something with few money but with a lot of passion and desire Here, it is important to say that on average at least twenty times you will need to reshape your idea in order to arrive to create something that makes sense in the business world the most important thing is the frequency with which we interact because if it takes us for example twenty days to solve a problem and test again the idea it will take us on average 400 days If we need to reshape the idea ten times, it will take us 200 days This is just to say that there is a lot of difference in taking six months or three years because three years will mean failure Six months is better, you have time to focus on the main point quickly and without any fears even if our idea is not complete and perfect Success is in the speed, the iteration with which we learn things about our project (Question of a student) (The founders of Friendz didn’t have fear that someone could steal their idea?) This is a frequently asked topic How many of you has this fear? this is a very normal thing but it is difficult to find someone that decides to steal your idea and create a startup with that project it is a very small probability If it happens, on the one hand it is good because it means it is a good idea if it is a big company that you fear it is valid what we said before big companies don’t care of little niche of people usually big companies don’t care about little targets other two reasons for which you should not have this fear when you do something new having other firms that do the same thing is useful for you and it helps you in finding new solutions to problems with new instruments and in an innovative way For instance Apple wasn’t the only company producing computers but the fact that there were other companies had helped the development of Apple itself Moreover, in a potential big market, there will be place for your project and for competitors as well The most important thing is the value you can perceive from talking about your idea it is more probable that you find a new partner, a new co-worker than someone who wants to steal your idea So an impartial advice talk to everybody about your idea without any fears if you have something that can be patentable you can talk about it but before ask to sign a non disclosure agreement Talk about it!