Start-ups Face Research Articles

Startups in times of crisis – A rapid response to the COVID-19 pandemic

Research summaryThe discovery of the coronavirus (SARS-CoV-2) and the spread of COVID-19 have led many governments to take drastic measures. The lockdown of large parts of society and economic life has come as an exogenous shock to many economic actors, not least innovative startups. This rapid response research combines a qualitative research design informed by entrepreneurial ecosystem actors with an analysis of policy measures called for, announced, and reportedly implemented in the international press. Interviews from an entrepreneurial ecosystem offer a first-hand account of the adversity startups face during a crisis and how by utilizing bricolage responses they cope, and the analysis of policy measures can serve as an inspiration to design support initiatives to protect startups from the consequences of the current lockdown and to alleviate the effects of future crises. Managerial summaryThe lockdown measures as a response to the spread of the new coronavirus threaten the existence of many innovative startups. Our rapid response research first illustrates the challenges entrepreneurs face as a consequence of the crisis. Second, we illustrate how entrepreneurs are dealing with the effects of the crisis and what they are doing to protect their ventures. Finally, we present measures that could be utilized by policymakers to assist entrepreneurs facing challenges. The research conducted suggests that while startups are successfully leveraging their available resources as a first response to the crisis, their growth and innovation potential are at risk. Therefore, policy measures should not only provide first aid to startups by alleviating the pressure caused by constrained cashflow, but also involve long-term measures embedded in and supported by the wider entrepreneurial ecosystem to ensure rapid recovery and growth.

Entrepreneurial teams' acquisition of talent: Evidence from technology manufacturing industries using a two‐sided approach

AbstractResearch summaryOne of the established findings in the spinout literature is that founders with prior industry experience assemble larger entrepreneurial teams and create better‐performing startups. We examine the role of prior industry experience in the startups' next stage—its hiring of new employees. We tackle two empirical challenges—the mutual aspect of hiring and the effect of unobserved variables on employees' earnings using a two‐sided matching model. Our results reveal that even firms founded by entrepreneurs without industry experience can attract new employees with such experience if the founders start with a large entrepreneurial team. Further, startups provide new hires with an earnings premium for their industry experience. Our approach illustrates the benefits of matching models over traditional regressions.Managerial summaryGrowing startups face the question of who to hire and how much to compensate the new hires. Simultaneously, prospective new hires ask which startup to join and how much their salary will be. We explore these questions using a novel method that tackles the mutual selection process. In the context of five technological manufacturing industries, we find that having industry experience within founding teams may not be necessary to attract new hires with high quality if the startup can signal its own quality through other means such as having a larger founding team. Our results indicate that startups prefer employees with industry experience for which startups offer a wage premium. Thus, employees seeking startup employment benefit from gaining industry experience prior to joining a startup.A video abstract is available at https://youtu.be/w00YzYi5VqA.

Black and White: Access to Capital Among Minority-Owned Startups

We use confidential and restricted-access data from the Kauffman Firm Survey and matched administrative data on credit scores to explore racial disparities in access to capital for new business ventures. The novel results on racial inequality in startup financing indicate that black-owned startups start smaller and stay smaller over the entire first eight years of their existence. Black startups face more difficulty in raising external capital, especially external debt. We find that disparities in credit-worthiness constrain black entreprenuers, but perceptions of treatment by banks also hold them back. Black entrepreneurs apply for loans less often than white entrepreneurs largely because they expect to be denied credit, even when they have a good credit history and in settings where strong local banks favor new business development.

Startups in Times of Crisis – A Rapid Response to the COVID-19 Pandemic

Research summary: The discovery of the coronavirus (SARS-CoV-2) and the spread of COVID-19 have led many governments to take drastic measures. The lockdown of large parts of society and economic life has come as an exogenous shock to many economic actors, not least innovative startups. This rapid response research combines a qualitative research design informed by entrepreneurial ecosystem actors with an analysis of policy measures called for, announced, and reportedly implemented in the international press. Interviews from an entrepre-neurial ecosystem offer a first-hand account of the adversity startups face during a crisis and how by utilizing bricolage responses they cope, and the analysis of policy measures can serve as an inspiration to design support initiatives to protect startups from the consequences of the current lockdown and to alleviate the effects of future crises. Managerial summary: The lockdown measures as a response to the spread of the new corona-virus threaten the existence of many innovative startups. Our rapid response research first illus-trates the challenges entrepreneurs face as a consequence of the crisis. Second, we illustrate how entrepreneurs are dealing with the effects of the crisis and what they are doing to protect their ventures. Finally, we present measures that could be utilized by policymakers to assist entrepreneurs facing challenges. The research conducted suggests that while startups are suc-cessfully leveraging their available resources as a first response to the crisis, their growth and innovation potential are at risk. Therefore, policy measures should not only provide first aid to startups by alleviating the pressure caused by constrained cashflow, but also involve long-term measures embedded in and supported by the wider entrepreneurial ecosystem to ensure rapid recovery and growth.

