Monday, July 28, 2014

The reasons why many European startups are failing, and it might come from a surprising place.

 By Paul Chen

Here in Poland, startup veterans like Piotr Wilam and Bartek Gola keep wondering when will Poland have our big success.   The main reasons aren't in the product development.  

The Anakin Skywalker complex

In the prequels to the original Star Wars, it tells how Anakin Skywalker turned into Darth Vader.  The main reason was that as talented and powerful as Anakin was, he was really impatient and wanted to show off his power and rise up through the ranks and be recognized for it too.  I can see it happening here in Poland.  It is a national character of Poland to care too much what others are thinking about you.  As George Feeny says," If you care too much about what others think of you, you will never develop as a person."
There are indeed many potentially great startups in Poland.  They will get their recognition in due time.  However, I believe that there are still a lot of growth to do.   There have been hyperbolic pieces on how Poland is getting set to take over the world.  These pieces have been met with criticism.  I agree with a certain Games of Throne character when he said,"A king does not need to announce himself to be king."

I was talking to Jakub Krzych, founder of Estimote, the other night.  I agree with how they are proceeding with their growth.  They are not making many big announcements, nor are they seeking all kinds of media attention.  What they are doing is working hard and trying to perfect their business offers.  They realize that they are not the only beacon game in town.  What they have is really wonderful brand recognition perhaps through their participation in Y Combinator or having won TechCrunch's Disrupt.  That gives you a certain amount of capital and public trust.   Hardware is really hard because you got to get it right on the first iteration.  There are no software patches to fix the bugs.  If you get hardware wrong, it gets really expensive.  You don't get a second chance to make a first impression and you get bad PR.  And doing a massive recall on hardware is seriously expensive, because of shipping and the refurb.  So what they are doing is to make sure they have a solid piece of hardware and a wonderful suite of applications as their offer.  When others are selling the same hardware as you, it's your software that will set you apart.  They already have some high profile clients such as Virgin Atlantic and nTrust.  There should be more startups with such ways of working.  

Missing pieces of a sustainable entrepreneurial community

In Brad Feld's book, he mentioned that a sustainable entrepreneurial community needs to have four things:

  • Two types of people: leaders (entrepreneurs) and feeders (people who support startups, such as government agencies, funders, service providers). While the "feeders" are the very fabric of the community, the entrepreneurs must be in the lead.
  • A long-term view and commitment to building this community
  • A philosophy of inclusiveness that welcomes everyone with an interest, not just entrepreneurs
  • Substantive activities that engage the entire community to help startups move forward

Here in Poland, we only have one of these.  There are conferences like Bitspiration.  There are meetups like Geek Girls Carrots.  There are workshops like Webmuses. And locally here in Krakow: Krakspot, Startup Stage, Hive Swarm and Open Coffee.  These activities  
There is a popular view point that people in the CEE region aren't known for being warm to outsiders.  And I can feel it.  Some one once said that Czechs and to some extent Poles are like water, it takea a long time to warm up, but once it gets boiling it stays warm as long as you continue to add heat.  To some extent I still feel like an outsider.  It could be because I am not a programmer or a designer.  It could be because I don't speak the local language.  It could be because I am not Polish.  A lot of my expat entrepreneurs feel the same way.  It feels like the only people that Poles would like to succeed in Poland are fellow Poles.  Civilizations have had such exclusive policies and they usually end up falling into the dark ages.  The success of  Silicon Valley is a clear case where if you allow others to come in and be included in the conversation and allow ideas to blend, then they will succeed then the whole community will benefit from it.  
        From what I see, the members would like to have one or two big successes then it's happily ever after.  But a successful community does not rest on its laurels.  Budapest has Prezi, Ustream, and Logmein.  Berlin has Soundcloud, Delivery Hero, and Axel Springer. Prague has Apiry, AVG, and  And they are still working hard but they aren't asking about when are they going to have their next big success.  
At the moment, I feel that leaders of the community are the feeders not the entrepreneurs.  It's Angels like Richard Lucas, incubator and accelerators like Innovation Nest and Hubraum who are basically setting the pace in Krakow.  Startuppers need to remember that these people are only facilitators.  The community will succeed when the startups grab the bull by the horns and decide how the ride will go.  The feeders should encourage more risk taking and the entrepreneurs should take the risks.  Remember, true growth occurs outside your comfort zone.

The Athlete's mentality

They say baseball is 10% Physical and 90% Mental. Same is running a successful startup and building a successful and sustainable startup community.  In the CEE region, if you fail, like Hester Prynne, you will have to wear it around for the rest of your professional life.  The communities are small enough that the word will spread around quickly, and the authorities will punish you for it.   Whereas in Silicon Valley, good VC's actually would prefer that you failed because you would have learned something valuable from it.    Because of this environment, people are terribly afraid of making a mistake.  As a result, they don't take the risks and succeeding becomes even harder.  If you never swing the bat, you will never hit the ball.  And in football, they say when taking the penalty, the best thing is to just kick the ball.  
Most of the reason that Poland hasn't really had a big success is not in the products and types of services it produces.  It is mostly from the intangibles.  And these are the most difficult to tackle.  Overcoming fear, taking risks, and enjoying it when you succeed are things that any successful person needs to do constantly.  In Poland we are growing rapidly.  Like Keith Teare told me, it's good to have a destination, but enjoy the trip!     

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