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* Pseudonyms, company’s real names are on file with Spinout Wales
** The company’s name has been withheld at the request of the founder
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Identification of needs of global start-ups
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Introduction
To assess the needs of the companies, the case studies were analysed with respect to five functional areas as identified in the interview protocol, namely: research & development; production/operation; market development/sales; organisation and governance; finance/administration. By examining the evolution of the companies the needs were identified for each of the areas, the following sections give an aggregated report on these needs related to each functional area, while specific needs are identified in the tables 1-5.
3.2 Research & Development
For early stage high tech firms, knowledge is possibly the single most important resource (Arenius & Autio, 2002). Acquisition of valuable know-how, learning and keeping up to date with the newest evolutions in the field are essential ingredients for success in these firms. It is important, therefore, that the founding team consists of people who are authorities in their fields of research as they provide scientific excellence, reputation and networks of scientific and technical partners to the firm. The majority of the case study companies are based on university knowledge or knowledge gained by the founder(s) while working at a university research group. For some of the case companies especially in the biotech firms, access to a global network of “world-class” scientists etc. was not necessary as the entrepreneurs are these experts. From the cases the other identified needs related to logistical and strategic implementation of research and development issues (see Table 1).
Specific Needs Identified |
Performing of technological due diligence (assessing how unique the company’s technology is in the world/on the market)
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Creating an appropriate IP strategy (global)
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Developing a balanced innovation strategy (including R&D roadmap, balanced portfolio of short, medium and long term R&D objectives)
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Identifying and providing access to specialised R&D equipment and facilities
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Identifying and relating to (global) networks of “world-class” scientists, experts, technical and/or industrial partners
| 3.3 Market development / sales
The case studies revealed that marketing, and especially international marketing, is a problem area for the start up companies (see Table 2). Developing adequate sales and marketing strategies can be problematic for all start up firms. The firm must be able to see possibilities on the market related to customers’ needs and desires and have the capacity to exploit them within the firm’s current context (Klofsten, 1998). This is especially true for high tech firms whose domestic market is limited because of their technology offering, who therefore need to gather information on both foreign and domestic markets, customers and competitors. Rialp-Criado et al. (2002) claim that market knowledge and market commitment are important ingredients for a new venture’s success. Oviatt and McDougall (1995) suggest that one way in which new ventures might overcome the liability of smallness and newness is by being the first to market with a distinctively valuable product or service; there is ample evidence of this in the case companies.
Table 2: Specific Market development / sales needs Specific Needs Identified |
Screening and selecting target markets / market segments (market intelligence)
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Identifying lead customers
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Defining and implementing the appropriate marketing mix for targeted market segments: products, price, distribution and promotion
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Developing an appropriate sales strategy and structure (including aftersales and service)
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Developing adequate contractual arrangements related to IP / liabilities, (with customers and distributors)
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Little is written or known about the production decision of early stage high tech companies in the international entrepreneurship literature. The literature suggests that internationalisation is more focused on commercialisation of products and services rather than production (Burgell & Murray, 2000). From the cases it can be seen that production requirements differ among start-ups depending on the technology used. Many companies spend their early years focused solely on research, product development and testing, with no requirement (yet) for large production facilities. While the data shows several companies with manufacturing requirements in their early stages and that these companies employed several different solutions to tackle their needs with respect to both technical and product development and design and also with regards to manufacturing decisions. Some of the methods employed by the case companies include: outsourcing to partner companies; licensing the technology in; contracting university staff; and, entering into OEM (original equipment manufacturing) agreements with international companies. Some of the more specific problems relating to these decisions are outlined in Table 3.
Table 3: Specific Production / operation needs Specific Needs Identified |
Assisting / supporting the “make or buy” production decision
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Setting-up production facilities abroad
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Setting-up logistic infrastructure
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Selecting the appropriate location of facilities (taking into account local legislation related to industry, environment, etc and local support / incentive schemes)
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Identifying and selecting relevant partners for outsourcing
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Developing adequate contractual arrangements related to IP/liabilities (with production partners)
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Many early stage high tech firms, especially university spin-offs are started by technically skilled and motivated researchers, who are generally young and lack business and management experience (Luostarinen & Gabrielsson, 2002). This was supported in the case findings, where the entrepreneurs, especially those starting for the first time and academic entrepreneurs expressed that they had some deficiencies in dealing with organisational issues and also especially the academic entrepreneurs intimated that they were lacking with respect to some managerial capabilities. To make up for this the entrepreneurial team should consist of people with complementary expertise across the various functions required in the venture (Rialp-Criado et al., 2002; Oviatt & McDougall, 1995). Another way in which early stage high tech companies supplement their lack of managerial and organizational skills is through the support of advisory boards (Luostarinen & Gabrielsson, 2002) and boards of directors. Boards of directors have been shown to assist start up companies with their organisational development, providing credibility to the company as well as providing advice and counsel, and playing stewardship and monitoring roles (Deakins & Boussouara, 2000; Keasy et al., 1994; Hambrick and D’Aveni, 1992). Many of the case studies provide examples of the arrival of new management members with complementary capabilities to those already existing in the firm. The case studies also clearly illustrate the evolutionary nature of boards of directors as new members are added as the ventures experience new organisational challenges. The specific needs relating to organisation and governance are illustrated in Table 4.