The Lean Discovery Process: the case of raiserve

Purpose Uncertainty in the early development of digital business startups can benefit from data-driven testing of hypotheses. Startups face uncertainty not only in product development, but also over the structure of the business model and the nature of the customer or market to address. The authors conceptualize a new model, the Lean Discovery Process (LDP), which focuses on market-based testing from the early business idea through to fully realized product stages of an innovation. The purpose of this paper is to highlight a methodology to help digital business reduce uncertainty and apply lean principles as early as possible in the development of a business concept. Design/methodology/approach Examining literature in lean startups, lean user experience and lean software development, the authors highlight underlying assumptions of existing lean models. The authors then examine the LDP using the case of raiserve, a social entrepreneurship startup that focuses on the management of cause-based voluntary service. Findings Existing literature focuses on product development against an assumed customer base. Early hypothesis testing can be applied to business concept development to substantially reduce cost and time to market. Research limitations/implications Further investigation of different forms of uncertainty in digital startups can open up opportunities to further apply lean methodologies. A more extensive empirical study to measure the potential impact is warranted. Originality/value The authors conceptualize the minimum viable customer and support early testing with concepts from market research and collective intelligence. The authors demonstrate early opportunities to apply lean principles and rigorous hypothesis testing in an LDP that results in significant reductions in time and expense of product development.

Design practices for strategic innovation in start-ups

This paper looks at the use of design practices in start-up firms for the creation of strategic advantage through product/service innovation. Start-ups face non-negligible challenges during the early-stage of development. The research questions examined to what extent design practices can provide the leverage needed to face these challenges. A 4-day Innovation by Design Challenge workshop provided the field for the research carried out. Participants were start-up firms each working together with two designers to form six teams. Methods used included: observation for the mapping of team activities; a short self-report questionnaire and; pre- and post-workshop semi-directed interviews with the start-ups. The findings support the idea that design practice integration into the initial development of a start-up can indeed provide a lever for success and provide the start-up with the strategic vision needed to go through the early-stage and bring their products/services to market successfully.

Role of Accelerators in Development of the Entrepreneurial Ecosystem as a Part of the Regional Economic Development Strategy

The Metropolitan Association of Upper Silesia and Dąbrowa Basin, usually referred to in Poland as the Silesian Metropolis, is one of the key urban centres in the country, integrating 14 largest cities in the Silesia and Zagłębie Regions and 2 million inhabitants. It also offers the best investment areas in Poland, an absorptive labour market, unique tourist attraction and many cultural highlights. The Silesian Metropolis began its activity on January 1, 2018. In stimulating and developing the economies of cities and regions, not only the role of an individual entrepreneur, his idea and effort on the way to building new ventures is emphasized, but also the role of the entire business environment, support network which are defined in the literature as an ecosystem. The creation of the Metropolis is pioneer, long-term and complex process, requiring vision and consistent work, therefore there are taken various strategic initiatives including development of accelerators within the entrepreneurial ecosystem. Analysing the ecosystem from the point of view of urban development is important, because trends show that there is a strong urbanization and concentration of start-up entrepreneurship around large cities. The aim of this study is to understand the role of accelerators in building and developing an entrepreneurial ecosystem as a part of regional economic development strategy. Interviews with 61 ecosystem actors, along with a variety of published sources, informed our qualitative research method. We document what accelerator expertise looks like and how it can affect commitment to the regional entrepreneurial ecosystem. We note, that accelerators in the Silesian Metropolis are, in many ways, start-ups themselves, facing the same challenges other start-up face. Our findings suggest that as these accelerators continue to build their own expertise and continue to engage in ecosystem developing process, they will benefit more fully from other expertise that emerge as the ecosystem itself, continues to develop. We describe the process that enable accelerators to enhance expertise, commitment to the regional entrepreneurial ecosystem, which is a part of the regional development economic strategy in the Silesian Metropolis.

