Tag Archives: Start-up of the month

The Black Swan and Start-ups

I am not sure how many posts I wrote on Taleb’s Black Swan. Whatever, I was asked by EPFL to add a contribution to its relationship with start-ups. This is my eighth contribution on start-ups to the EPFL web site. Here it is:

08.05.13 – What do natural disasters and unusually successful high-tech businesses have in common? They are both statistical outliers, and they both have outsized impact. This is the concept of the “Black Swan.”

The concept of Black Swan was created by Nassim Nicholas Taleb in his works on risk and randomness and popularized by a best-seller published in 2007 and sold over 3 million copies! Taleb explains the concept of Black Swan as follows: “There are two very distinct classes of statistics. The first defines the Mediocristan, the second defines the Extremistan. Without going into much detail, the Mediocristan exceptions occur, but don’t carry large consequences. Add the heaviest person on the planet to a sample of 1000. The total weight would barely change. In Extremistan, exceptions can be everything (they will eventually, in time, represent everything). Add Bill Gates to your sample: the total wealth may increase by a factor of 10,000. The first kind is of “Gaussian-Poisson” nature with thin tails, the second kind is of “fractal” or Mandelbrotian nature, with fat tails. But note here an epistemological question: there is a category of “I don’t know” that I also bundle in Extremistan – simply because I don’t know much about the probabilistic structure or the role of large events.” The Black Swans are unknown events, in Extremistan. These events are rare, very rare, unpredictable and have a huge impact. Ironically, we tend to rationalize them afterwards. The fall of the Berlin Wall, the events of September 11th, the Fukushima accident are examples of Black Swans.

The world of high-tech entrepreneurship is particularly well described with the concepts of Taleb. We have hundreds of start-ups in Switzerland. Thousands of start-ups are founded each year around the world. But a small number grows and survives. An even smaller number will become a great success. Logitech, Swissquote, Actelion in Switzerland. But if it were only about that kind of success, using the concept of Black Swan here would be misleading. Google and Apple are two real Black Swans. The extent of the success of these two former start-ups was simply unpredictable. Many authors have tried to rationalize the success after the fact, but failed, I think. Apple market capitalization is about twice as large as any other company. Steve Jobs, an unlikely entrepreneur, founded it in 1976 at the age of 21 and even more incredibly, he saved it from disaster with his comeback in 1997. Read the new book “I’m Feeling Lucky” on Google’s first steps and you will understand the extraordinary exceptionality of its two founders, Sergei Brin and Larry Page. Google is less than 15 years old, counts more than 50,000 employees and has nearly $40B in revenue.

Taleb is very controversial and provocative. He denounces the excesses of the statistical discipline, which sometimes makes us believe in the elimination of risks. He hates the “wisdom” of scholars to the point of attacking them personally. I remember a conference where the president of the session “blamed” my great passion for high-tech start-ups which according to him is only a fraction of firms. I did not try to hide my bias, but simply pointed out to him that their impact is far from being marginal and also that the field is fascinating in the difficulty in anticipating the potential success. Passion sometimes has to prevail over reason…

Taleb drove the nail with the publication last November of Antifragile, which is subtitled “things that gain from disorder.” This book is a multifaceted, sometimes messy, work, praising the artisan, the souk and the experimenter; he also criticizes the expert, often worn because too rational. Again Taleb’s ideas fit perfectly with innovation. “The fragility of every start-up is necessary for the economy to be antifragile, and that’s what makes, among other things, entrepreneurship work: the fragility of the individual entrepreneurs and their necessarily high failure rate.”

The Black Swan may have a quite simple explanation. It often has its roots in the weaknesses (for disasters) and genius (for the wonders) of the human species. Albert Einstein, Leonardo da Vinci, Steve Jobs and Lionel Messi are creators of genius. It is possible to quantify through science and technology many phenomena, but it is still difficult to measure human capabilities. Black Swans would probably not be as unpredictable if they did not have their root in the human interference in nature.

Swiss medtech start-ups and their ecosystem

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Here is my seventh contribution to EPFL’s start-up of the month. It is about medtech and specifically KB medical. It’s also about the Swiss innovation ecosystem.

KB Medical, a new start-up in the world of medical technology, just announced that its fundraising effort raised 4 million Swiss francs.