Table 4: Specific Organisation and Governance needs Specific Needs Identified |
Formation of a Board of Directors with international management experience
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Formation and development of a senior management team with international experience
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Recruiting and selecting “foreign” employees
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Developing adequate HR administrative procedures and arrangements (incl. tax/legal aspects)
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Identifying and developing appropriate arrangements (VAT, legal issues, etc)
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Developing management capabilities
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New ventures traditionally begin with limited financial resources. Also, in the early stages of the company, especially for high tech firms who require heavy research and development investments as they are still in a development or testing phase revenue flows from sales are often weak or nonexistent. Therefore, attracting sufficient financial resources is a prerequisite for start up companies. A distinction can be made between three types of capital required at different stages in the firms’ development. Pre-seed capital is the capital required at the very early stage, i.e. before the foundation of the company; seed capital is required to perform further research and development and to develop the product after the establishment of the company; while growth capital is required for the production and/or the commercialisation of the company’s product and/or services. All the cases highlight the need for funding at all stages of the company’s development and illustrate that the case companies look for funding from all available avenues, both public and private, e.g. international, regional & local venture capitalists; government backed funds; university funds, e.g. through technology transfer offices; national enterprise organizations; private equity; and, grants & loans. Several companies also emphasised the need for having at least one cash generating product or service to help overcome the lack of funding at seed phase. The specific needs with respect to financing are outlined in Table 5.
Table 6: Specific Finance / administration Needs related to the ‘capitals’ Specific Needs Identified | |
Identifying, selecting and convincing investment / finance partners during the
- pre-seed phase
- seed phase
- growth phase
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Economic
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Identifying and accessing grants/subsidies for export, R&D, etc
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Economic
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Identifying, developing and installing accounting /administrative /legal procedures pertaining to (global) activities (VAT, legal, import/export regulation, etc)
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Cultural
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3.7 Conclusions
A summary and conclusions regarding the identified needs and the specific needs are presented in the tables below.
Identified Area of Need: Research & Development
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Specific Needs Identified |
General Case Information
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The majority of the case study companies developed their own research and development. This task was largely performed by research groups within the university or provided through university spin off programmes and government agencies.
For some of the case companies especially in the biotech firms, access to a global network of “world-class” scientists etc. was not necessary as these people were those experts. For others access to these networks has many advantages, e.g.
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Strong relationship keeps them ahead of other firms in the industry
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Credibility
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Introduction to venture capitalists
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Professional counselling & mentoring
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Performing of technological due diligence (assessing how unique the company’s technology is in the world/on the market)
|
Creating an appropriate IP strategy (global)
|
Developing a balanced innovation strategy (including R&D roadmap, balanced portfolio of short, medium and long term R&D objectives)
|
Identifying and providing access to specialised R&D equipment and facilities
|
Identifying and relating to (global) networks of “world-class” scientists, experts, technical and/or industrial partners
|
Identified Area of Need: Market development / sales
|
Specific Needs Identified
|
General Case Information
|
The case studies revealed that marketing, especially international marketing, is a problem area for the startup companies. Some of the problems areas highlighted include:
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Finding initial customers
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Creating market awareness
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Building distribution and reseller networks
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Sales & market development
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Customer relations
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Export support
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How to undertake overseas sales
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Screening and selecting target markets / market segments (market intelligence)
|
Identifying lead customers
|
Defining and implementing the appropriate marketing mix for targeted market segments: products, price, distribution and promotion
|
Developing an appropriate sales strategy and structure (including aftersales and service)
|
Developing adequate contractual arrangements related to IP / liabilities, (with customers and distributors)
|
Identified Area of Need: Production / operation
|
Specific Needs Identified
|
General Case Information
|
The case data revealed that the companies employed several different solutions to tackle their needs with respect to both technical and product development and design and also with regards to manufacturing decisions. Some of the methods employed by the case companies include:
-
Outsourcing to partner companies
-
Licensing the technology in
-
Contracting university staff
-
Entering into OEM manufacturing agreements with international companies
|
Assisting / supporting the “make or buy” production decision
|
Setting-up production facilities abroad
|
Setting-up logistic infrastructure
|
Selecting the appropriate location of facilities (taking into account local legislation related to industry, environment, etc and local support / incentive schemes)
|
Identifying and selecting relevant partners for outsourcing
|
Developing adequate contractual arrangements related to IP/liabilities (with production partners)
|
Identified Area of Need: Organisation and governance
|
Specific Needs Identified
|
General Case Information
|
The case studies indicated the importance of having the ‘right’ people on board with previous international business and managerial experience as these provide among others:
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Credibility to the enterprise
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Encouragement to the entrepreneur
Amongst the case companies several entrepreneurs referred to the need to recruit foreign employees, especially e.g. those companies who wanted to have ‘local agents’ operating for them.
The case entrepreneurs, especially those starting for the first time and academic entrepreneurs expressed that they had some deficiencies in dealing with organisational issues.
The case entrepreneurs and again especially the academic ones intimated that they were lacking with respect to some managerial capabilities
|
Formation of a Board of Directors with international management experience
|
Formation and development of a senior management team with international experience
|
Recruiting and selecting “foreign” employees
|
Developing adequate HR administrative procedures and arrangements (incl tax/legal aspects)
|
Identifying and developing appropriate arrangements (VAT, legal issues, etc)
|
Developing management capabilities
|
|
Identified Area of Need: Finance / administration
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Specific Needs Identified
|
General Case Information
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All the cases highlight the need for funding at all stages of their development. The case companies look for funding from all available avenues public and private, e.g.
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International, regional & local venture capitalists
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Government backed funds
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University funds, e.g. through technology transfer offices
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National enterprise organisations
-
Private equity
-
Grants & loans
Several companies emphasised the need for having at least one cash generating product or service to help overcome the lack of funding at seed phase
|
Identifying, selecting and convincing investment / finance partners during the
- pre-seed phase
- seed phase
- growth phase
|
Identifying and accessing grants/subsidies for export, R&D, etc
|
Identifying, developing and installing accounting /administrative /legal procedures pertaining to (global) activities (VAT, legal, import/export regulation, etc)
|
Annex 1: Papers
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