THE ROLE OF SUPPORT ON START-UP SUCCESS: A PLS-SEM APPROACH

A start-up plays a significant role in the economic growth, employment opportunity, incubators for eco-innovation, and create a new market. Despite their important roles towards the economic and social growth, start-ups face difficulty in sustaining and surviving as the failure rate of start-up range between 50% and 95%, especially in emerging countries such as Malaysia. Therefore, it is important for start-ups in developing countries to identify specific support services that determine their success. In this study, we focus on technology-related, market-related, finance-related, and soft-related supports received by start-ups in Malaysia. The present study has collected data from 500 startups in Malaysia who were recipients of the funding from Malaysia government agencies. To the best of our knowledge, this study provides the first statistical test of how start-ups who were business owners or business partners receiving funding or support from the government agencies view the support system. Based on the analysis, this study provides evidence that support matters to start-up success. Technology-related, finance-related, and soft-related supports hold a significant relationship with the start-up success, while surprisingly, market-related support did not have a significant relationship with start-up success. Our results have extended previous research by highlighting the importance of these supports in driving start-up success and indicating how each dimension of these support services either enhances or inhibits start-up success.

Technology Start-ups and IP Protection in India

In India, the trend of IPR filing has been documented for scientific agencies or academic institutions, firms in the software industry, manufacturing sector, handicrafts, glassware and other small-scale industries. However, the IPR filing behaviour or protection of IPRs by Indian Technology Start-ups leaves much to be desired. They do not have much awareness about Indian IPR system and government initiatives to promote such a system. At the government end too, there is a knowledge deficit. Indian regulatory and legislative reforms should be based on an analysis of the growth pattern and characteristics of start-ups; awareness and engagement of start-ups in IPR protection; challenges faced by them while applying for such protection; and also, their awareness and opinion about various policy reforms and schemes. With this backdrop, the objectives of this report are two-fold. First, it examines the level of awareness among Indian technology start-ups about various forms of IPR and their efforts for its protection. Secondly, it explores if the tech start-ups are availing the benefits of Indian government initiatives like Start-up India and similar other programmes/schemes. This report presents findings from a survey based on the views of 249 tech startup representatives from across India about their awareness of IP and engagement in its protection. Building on first-hand account of tech start-ups about their experience in dealing with the Indian IP offfice, this report also identifies key challenges that tech start-ups face during IPR protection. Taking lessons from the best practices in IP offices in other countries, the report provides recommendations on potential areas of improvement to make the system more user-friendly and transparent and robust.

The Spinoff Advantage: Human Capital Law and Entrpreneurship

The term entrepreneur comes from the French word entreprendre, which signifies “one who undertakes innovations.” That underlying innovative nature typifies entrepreneurship’s vital role in our economy, contributing to both economic growth and industry progress. Many states affirmatively support entrepreneurship through tax credits, subsidies, and awards, as well as by sponsoring incubators and accelerators. And yet, despite this public policy favoring entrepreneurship, human capital law – which lies at the intersection of intellectual property, employment regulation, and contract law – has developed in ways that often curtail that very same entrepreneurial activity. Post-employment restrictions, both contractual and regulatory, particularly limit the ability of the most experienced professionals to found, or even join, new ventures. This chapter explores the discordant, contradictory nature of state policies favoring both entrepreneurial venture and human capital law and argues against the counter-productive expansion of restrictions on talent mobility. It first discusses the general disadvantage startups face in litigation brought by incumbents as well as the rise in intellectual property disputes and their effects on entrepreneurship. The chapter then presents the particular cost of human capital legal disputes on entrepreneurial spinoffs, that is, companies founded by former employees of competitors.

Crowdfunding: A Successful Way of Raising Capital?

Crowdfunding though not as popular in the western worlds is slowly catching up with other sources of raising capital in India. It can be seen “as the practice of raising various small sums of money from a large number of people through online platforms (crowdfunding platforms) to fund a project, cause or business.” The article analyses the risks that the start-ups face and along with them the investors too. It also discusses the risks involved in investments through crowdfunding and whether it is worth it in long run long with the need for its regulation. The article further discusses UK’s, USA’s, Australia’s and Italy’s models of regulation for crowdsourcing and protecting the interest of investors. These models are just few of the leading models in the world and they can serve as a source of valuable information to SEBI so that it can figure out the ways to proceed with the task for regulating them ensuring the protection of investors’ interests. More importantly, they show that if SEBI plays its cards right, it can foster the right environment for growth of this unorthodox method of investing as well as MSMEs and start-ups that are the chief beneficiaries of crowdfunding. The article concludes with the suggestions on methods to strike a balance between the well-being of start-ups and investors.