The news is surprising in more ways than one. KB was founded on October 4, 2012, and the fundraising announced on October 29. It is rare for a start-up to launch with initial funding without having to go through the agonies of surviving in our ecosystem that subsists on subsidies. What’s more, this start-ups is active in an area in which private funding is less common than with the Internet and biotechnology.

These apparent surprises are, however, misleading. Szymon Kostrzewski and Philippe Bérard (the K and B of KB Medical) have been pursuing their research for years in the Biorobotics Laboratory at EPFL. They were supported by an Innogrant. Furthermore, they also received a boost from the Liechti Foundation and were winners of the National Venture 2012. Also, Szymon spent time in Boston as the winner of VentureLeaders. Therefore, the research upstream has been discreet but effective. There is probably a lesson to this announcement: there is no point in creating a start-up prematurely if it is not necessary.

Medical Technology in the Footsteps of the Watchmaking Tradition

Perhaps more importantly, the Lake Geneva region is fertile for medical technology research from the fields of micro-technologies and robotics. The famous Delta Robot is from the same laboratory of Professor Clavel. More recently, start-ups such as Endoart, Sensimed, and Aleva Neurotherapeutics succeeded at raising significant capital. And even more recently, DistalMotion from Ricardo Beira and StereoTools from Remi Charrier were launched through the support of their laboratory plus an Innogrant. These three young start-ups are distinctive for their use of extreme mechanical precision to improve the performance of delicate surgical procedures.

We often speak of engineering for local technology clusters. In the footsteps of the watch industry, the substance of SMEs specializing in medical technology was created in Switzerland. Today start-ups enrich what could resemble a Medical Valley, in the shadow of pharmaceutical giants such as Roche and Novartis and under the friendly gaze of Medtronic and Johnson and Johnson (J&J).

On the Board of KB Medical, one finds Malgosia Iwankowska who worked at J&J, Medtronic, and Sensimed. This is a technology cluster, but even more, it is human talent and a network of connections that develops and grows over the course of years. This Swiss tradition of precision quality and bespoke, however, is widely recognized, and that somewhat demystifies the intrigue of KB Medical’s remarkable news.

More infos:

Several Medtech Start-ups at EPFL

Two EPFL Start-ups Take Off in Tandem with a corporate investor

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Here’s my 6th contribution to EPFL‘s “start-up of the month”

29.10.12 – Industrial or financial? For a start-up, the choice of an investor is crucial. Pix4D and senseFly, young offshoots of EPFL, provide a recent example of this dilemma.

We turn our attention to EPFL start-ups following two general stories in the entrepreneurial world. This month it is a question of not one but two young offshoots. Sensefly and Pix4D made headlines at EPFL this summer. It is indeed rare that an investor announces in one day the investment of capital in two of our start-ups. What’s more, the growing number of corporate investors in relation to venture capital investors represents an interesting trend.

Drones and 3D Images
SenseFly came out of the laboratory of Dario Floreano. You may have noticed these small airplanes crossing the skies over EPFL, as well as the start-up founders who pilot them remotely. A few years ago, I was impressed by these strange flying machines that automatically avoid obstacles. Pix4D is a spin-off from the laboratory of Pascal Fua, a specialist in image processing. They produce no equipment. Instead, they devised a method for constructing 3D images from disparate two-dimensional shots.

The investor is Parrot, which I had wrote about earlier this year: Parrot and Henri Seydoux, a French success. This French company of around 700 employees shows an annual revenue of around 250 million euros. Created in 1994, it went public in Paris in 2006. After its initial launch in voice recognition and hands-free kits for cars, its founder and CEO Henri Seydoux saw the need to diversify its activities. He bought a multitude of start-ups in fields connected to the heart of his business: wireless telecommunications, image processing, games, sensors. On their own, senseFly and Pix4D began collaborating at the beginning of this year, and Parrot found a synergy with both companies. Given that, the announcement of the simultaneous investments makes perfect sense.

The Tricky Choice of an Investor
I don’t know if the heads of Pix4D and Sensefly deliberately selected a manufacturing partner over a financial one. In any case, this decision is far from easy. All founders have to weigh the options when looking for an investor. A financier has only a return on the investment on the brain, and often over a short-term. A corporate investor thinks more strategically, but at the risk of being more selfish. In contrast to a financier, the corporate investor generally does not want to see partners working with the competition. The consequences of this choice, therefore, are critical to the development of the start-up.

