“Excellent entrepreneurs do not start with brilliant ideas or extraordinary insights and predictions. They begin as I or you could begin: with who they are, what they know and who they know. “
Excellent entrepreneurs do not start with brilliant ideas or extraordinary insights and predictions. They begin as I or you could begin: with who they are, what they know and who they know.
It is these words of Prof. Saras Sarasvathy, Darden Business School author of the logic of entrepreneurial effectuation action, and in the practical experience of Open Innovation, which bring in the expertise and background from years of experience, that the creators of the 100 Open Startups network are inspired.
In fact, it is possible to find in both currents of thought the driving force that drives the gears of the ecosystem managed by them.
It is there at the root of the Open Innovation concept proposed by Prof. Henry Chesbrough of UC Berkeley in 2003 to be a more distributed, participatory, and more decentralized approach to innovation, based on the fact that useful knowledge is widely distributed and no company, no matter the size and capable of being able to innovate effectively on its own. Already at the root of effectuation is the idea that it is possible to co-create the future by undertaking.
The ecosystem assembled by 100 Open Startups embodies these two concepts by connecting startups to large companies, executives and angel investors . The common goal is to generate value by associating new business models, technologies and innovative practices. This lessens the odds of failure, allowing you to try many times, increasing the odds of finding the next big idea that will make startup and big companies thrive and investors could leverage leading to the creation of a unicorn.
The goal of a good innovation program, therefore, is not to minimize expenses, but to maximize the chance of finding the best way to impact the market and generate profit. And the process — involving a broad and active stakeholder group and making the interactions happen — is an important part of the maturing of the entire ecosystem. This year’s figures confirm that.
The program’s historical data, measured against startups that entered the 2016, 2017 and 2018 rankings, show that the model created by the 100 Open Startups is a well paved road that brings innovation to the Open Corps while ensuring resources to accelerate growth and consolidate startups.
From the investment point of view, for example, the data show that a startup that scores to enter the ranking is 2.5 times more likely to attract funding . Historically, ranked startups have increased their funding by 133% after entering the rankings. And the average value of post-capture funding declared by startup was $ 1.7 million.
You can say that the ranking works as a showcase and as a magnet: 55% of startups who signed up for the program without ever having raised funds got their first investment after being ranked in one of the previous three years.
The investment data for the 2019 rankings (the Top 100 and the participants in industry rankings and challenges) are equally promising: together, 212 startups received more than $ 142 million in investments (angel, seed, corporate, government, foundations, family & friends).
Almost two-thirds of the founders (63%) stated that they invested their own money in their ventures. But they were not alone: 39.2% received investments from angels, 14.2% seed funds or venture capital, 9% from corporations and 19.8% from accelerators. And the search continues: 80.7% of startups want more investment to grow.
The attractive side of the 100 Open Startups appears when one looks at the figures invested by some of the traditional groups. Angel investors, for example, increased from $ 24.6 million in 2018 to $ 33.4 million in 2019. And the seed investment went from $ 19.7 million in 2018 to $ 24.6 million in 2019. And the Open Corps came with $ 12.8 million for the 2019 ranking, triple the amount invested in 2018, which was $ 4.25 million.
Socio Economic Impact
The historical series of the 100 Open Startups also reflects a quantitative and qualitative leap in the ecosystem of Brazilian entrepreneurship and innovation. In 2016, the first year of the ranking, there were 106 startups and 86 large companies that accumulated points for the ranking.
These numbers grew steadily for 275 startups and 243 large corporations in 2018, and took a quantum leap of over 300% for the 2019 ranking : 895 startups and 876 large engaged companies, totaling more than 5,400 relationships, from simple mentoring to contracting projects and financial investment.
The data on the 2019 rankings show a group of mature companies — 82% are in the market phase, with product and billing — and an equally mature collective of founders: 54.2% have previously undertaken and the largest slice (31, 9%) is between 31 and 35 years old. The combined turnover of this group was over $ 193 million in 2018, projecting growth to $ 324 million in 2019 . And 15% of the 100 Open Startups 2019 are led by women.
The socioeconomic impact of the startups of the 2019 ranking is not only in revenue but also in job creation: 1,888 employees at the end of 2018, which reached 2,455 in the first five months of 2019 (data declared by 177 ranqueadas). 41.4% of startups have between 5 and 10 employees.
This item is worth a comparison. A recent study published by Lavca, a nonprofit organization dedicated to supporting the growth of private capital in Latin America and the Caribbean, mapped the region’s startup scenario and showed that in the last ten years, 227 Latin American (including Brazilian) startups interviewed for the study generated more than 25,000 jobs in the region. The 100 Open Startups of 2019 generated in one year 10% of this total, which is not information to be disregarded.
The so-called disruptive technologies — Artificial Intelligence (AI), Machine Learning, Big Data, Analytics, Internet of Things (IoT), Software-as-a-service, Augmented Reality (AR) and Virtual Reality are feeding the digital transformation and Industry 4.0, appear as final product / service or as an important part of the projects of more than 50% of the 100 Open Startups.
Of the 100 companies on the Top 100 list this year, 20% are direct suppliers of new technologies . Eight companies in the ranking offer AR / VR solutions. In the Big Data and Analytics scenario, startups focus on consumer understanding and solutions that combine image recognition and analytics, for example.
Deep Learning for image recognition is present in business applications, security and monitoring. Using drones combined with Image Analytics in Deep Learning allows you to monitor large areas and infrastructure facilities. Applications of Industry 4.0 and IoT monitoring of large fleets or large areas shows that startups are following the global digital transformation movement and therefore even more capable of adding intelligence and inventiveness to the Open Corps.
The Chemistry of Rupture
The most important corporate dilemma to thrive in the twenty-first century is finding the right formula to be disruptive instead of becoming a victim of disruption.
It is clear that innovation management processes need to evolve. And be open to the diversity of sources of knowledge that can be mobilized to generate a new dynamic. Companies must implement new innovation practices that ensure permeable boundaries in order to take advantage of the diversity of information available by leveraging external sources.
The ecosystem built by the 100 Open Startups thrives precisely because it systematizes the process. Everyone in it has been generating competitive advantages for you and your business partners. And since everyone has a chance to get in touch with everyone, just by being open to frank dialogue and the exchange of knowledge, the ecosystem thrives.
The risk of adverse partner selection is minimized by the extensive network of reviewers and the scoring methodology that highlights the most attractive startups. And the breach of contracts, for the knowledge of the parties with which each startup transacted, since the market assumes that the object of an exchange must be a minimum partially known by the contractual partners so that they can arrange a transaction. Neither technology nor ideas are commodities; they are the ‘subject’ of the transaction.
At The Shift we believe that innovation and disruption result from continuous and accelerated change movements. And that it all begins when the atoms come together, attracted by common interests. The chemistry of innovation and rupture requires a certain amount of detachment and union. Often one needs to get rid of the weight of corporate culture and legacy to make innovation gain traction. And accelerate it by embracing the dynamics and freshness of startups. The perfect combination of chemical elements is that it will promote the diversity of substances needed to accelerate growth and prosperity in the 21st Century.
In other words, the sum of affinity and strategic alignment is half way to innovation, and perhaps also disruption, to take place. Because at the end of the day, the certainty of the digital economy is that the break is the only constant.
Cristina De Luca & Silvia Bassi — are editor-in-chief of The Shift, ION 89 ‘s data-sharing and insights-as-a-service platform for disruptive innovation.