Strategy-as-Practice, Identity, and Capability to Perform in a Pluralist Context: A Case Study

Start-ups face triple challenges of constructing a salient identity, developing a saleable product, and forming a fully-functioned firm. The challenges become more complicated when those start-ups are situated in a pluralist context where they are subject to different, sometimes competing norms, values, and practices from more than one category, sector, and industry. Guided by a strategy-as-practice lens, we set to understand such an intricate process of how start- ups in a pluralist context form their identities while building capability to perform over the course of emergence. Based on a case study of a start-up at the intersection of technology and insurance, we found that start-ups engage in a series of practice to form an identity, sketch a product, and leverage upon their strategic decisions at pre-launching, launching, and post-launching phase. These practices constitute an interconnected process as start-ups manoeuvre different identity claims to build up their competitive advantage prior to scale up. We seek to contribute to the literature of strategy-as-practice, identity formation, and organizations in a pluralist context.

Mitigating Risk of Failure by Expanding Family Entrepreneurship and Learning from International Franchising Experiences of Johnny Rockets: A Case Study in Pakistan

It is generally believed worldwide and backed by research too that startups face a high risk of failure and eight to nine out of ten ideas may not work (Hisrich, Peters, & Shepherd, 2009). However, many experts claim that the situation can turn vice versa for family entrepreneurship (or creative family businesses) and franchise ventures (Francorp, 2016). This exploratory probe aims to discover these two phenomena for Johnny Rockets (JR) Pakistan, which is an international franchise of fast food chain of restaurants, and simultaneously it is a family business extension. Literature is reviewed from four perspectives: family entrepreneurship and business, franchise business, internationalization of companies, and fast food restaurant industry in Pakistan. Primary data is garnered from three sources: in-depth interviews from middle to top management of Johnny Rockets, owners of the franchises, and from its consumers in accordance with phenomenology method and purposive sampling to analyze their lived experiences with JR and its direct rivals. The data analytic techniques comprise thematic analysis and constant comparison. The findings unveil that in the wake of tolerating several difficulties, now Johnny Rockets seems to be on the right path of sustainable growth. The study underpins the notions that family entrepreneurship and franchise ventures enjoy a high probability of success, but it requires an organizational culture of the congenial work environment, and propensity to create a customer-centric modern learning organization, ready to accept trials and errors and continuously innovating its processes and systems.

Waiting for the Payday? The Market for Startups and the Timing of Entrepreneurial Exit

Most technology startups are set up for exit through acquisition by large corporations. In choosing when to sell, startups face a tradeoff. Early acquisition reduces execution errors but later acquisition improves the likelihood of finding a better match since in the early market, there are fewer buyers because early acquisition requires costly absorptive capacity. Moreover, the buyer’s decision to invest in absorptive capacity is related to the startup’s decision about the timing of the exit sale. In this paper, we build a model to capture this complexity and the related tradeoffs. We find that the early market for startups is inefficiently thin if the timing of exit is a strategic choice, i.e. startups have to commit to whether to exit early or late. Too few startups are sold early, and too few buyers invest in absorptive capacity. Paradoxically, venture capital aggravates the inefficiency. However, if the timing of exit is a tactical choice, i.e. startups can choose to go late after observing the early offers, there are too many early acquisitions and too much investment in absorptive capacity by incumbents

A Local Learning Market to Explore Innovation Platforms

This research investigates the design of a unique innovation platform to support entrepreneurial growth. The premise of the platform is that the needs of institutions can be coupled with supply from early-stage businesses to enable the learning and growth of those businesses. We assume that some institutions are in a position to be more helpful and understanding about the setbacks encountered by early-stage businesses, and that the institutions’ skillset and tolerance offers entrepreneurs an environment to learn and grow their businesses. Many startups face competition from powerful multinational corporations that have the scale to reach consumers through inexpensive pricing, branding and reputation. The subset of startups with sustainability embedded into their ethos often has an even more difficult time competing with prices. This is especially apparent with food. Not all food is priced to accurately reflect its costs to society and the environment. For novice entrepreneurs, attempting to internalise some of these non-monetary costs may seem too great a risk. The proposed institution-based innovation platform might overcome some of these difficulties. To explore the possibilities of the platform, we combine literature review and case study analysis. While existing innovation platform cases in the literature have been studied in retrospect, we introduce a novel approach that sets out to follow the design of a food innovation platform, referred to as the Local Learning Market, from the earliest stages of planning. Our findings point to the potential risk, trust and learning advantages of this particular platform. Entrepreneurs are able to experiment and develop their value proposition in a safe space, find viable customers and identify market niches. Researching the Local Learning Market is a first step in understanding whether similarly modelled platforms can increase the likelihood of success for startups pursuing sustainable business models in other sectors.