The good news is that start-ups in recent years seem to receive more funding in their early stages, without having to wait for revenues and clients to prove their potential. It is even more exceptional that through collaborating, two EPFL start-ups improved their commercial potential.

Hopefully future entrepreneurs will be encouraged by this favorable environment. Let me conclude by quoting J.C. Zufferey, co-founder of senseFly: “We appreciated and benefitted from the support of PSE, FIT, Venture Kick, and CTI in this adventure. I think EPFL must not relent in its efforts to train, motivate, support, and coach young entrepreneurs. This is the price to gradually develop a culture of innovation in a country where people are naturally afraid of trying.”

What’s a start-up worth, or reflections on Facebook’s IPO fiasco

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Here’s my 5th contribution to EPFL‘s “start-up of the month”

When its IPO was announced last February, everyone agreed that Facebook was worth somewhere in the ballpark of $100 billion. Today, Facebook has lost 40% of its value – how is this possible?

Facebook a perdu plus de 40% de sa valeur

Facebook, unfortunately, isn’t an EPFL start-up, but the controversy surrounding its overvalued stock market debut (Initial Public Offering, or IPO) nonetheless provides a good opportunity to discuss the value of a start-up, in particular, spin-offs from EPFL laboratories.

A company’s value cannot truly be measured scientifically, even though there are techniques that try to do this via revenues and profits – Logitech and Swissquote, who have historical connections with EPFL, are measured like this. The law of supply and demand rules here: the value of a company is the product of the number of shares and the price per share. Companies listed on the stock exchange are thus hostages of the market and its moods.

When companies are not listed on the stock exchange, as is the case in the majority of start-ups, they can still be valued. Interested readers can learn more in the article “Equity Split in Start-ups.” When EPFL start-ups like Eelcee, Abionic, Aleva and Kandou (see previous articles) recently announced they were looking for financing, they were valued by their investors, even though there was no market in which to buy shares. Switzerland, however, provides some information via the registre du commerce (commerce registry) in which each start-up registers the change in its number of shares. From there, if you know the amount of money that has been raised, you can deduce the price per share and thus the value of the company. But I personally wouldn’t make the calculation, out of respect for the discretion desired by the entrepreneurs and the investors.

Again, value is just a subjective thing that depends on the good will of the investors. Facebook, like Google ten years ago, didn’t completely abide by Wall Street’s rules, by which a company agrees to be under-valued at its IPO so that the ensuing trading result in an upward curve. So far, it’s just simple speculation, and we’ll have to wait several years before we know whether or not Facebook’s IPO was a failure or not.

Our start-ups have a similar problem. I’ve known many entrepreneurs who prefer that their companies have the best possible value when they were looking for funding. They forget that the only real value is that which is created over the long term by their products or services, and that the value of a company is a very volatile thing, as Facebook just illustrated so well. Entrepreneurs tend to retain the lion’s share of their companies, even though by doing this they also seem to be ignoring Logitech founder Daniel Borel’s advice: “We prefer a little pie that we control completely to a big pie that we only control 10%, and this can be a limiting factor.”

I’m convinced (even though I’m often wrong) that Zuckerberg’s impact will be similar to Brin and Page’s. Here in Switzerland, I hope that local companies are created whose value is on a par with those of Daniel Borel, Mark Bürki and Paolo Buzzi.

References

Facebook Finally Files For $5B

Facebook data today

Logitech

Swissquote

Equity split in start-ups

Eelcee and composites

Two million Swiss francs for an allergy-detecting device

Swiss register of corporations

Start-ups hiding six feet under

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Here’s my 4th contribution to EPFL‘s “start-up of the month”

03.06.12 – The fear of failure probably explains the absence of a “European Google”. Whereas, on the other side of the Atlantic, start-ups are born and die in full view of everyone, their counterparts in Europe hang on for dear life, sometimes even when it doesn’t make sense to do so.

The fourth start-up of the month doesn’t exist! At least not at EPFL, nor in Switzerland or in Europe. I mean those start-ups that fail. European start-ups are a real paradox. We often complain about not being able to create successes like Google, Apple or Facebook, but on the other hand we don’t have any big failures either! In his doctoral work published in 2011, Sven de Cleyn – a researcher specialized in technology transfer – demonstrates that less than 10% of European academic start-ups close down [1]. In a survey dating from 2008, ETHZ produced similar metrics, with an activity rate of 88% [2]. EPFL is therefore no exception to the rule.

