I originally posted a ‘Shift in the Startup Universe’ on January 1st 2011. Yesterdays announcement by The White House is indicative of further shifts in favor of the entrepreneur. The key role startups have in rebuilding the global economy is also being recognized by governments abroad (e.g. UK and Australia).
That recognition, where accompanied by concrete, meaningful steps to make it easier for startups to launch, is to be welcomed. The proposed measures will assist some startups. But they are not remotely enough. These steps must be viewed as the first of many. And early stage entrepreneurs, not just business leaders and politicians, must be fully involved in the process of deciding how to create a more favorable climate for startups.
Finally, it should not be forgotten that it is only because of the economic crisis, that startups are now centre stage and being heralded as the the solution. When the dust settles and the economy is fixed, we do not want to see entrepreneurs become forgotten heroes.
What follows is my original post from earlier this year.
A lot can change in a year or two. There was a time not long ago, when a job in a major corporate was something to be treasured, providing the financial security and job certainty that you would not get working in a startup. A time when Fortune 500 companies and the major financial institutions were the target for hungry young graduates.
In those days gone by, the obtaining of Venture Capital was seen as the Golden Key to startup success. If you couldn’t secure Venture Capital, then Angel Funding was second best.
But that was yesterday. Today, after the economic devastation that has left millions unemployed, people now know that they cannot trust or rely on governments, banks and companies to secure their present, or future. The entrepreneurial path is now seen by many to be more promising. And it isn’t just the young who are deciding to take control of their future, as many older people turn their experienced hands to launching their own businesses.
In the United States, despite the recession entrepreneurial activity has risen to highest rate in 14 years . The Startup buzz is everywhere. New York is fast becoming a new hub for a multitude of exciting tech startups. President Obama issued a proclamation that November 19 shall now be National Entrepreneurs Day. And the media frequently feature stories on the challenges and successes of entrepreneurs from every walk of life.
This shift in the perceived desirability of launching or working in a startup, has been enhanced by the barriers to becoming an entrepreneur being significantly lowered. Historically, the cost of launching a successful startup and getting product to market, could easily amount to millions of dollars. No more.
Technology costs have substantially dropped due to a range of factors, including the increase in first rate open source software, Cloud based services and startups building products faster by delivering the minimum number of features in the fastest possible time, rather than a feature rich version 1.0. The Lean Startup is the preferred way forward in today’s economy.
The lowering of technology and other related costs for startups has had an inevitable consequence for funding, in particular Venture Capital. Startups no longer need the vast sums of cash previously offered to the chosen few. Many seasoned investors now claim that the Venture Capital model is broken, while other equally experienced investors contend that Venture Capital is not broken, but needs to adapt to the changing nature of technology business.
Adaption by investors has led to the rise of Super Angels and Lean (or Micro) VC’s. While investors try to figure out how they can own a piece of the next hot startup, entrepreneurs are increasingly looking further afield from traditional sources of capital to incubators like Y Combinator and Tech Stars and many other incubators across the globe that provide mentoring and seed capital.
And the business funding revolution does not stop there, as many entrepreneurs go a stage further and turn to bootstrapping or Crowdfunding.
The dust has not yet settled and there will no doubt be further shifts in the startup universe. So while there are very few positive consequences to come out of the economic crisis, the rise of the entrepreneur and startup, and the decreased reliance on an unreliable ‘establishment’, are perhaps one silver lining in a very gray cloud.