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Without a working acquisitions machinery in the startup ecosystem, new ideas will not reach a depleted market.

Better odds

European startups can learn more from creators like Alexander McQueen and Vivienne Westwood than the hyped mushrooms that pop up and quickly evaporates in Silicon Valley. The reasons are plenty, but the venture money is usually not there and the acquisitions don’t exist, conditions that are necessary in a thriving ecosystem. Without them, the cardiac cycle doesn’t work and new ideas will not reach the market. Established companies prefer competition as it is, still believing in their own abilities to serve a market in decline. The consequence is near stagnation, not only for isolated sectors but for the whole economy, a situation that almost can be seen now.

Inexperienced founders look naively for patterns and simple recipes that will make them successful within a few years. In the process, they become easy prey for con artists and charlatans, marauders who write books and dish out enigmatic advice in social media. The real money is earned through expensive appearances and consulting gigs that are nothing but humbug, appearances that can cost more than $50,000. Many of these marauders have worked in failed startups, which they market as invaluable experiences, launching new ideas and concepts that didn’t help them. Some have more than ten startup failures behind them.

The hard truth is that super successful founders can’t repeat past successes; the unknown elements are merely too many each time, and the ability to control them cannot be found in one founder alone. Founders must learn tremendously much in a relatively short period of time, from technology and investor relations to regulations and marketing. It makes experienced founders extremely attractive in the eyes of venture capitalists, although the founders can’t guarantee to repeat earlier successes. Still, there must be empirical evidence out there that could help a newly appointed founder understand what can give them better odds.

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One model which has proved to work is to have two founders: one who is a creative genius, the other a gregarious business person that never gives up. Many successful ventures show this pattern, but creativity and innovation must be a central part of what they do, commodities don’t count. French fashion produced Yves Saint Laurent and Pierre Bergé, while Italian fashion brought Valentino Garavani and Giancarlo Giammetti. Without the business side, ideas and creativity would never have reached a picky market. Without creativity, there would be not much to sell, even less to pay attention to.

Both Alexander McQueen and Vivienne Westwood needed a professionally managed business and marketing organisation in order to grow. In Westwood’s case, she experienced how creativity became subordinate when the business expanded, a situation she didn’t like. She thinks the most fun period was the early days, when they hardly had any money but the ideas surged in the small studio above their Worlds End store. Some of her staff even chipped in just to be part of her adventure. As the business grew, things changed and she lost authority. Nowadays, Westwood only approves and criticises ideas, and the fun is largely missing. For Alexander McQueen, the experience was much like Westwood’s, but more intense and fatal. The string of successes became hard to deal with, the amount of work that kept increasing affected McQueen’s health, and in February 2010 he ended his own life. Although the fashion world was wordless at what had happened, nothing changed at its core.

A creative organisation must be led by a creative person, says John Hegarty, the legendary advertising executive who founded BBH in London in 1982. Without a creative culture, a company will erode its brand and soon become a business of commodities. Even if both founders may have a little bit of creativity and business in their blood, the talents and drive must be there in multitude, but they are seldom found in the same person. It’s very rare to find successful startups with a single, often inexperienced, founder who is only interested in technology.

Microsoft is perhaps the best example in the software industry that mirrors how fashion companies are built in Europe. Unlike Apple, Microsoft didn’t have investors in the beginning, they built products and acquired customers in the old fashioned way. The joint venture with IBM to build the operating system for their personal computer came later and broke the pattern. It was IBM who made Microsoft into the company they are today. Without IBM’s access to enterprise markets Microsoft may have ended up like Novell.

Apple had its own business expert in Mike Markkula, who not only made the first investments in Apple but also brought his business and marketing experience from Fairchild Semiconductor and Intel. Without Markkula, who was of Finnish heritage, Apple would probably not have made it beyond its original products, the Apple I and Apple II computers. It was Markkula who coached Steve Jobs and knew how a technology company should be organised and operated. If Jobs had brought Markkula — or someone with his skills — to NeXT, the computer company may have survived and outlived Apple.

The model for European startups is different because of a different climate. It takes much longer time to build a successful technology company in Europe, and that can’t be changed even if we make founders believe they can. Silicon Valley can bring more ideas to the market in shorter time and test if they work, Europe is not in that position. The problem is partly regulatory, partly how people think about markets and the way they value the acquisitions machinery.