In fact, this strange phenomenon can easily be explained. European start-ups focus on survival, to the point that Sven de Cleyn had to use this parameter to define success. Failure is so culturally stigmatized that it must be avoided, almost at all cost. This is one of the fundamental reasons behind the difficulties we experience. In the excellent film Something Ventured, the Californians, followers of a Manichean way – success or death – call start-ups the “living-dead”!

Yet, failure is far from being a bad thing – it is actually necessary. Who didn’t fall several times while learning to ski, roller-skate or simply ride a bike? How could we manage not to fail in the far more complex task which involves bringing a technology or innovative product on to the market? Schumpeter, the famous innovation economist, had created the concept of “creative destruction”, explaining that the new replaces the old, and that this is in fact a good thing. He used a striking image to illustrate this: “It’s not an owner of stage-coach lines who is going to build railways!”

In his famous speech at Stanford in 2005, Steve Jobs echoes this sentiment: “Remembering that I will soon be dead is the best tactic I have ever used to help me make the important choices in my life. Because almost everything – expectations, pride, fear of embarrassment or failure, all these things – evaporates in the presence of death, leaving only what really matters. Remembering that you are going to die is the best way I know of avoiding the trap of thinking that we have something to lose.”

So, you may say that that’s easier to say than to do! It’s certainly very difficult to bring up past failures or to cite examples, as entrepreneurs are reticent to confess such things. I could mention a few myself, but without having the consent of the people concerned. I could almost have called this article “Desperately Seeking Start-up Failures”!

It seems that start-ups, like the mythical thorn birds, look to hide away in a thorn bush and impale themselves. We never organize proper funerals for those who fail, but now FailCon has done away with this taboo. This one-day conference is aimed at technology entrepreneurs, investors, developers and designers. It’s dedicated to the study of their own and others’ failures, as a preparation for success. During the first event held in San Francisco in 2011, Vinod Khosla, the famous venture capitalist, admitted having more often failed than succeeded. Failure in not desirable, it’s just part of the system, and it’s high time we integrated it accordingly. When will there be a FailCon in Switzerland?

[1] Sven H. De Cleyn, The early development of academic spin-offs: holistic study on the survival of 185 European product-oriented ventures using a resource-based perspective.University of Antwerp, 2011
[2] Oskarsson I., Schläpfer A., The performance of Spin-off companies at the Swiss Federal Institute of Technology Zurich. ETH transfer 2008.

Start-Up of the Month: Kandou and the Investors

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Here is my new “Start-Up of the Month” chronicle, published by EPFL.

22.04.12 – Which investors trusted their money with Kandou? This startup, active in the high-tech domain, knows how to find financing.

In November 2010, EPFL celebrated its thousandth invention. I’ve extracted a passage from an article published on this occasion: “Kandou, invented by Harm Cronie and Amin Shokrollahi of EPFL’s Laboratory of Algorithms, enables processors to communicate with their peripherals (memory, printers or screens) faster while using less energy. A small revolution in the field of computer science, but which comes from mathematics!”. In March 2012, the start-up resulting from this invention announced that it had raised 10 million dollars. Some news (or rather an absence of news!) which is intriguing: this young company has very little to say about its investors. “They are private investors, not institutions or industrial concerns”, explained Harm Cronie briefly in the newspaper Le Temps. Even more surprising, this first raising of funds has already ushered in a second, which is already being organized. “I can’t say any more about this at the moment, as we are currently discussing with the investors,” he concludes.

This is not the first such venture for Amin Shokrollahi. Digital Fountain was sold to Qualcomm in 2009 – since 1998 it had raised over 50 million dollars. The start-up had support from Cisco, Sony and TI, but also trust funds such as Matrix and Granite. With Kandou, he has changed his strategy. He knows that institutional investors have constraints which force the entrepreneur to have a more mature strategy than with private investors, whereas business angels can act out of passion, and are not accountable to their own lenders.

