Tuesday, 5 August 2014

Startups in Leicester: How The Public Sector Can Help

Business support for innovative startups in Leicester is not focused on the right things and this symptomatic of a common misunderstanding of what a startup really is.

Public sector organisations often often assume that startups are just young SME companies. They also often end up supporting business services agencies rather than teams focussed on innovative and scalable business ideas.

As a result, support schemes often require startups to write business plans, incorporate, register for VAT, rent office space etc, before they have worked out a clear business model. At best, jumping through these hoops makes extra work for startup entrepreneurs when they should be focussed on prototyping and validating their product. At worst it can be a waste of everyone's time and money.

Young SMEs who are already establishing the paraphernalia of business (office, telephone number, business cards, etc) are certainly worthy of support but they are not really startups and their needs are quite different to startups.

SMEs tend to sell their time and expertise for money which tends to limit their ability to grow. Startups strive to create scalable products with a global reach like Facebook, Dropbox or Twitter. Typically startups derive their income from intellectual property, global sales or subscription-based income.

Again, absolutely nothing wrong with accommodating and nurturing business-to-business SMEs (I've run one such firm myself for the last 12 years) but they are less likely to create profound innovation or help turn your city into a thriving Tech City or Silicon Valley.

What Are Startups and How Can They Be Supported?

The reality is that a true startup is nothing more than an informal bunch of people with a wild idea and the enthusiasm to see where it can take them.

Stanford professor and Lean Methodology pioneer Steve Blank defines a startup as:-

"An organisation formed to search for a repeatable and scalable business model".

These are very speculative organisations who are highly innovative but have a high 'failure' rate. These frequent 'failures' however do not mean bankruptcies and lay-offs - they mean quickly testing business ideas and gaining insight without spending lots of money or over-formalising. They are experiments not companies.

Such innovative organisations should not be pressurised into formalising their businesses prematurely but they are absolutely worthy of support.

Key things that startup entrepreneurs really need include:-

  • Sources of inspiration for business ideas.
  • Opportunities to meet diverse potential co-founders.
  • Moral support and mentoring from peers.
  • Informal access to experts in their field.
  • Education on quickly validating business ideas and building prototypes (especially Lean Methodology.)

Above all, they need the support of an entrepreneurial ecosystem as championed by Brad Feld in his pioneering book Startup Communities, based on his experience in Boulder, Colorado. Feld is very clear that these need to be entrepreneur-led grass-roots communities rather than top-down public sector initiatives but that doesn't mean that the public sector has no place in an entrepreneurial ecosystem. It just requires a more nuanced, light-touch approach where the public sector feeds rather than leads entrepreneurial activity.

Here are some examples of ways in which the public sector in Leicester could help startups:-

  • Fund cheap, large-scale, low-commitment co-working space close to the universities and cultural quarter but let startup-friendly organisations run things.
  • Make it easier for community organisers to access free or cheap event venues (especially in the evenings) to spread knowledge.
  • Promote existing startup activities to help accumulate a critical mass of participants. 
  • Build better bridges with the universities to break the still-present town-and-gown mentality.
  • End the artificial pigeon-holing and separation of 'technology' and 'creative' businesses - they need each other.
  • Open public sector data to the public to support the civic hack community.

Leicester already has a small but flourishing startup community which I helped found at the beginning of 2013 based on Brad Feld's wisdom. We've gone from a couple of meet-ups a month to typically 5-10 with a wide range of activities including startup weekends, hackathons, seminars and mentoring sessions. We also have the beginnings of a base camp for activities in the form of accelerator and co-working space Incubate Leicester which opened its doors earlier in May 2014.
If Leicester aspires to produce its own Facebook or be a Silicon Valley then it needs to prioritise developing an entrepreneurial culture over ploughing into expensive copycat science parks or giving perks to SMEs. The good news is that raw materials are all around us with two great universities, a cosmopolitan population and a flourishing creative business community.

We've already had some enthusiastic, albeit limited, support from Leicester City Council, University of Leicester and De Montfort University, particularly with hosting startup events. However, there is a lot more potential for support in the way of facilities and activities which focus on informality, serendipity and the growth of the ecosystem.