Startup India: A challenging Way of Thrones

Start-up India a scheme by the Narendra Modi's government and also an initiative towards better entrepreneurial development in India. The main aim of the government is to focus on the 70%6 of the young population of India who are leaving India for better opportunities. The government has made many arrangements for the youth to get into the field of business rather than going for the job. Actually speaking this is the right time for this as 65% to 70% of the total population in India is between the age group of 25 to 35 years, where actually a person can take challenges and works in the development of his/her career. There are many youngsters who have excellent ideas about the business but cannot get into it as they don't get support from the friends or family. One of the challenges is that also where parents want their children to earn a fixed income though private or government jobs. Many ideas are crushed under the parents expectations during its birth stage itself. Second huge challenge is finance, as we all know there is no honey without money and business is one which needs huge amount of cash inflow. The lack of technical expertise of how the idea will work is also one of the challenges in the startups. In addition to that young populations don't have that patience to wait for the business to prosper and give them fruits of their investment Here in this paper an attempt has been made to look into the challenges that the startups face in India.

Foundations of Entrepreneurial Strategy

Motivated by a significant disconnect between research, teaching and practice regarding the role of strategy in entrepreneurial ventures, this paper develops an integrated framework that defines and delineates the scope of entrepreneurial strategy, clarifies the choices and complementarities that shape entrepreneurial strategy, and proposes a choice-oriented process for implementing entrepreneurial strategy. We take an axiomatic approach, highlighting four interrelated premises: (i) Freedom: there is more than one alternative path by which value can be created and captured from a given idea; (ii) Constraint: resource and strategic constraints prevent the entrepreneur from pursuing more than one of these alternatives at once; (iii) Uncertainty: even after undertaking cost-benefit analysis to deselect some alternatives, there is unresolved uncertainty preventing a ranking of at least two alternatives, and (iv) Learning by Commitment: partial movement down a path to learn more about an option changes both the value of and the information available about alternative paths. Together, these conditions give rise to our central organizing insight, the paradox of entrepreneurship: choosing between equally viable alternative strategic commitments requires knowledge that can only be gained through experimentation and learning of the type that inevitably results in (at least some level) of commitment that forecloses particular strategic options. Entrepreneurial strategy is a choice-oriented approach to overcoming the paradox of entrepreneurship. Specifically, entrepreneurial strategy is the set (or sequence) of choices founders (and their teams) make in order to test a value creation and value capture hypothesis when entrepreneurial experimentation requires partial commitment. This approach yields three principles of entrepreneurial strategy. First, Choice Matters: when learning requires partial commitment, start-ups will not simply be able to optimize by identifying a best approach, but will instead be required to select an alternative that results in leaving equally viable yet conflicting alternatives behind.Second, These Choice Matter: there are specific choices start-ups face – Customers, Technology, Identity, and Competition – where the interplay between experimentation and commitment are salient; a choice-oriented approach yields a reconceptualization of traditional frameworks endemic to teaching and research in these domains. Finally, These Choices Matter Together: structured complementarities and interdependencies among these choices results in the identification of four alternative strategic directions for a given idea. Together, these principles motivate a new class of choice-oriented decision-making tools for entrepreneurs. We highlight one new tool – Test Two, Choose One – that offers a novel approach for how to undertake entrepreneurial decision-making under uncertainty.

Lean start-up companies by means of crowdsourcing

Lean start-up approach provides both small and larger companies a novel, important and useful way to organize their business development, while reducing related high risks. Traditional start-ups face a multitude of significant challenges and risks. A study by Ghosh showed that as many as 75% of all start-ups fail. Earlier research has preliminarily demonstrated that crowdsourcing has the potential to reduce the risks of failure of start-ups, as well as overcome some of the inherent challenges lean start-ups face. We argue that crowdsourcing can significantly improve the leanness and agility of start-ups’ business functions.

IP Issues for Start-ups

Most start-ups face myriad issues, even before opening their doors. This includes getting financing, hiring the right people, finding office space, and--importantly--getting the company's intellectual property under control and adequately protected. The Web extra at http://youtu.be/32VJau3FG6Q is an audio recording of Brian M. Gaff reading his Computing and the Law column, in which he discusses the myriad issues that most start-ups face before even opening their doors, including getting financing, hiring the right people, finding office space, and--importantly--getting the company's intellectual property under control and adequately protected.

"Small, but attractive: the effect of employer branding and legitimacy on startup attractiveness"

Startups face competitive disadvantages compared to established firms because they operate under higher levels of risk, uncertainty, and limited public recognition. In this context, one of the bigg...