As I mentioned in the introduction to these columns: you have to think global. For Kandou, the first partners may be called IBM or Intel. If an innovation is solid enough, clients can be located anywhere (unfortunately, however, rarely in Europe when it comes to high-tech). However, it took nearly 18 months to move forward to this acceleration phase. Kandou knew how to use the richness of the eco-system; including the EPFL spin fund, which is similar to Innogrants, venturekick or FIT. Giving birth is not instantaneous – experience shows that you need between 1 and 3 years.

Amin Shokrollahi and Harm Cronie

Moreover, Amin is not on his own: there is also Harm Cronie, co-founder and former student. The professor-student pair is one of the most conventional. It’s certainly not the most common – the partnership made up of two young entrepreneurs is probably the most-well known type (at least in the United States with Google, Yahoo, eBay, etc.). But perhaps we are forgetting that Netscape was founded by Marc Andreessen and Jim Clark, professor at Stanford and also founder of Silicon Graphics. In addition, Amin has been able to benefit from the advice of his mentor, Steve Papa. The latter founded Endeca, an American success story, which was sold to Oracle in October 2011 for over 1 billion dollars. Mentors are essential to entrepreneurs, as the latter are often isolated and must take critical decisions from the very first days of the start-up’s existence. Friendly and experienced advice is therefore very welcome. Thus, Steve Jobs could rely on Bob Noyce, the founder of Intel, during his first years as an entrepreneur.

Kandou prepared the ground to be born under a lucky star. A breakthrough technology responding to a market-driven demand, a friendly eco-system, a very talented team and investors prepared to support ambitious growth. All the necessary ingredients are there!

Of Start-ups and Men

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Second contribution to the EPFL “start-up of the month”: after venture capital with Aleva, I focus on the team with SWISSto12.

12.03.12 – A killer product is not the only key to success for a young start-up. Even in the high-tech sector, the human-factor can be vital, and the founders of SWISSto12 know just how to use this to their advantage

Emile de Rijk, Alessandro Macor founders of SWISSto12

SWISSto12 is the ideal model of a “starting” start-up company. It has all the essential (and sometimes counterintuitive) ingredients for success. A critical factor for a good start is the trust and transparent dealings between the individuals making up the original team. The two founders, Emile de Rijk and Alessandro Macor, may not have the experience you (wrongly) think they need, but their dedication will move mountains. They have invented a Terahertz Signal Transmission technology and, because this answers hitherto unsolved problems, SWISSto12 had a client even before it was established! An opportunity arose, and the two scientists made the most of it. More importantly, their innovation may open up new markets no-one had even thought of – such is the beauty of high-tech, with all its uncertainties. No need for a business plan at this stage: what matters is having a vision and finding the right people to make up the best possible team – which is the subject of this note.

First of all, I strongly advise not to embark on such an adventure alone. Professor Ansermet of the Laboratory of the Physics of Nanostructured Materials was impressed by the enthusiasm displayed by the two young scientists and provides friendly support. This is an absolute must.

EFPL backed up this support with its Technology Transfer Office, which helped to patent the technology and grant an exclusive licence to SWISSto12. (If I may make a brief digression here, one often sees entrepreneurs frustrated at the difficulty in negotiating IP rights. Although the perception is rather negative here, exceptions [such as the Bose adventure at MIT] should not obscure a much more transparent reality).

This start-up made the most of all the local support mechanisms: coaching at the PSE, Innogrant, VentureKick, CTI, and I probably forget others as the EPFL ecosystem is so efficient – to the point that this may even be dangerous if you rely solely on these support mechanisms.

SWISSto12 also secured an outstanding mentor in Valtronic founder Georges Rochat, who I recently found out has lived in Silicon Valley and knows the environment inside out. He not only contributes his own experience, but also a network and credibility which are key to the start-up’s development.

When the time came to recruit staff, things became tricky. After the exhilarating first few days, the new team realised that some dynamics were incompatible with a start-up’s culture where everyone lends a hand and “reporting structure” is considered a rather rude expression. A painful, but unavoidable decision was made to separate on good terms. In a start-up company, the main reason for failure is the human factor, much more than the technology, product or market.

I shared the idea of this column with Emile de Rijk, who said that you must “play out in the open and be honest with your partners to as to create win-win situations”. SWISSto12 is about to look for investors and the company’s potential should make it possible to realise these ambitions. I spoke of success criteria earlier. Naturally, there is no guarantee of this and entrepreneurship is always a careful balance regardless of a company’s size, and even more so in the case of a start-up. Still, in my opinion the founders’ passion and enthusiasm, combined with their ambition and lots of good sense, have definitely put them on the right track!

