You are a young scientist who is considering starting your own business. Maybe you have read stories about successful entrepreneurs--like scientist Stephen Wolfram who needed a tool for his research, developed the scientific computing environment Mathematica, sold over a million copies worldwide, and used his acquired wealth to go back to science. Because of his financial independence, he could now pursue his research undisturbed by grant writing and departmental politics. After 10 years of silence, he recently published his ambitious book A New Kind of Science.
Wolfram is of course an extreme example. A good way to learn more about high-tech entrepreneurship beyond the merely anecdotal is to consult with scholars that have studied the phenomenon extensively. With an assignment from my editor at Next Wave in hand, I traveled to the University of Twente in Enschede, the Netherlands, to attend the 10th Annual Conference on High-Tech Small Firms. I wanted to get some answers to my questions: How do you become a high-tech entrepreneur? How do you grow your company and make it a success? And what is a good exit strategy? The organizers, Annemarie Ridder and Joost Brinkman, gave me a warm welcome and introduced me to a number of people to help get me started.
Starting a business is easy. You need a good idea and a lot of motivation. As Wim During put it; "if you arrange the financial means to survive for some time, becoming an entrepreneur is a win-win situation; you learn real-world skills and knowledge that is priceless--it doesn't matter whether you are successful or not." Wim During is one of the initiators of the conference, and a professor of innovative entrepreneurship at the University of Twente, the host institution. He is a good communicator; his small face with a short-trimmed graying beard will occasionally explode in a broad smile, indicating that there is more to his life than thinking about small high-tech firms.
In his opening speech, During stated that the most intensely studied aspects of high-tech companies are "networking" and "innovation policy". He argued that, despite the economic slow-down, the present high-tech start-up climate is very good, partly due to the policies that have been implemented at the regional, national, and international level.
The University of Twente itself plays an important role in this development. They even refer to themselves as the "entrepreneurial university". One of the things they offer start-ups is the so-called TOP program (temporary entrepreneurial positions). Budding entrepreneurs can associate themselves with a research group that matches their product or service. For a period of 1 year they receive a interest-free loan from the university. Jann van Benthem is the manager of this program and from his enthusiastic stories you can tell he enjoys working with these highly motivated young entrepreneurs. "From the moment we allow them into the program on the basis of their business plan, I meet with them regularly to monitor progress. I also get them in touch with their fellow starters through the monthly TOP lunch."
Although this method seems to work locally, the national government is worried about the large discrepancy between the high quality of scientific research that puts the Netherlands in the top 10 and the low degree of utilization of this knowledge. Marcel Kreijen and Edwin van Scherrenburg of the Dutch Ministry of Economic Affairs discussed this "Dutch paradox" in their talk. Although they presented some new initiatives that should stimulate entrepreneurship, they also took some heat from the audience, which was pushing for more "evidence-based policy". For example, the notion that business parks are useful for high-tech firms came in for particular scorn. Most researchers believe that locating a lot of companies close together, as happens in the science parks in Cambridge, UK, or Sophia-Antipolis, France, is quite useless. High-tech companies do not need other high-tech companies; instead they need lawyers, accountants, marketing people, personnel officers, and so forth. This brings us to the number one aspect of growing a successful high-tech company: your network.
How to Become Successful
"Success has many parents, but failure is an orphan". Instead of interpreting this old saying as a cynical statement, you can also take it literally and start building a network of "parents" to increase your chance of success. Researchers all seem to agree that the quality of the network of a company is the prime success factor.
In his talk, Willem Hulsink of the Erasmus University Rotterdam had an interesting take on this issue. He acknowledged the fact that a good network is important for discovering opportunities, finding resources, and gaining legitimacy. But he also added that it depends on what kind of company you are starting and that in some cases your network may even be a burden. He distinguished the lone starters from the spin-offs that have a company or university to back them up, and from the start-ups in incubators. He argued that the strong ties of the spin-offs and incubatees will kick-start them into business but might hinder them as they go along. In contrast, the lone starters initially have weak ties but they manage to develop them into strong ties when the right opportunity presents itself, which on average makes them more successful.
In an outdoor conversation during a few sunny moments, Aard Groen completed the list of crucial success factors for me. Groen is director of the Dutch Institute for Knowledge Intensive Entrepreneurship, a professor in technology and management, and also one of the conference organizers. A crucial factor, says Groen, is the culture of your company and whether your values match those of your customers, partners, and suppliers. You have to be able to speak multiple "languages" to communicate and connect with the gamut of actors in your network.
Of course money is also an important factor. Most start-ups are financed by the three F's: family, friends, and fools. Surprisingly, less than 1% of high-tech start-ups get money from venture capitalists.
The last factor is strategy, which is intimately linked to the goal of your enterprise. If you just want to be able to pay your rent, you obviously need a different strategy than if you want to become the dominant player in your market. If you know exactly what your goal is, you probably also know the answer to the next question.
When to Get Out?
In thinking about your exit strategy you should reconsider your motivation for starting a high-tech company in the first place. Ray Oakey, in the conference?s closing presentation, argued that the motivation of a lot of entrepreneurs, quite simply, is independence. Oakey is a British scholar who teaches business development at the University of Manchester and was the initiator of the first conference back in 1993. I talked to him on the bus taking us to the conference dinner; he is one of those people who thinks carefully before answering and always gives you a balanced story.
In his talk Oakey conscientiously laid out his argument that the quest for independence can mean that you, the entrepreneur, want either freedom or control. This will decisively influence your exit strategy. If freedom is what you want, you might decide never to hire anyone else, and get out as soon as you can sell your idea. If your goal is control, you might want to grow your business, but only to the point at which you can still manage it yourself. Against his better nature Oakey ended up giving the audience a potent sound bite: "As a high-tech entrepreneur, you should consider selling the business every day".
On the return train to Amsterdam I sat back and reviewed my days at the conference. I had met a lot of interesting people and thought that I should plan to attend next years? conference, which will be held in Manchester again. Thinking about how the things I learned apply to my own company, I decided that some of my decisions were not so bad after all. On the other hand, I should take a critical look at my network to see where the holes are, I definitely have to talk to potential customers more frequently than I do now, and I also need to meet more fools.