Is venture capital a universal solution?

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Following my post from last Friday, here is a series I have been asked to write for EPFL start-ups. It is logical that it appears also here. This first chronicle is about Aleva, a great EPFL start-up, and it is also abotu venture capital. Here it is.

10.02.12 – Aleva Neurotherapeutics has succeeded in raising 10 million Swiss francs in venture capital. The EPFL start-up has shown that this type of financing is not out of reach for young Swiss companies.

For this initial article in the “start-up of the month” column, it was a “must” to talk about Aleva Neurotherapeutics. Andre Mercanzini, its founder, got his PhD at the Microsystems Laboratory (LMIS4) headed by Prof. Philippe Renaud. What was my motivation? André is a shining example of the enthusiastic and persevering entrepreneur. He obtained an Innogrant in 2008. This grant enables apprentice-entrepreneurs to devote their time to their start-up project for one year. The life of an entrepreneur is not exactly a bed of roses, and as well as enthusiasm you need courage. And you shouldn’t do it alone. By persuading another entrepreneur, Jean-Pierre Rosat, to join the adventure, Andre convinced three venture-capital funds (based in Lausanne, Basel and Zurich) to invest. But it was only in August 2011 that the raising of the 10 million francs became a reality, a full three years after Aleva was founded!

I’m not going to say much about the activity of this start-up. Aleva develops electrodes for neurosurgery and these are implanted in the brains of patients suffering from Parkinson’s disease or severe depression. I am not going to say more about Andre Mercanzini either; he can describe his adventure better than anyone else. On the other hand, I’ve noticed that Andre has already become a role model for other entrepreneurs from EPFL and that he himself had the opportunity to prepare his thesis in a very entrepreneurial laboratory. If you go to the page of LMIS4 mentioned above, you will see that no fewer than 13 start-ups originate from there. Emulation is a key element here.

Risk capital: for start-ups with rapid growth

What matters also to me, beyond the entrepreneurial qualities of the two founders, is to show that venture capital is not an unreachable objective. About 10% of EPFL start-ups have raised such funds. Some entrepreneurs who appeal to institutions in the venture capital area subsequently complain about their conservatism. Others avoid them like the plague, referring to them as “vulture capitalists”. This is open to debate. It’s undeniable that this type of investor is looking for companies with a potential for rapid and global growth, and not all start-ups can fulfill this criteria.

There is now available in the world, in Europe and in Switzerland, much more money than there was 20 years ago, even if there is a lot less than during the “irrational exuberance” period of the Internet bubble. It always has been, and will continue to be, difficult to find money (for any kind of project in fact). However, Aleva, but also Biocartis and TypeSafe (other start-ups from EPFL) have shown that it is possible. Is venture capital a must? I sometimes tend to think so when it concerns high-tech start-ups and I know that I’m sometimes reproached for giving it too much importance. I simply note that a very large number of successful American companies have applied for these funds and that boot-strapped companies are the exception in the USA. In Europe, it’s the opposite!

“In Switzerland, we prefer a small entity that you can control from A to Z”

I would like to finish with a quotation from Daniel Borel, another entrepreneur who studied at EPFL. “The only answer I can suggest is the cultural difference between the United States and Switzerland. When we founded Logitech, as Swiss entrepreneurs, we had to play the internationalization card very early on. The technology was Swiss, but the United States, and later on the world, defined our market, whereas the production quickly became based in Asia. I wouldn’t be at ease with myself if I were to paint a negative picture, because I think that many things evolve and that many good things happen in Switzerland. But it seems to me that in the United States, people are more open. When you obtain funds from venture capitalists, you automatically accept an external shareholder who helps you manage your company, but who can also sack you. In Switzerland, this vision is not so widely accepted: we prefer a small entity that can be controlled from A to Z, rather than a big undertaking that you can only control at 10%, which can be a limiting element.”

You have to go global, and right from the start

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I do not make the front page so often so it was fun to be on the EPFL one this morning. Forgetting about ego, I talked about my usual obsession, lack of growth of European start-ups. You may read the interview by clicking on the picture or reading it below.

More seriously maybe, you can read a similar analysis by Oseo, the French innovation agency which published “A look at 10 years of creation of innovative companies in France”. the study is in French and looked at 5’500 start-ups created between 1998 and 2007.

What the study says is that 85% of the company are alive after 5 years [against 50% in the USA; I already addressed the topic in Survival or failure – which success?], they have less than 10 employees, and the one important reason of this situation is the difficulty in building relational networks. Nothing new probably and nothing new in the interview below… except maybe that half of the French start-ups have an international strategy right from teh start and 30% have a foreign-only market!

“You have to go global, and right from the start.”

10.02.12 – How do you go about setting up a business? Hervé Lebret, start-up specialist and head of the Innogrant program at EPFL, answers a few questions. “When launching a start-up, you must think globally right from the start”, says Hervé Lebret, head of the Innogrant program, a support tool for entrepreneurs coming from academia. He believes that both the Swiss and Europeans hesitate too much when creating start-ups. As the person responsible for writing a monthly column dedicated to start-ups on the new EPFL website, starting next Monday, he was more than happy to be interviewed.

Does the current economic situation make it harder to find funding?
This may come as a surprise, but I don’t think that things have really changed. It’s hard to find capital, as it has always been, but not impossible. It depends on the business area concerned, but I would even go so far as to say that there is more capital now than there was 15 years ago. Businesses such as Scala or Aleva, with origins in EPFL labs, have raised significant sums from venture capitalists in the last few years, just as Aïmago, Lemoptix or Attolight which secured 1 to 2 million francs from Business Angels.

Are some areas more favorable than others?
It makes it easier if the know-how is present locally, as is the case here with biomeds or nanotechnologies. Cleantech businesses are starting to lose the favor which they enjoyed until recently. But I’m convinced that ideas can come out of anywhere and get a good reception, as long as their communication is efficient. Incidentally, we shouldn’t pay so much attention to the needs of the market. These don’t suffice to predict which start-up will be the next success-story. Promising areas have needs, but no immediate solutions, and when the start-ups enter the market the first needs have often already evolved and are moving in another direction.

How can one ensure a good launch for their start-up?
Only one start-up out of ten succeeds in raising venture capital like Aleva or Biocartis, and grows to a size of 50 to 100 employees. Then out of these, 10 percent will enjoy success over ten years, like Endoart or Swissquote, which employs over 400 people. The main goal should not be survival. On the contrary, these start-ups sometimes last too long. Some 90 percent of them are still there five years on, but they haven’t grown. In the United States there is a higher rate of renewal: only 50 percent of start-ups are still in existence after this same five-year-period. The problem lies in the conservative stance of Europeans, who are wary of quick growth. I think we should bring students’ attention to this aspect very early, starting in high school. You cannot just turn yourself into a businessperson. We need to encourage children and young people to explore and stop stigmatizing failure, which we still do now in Switzerland. We plan to show a fascinating documentary soon on the topic of students who are eager and interested in creating businesses – it’s called Something Ventured.

How do you carve out a place for yourself?
It’s fairly easy, if you have a good idea, to obtain up to 500,000 francs from public funds or philanthropic organizations, which allows the business to survive one or two years. These contacts also provide free marketing, which can in turn help to find initial business angels and make an initial million francs. The limits come from the young businessperson’s excessive humility, from their self-limitations. In order to succeed, you must be a salesman and somewhat extrovert, or team up with someone who is. Network is essential in effective positioning of the company.

How important are start-ups for the economic fabric of Switzerland?
Some forty start-ups are created each year in the Canton of Vaud, fifteen of which come from the academic world. They play an important role in the future of the Canton, of Switzerland and even Europe. Logitech or Swissquote, for instance, have created many jobs. However, Swiss start-ups in general struggle to grow beyond five or six employees. The biggest problem is well known: entrepreneurs lack risk-taking instincts and therefore struggle to grow their businesses. They prefer to do it in stages. In the United States an “all or nothing” policy prevails, and results in a higher success rate. Facebook, which has just declared its entry on the stock exchange, already employs 3000 people. Individuals who have good ideas go straight ahead and are not afraid of failure. They aim directly for global markets. The biggest mistake is to aim first and foremost for the Swiss market. One should aim for the world market straight away by adopting a global perspective and not being afraid of passing off as arrogant is essential.

Author: Cécilia Carron – Source: EPFL Mediacom