Fail smarterlearning innovation from startups

Innovation never is a straight road

In retrospect we are fascinated by ideas that have prevailed and that often changed the world a little or even a lot: from the steam engine to the railways to airplanes and the Internet, it is often technologies that gave the impetus. Today they are called blockchain, artificial intelligence (machine learning) or messenger RNA. During the Covid pandemic, start-ups such as Moderna and Biontech showed how they could outperform Big Pharma with mRNA technology because they were able to react much faster and more flexibly.

Business angels are working hard to determine which innovations will be the ones that will prevail. How do you recognize them? What needs to be done to turn a good idea into a success? As an angel, you get in touch with startups very early on, which show up as a treasure trove of ideas. This is where creativity and entrepreneurial thinking can really let off steam. We look back on 14 years of startup investments and try to figure out where this innovative power comes from, what it takes for it to be a success and what established companies can learn from it.

Bubbling innovations

Good ideas grow everywhere in Switzerland and as a business angel you see a lot of them: predicting the success of movies using AI (Largo Films), harvesting the energy of the jet stream at an altitude of 8 kilometers (Brainwhere), translating the universal language of newborn babies (Zoundream) or measuring the advertising effect of posters or radio advertising in real time (Significant). This is where innovative minds take on a problem and find a unique solution to it, mostly with the help of technology.

How do you recognize the potential of a start-up or an innovative business idea right from the very beginning? There is no checklist for this, but we have discovered a few simple features that are helpful:

Startups have more ideas

The innovative power of startups is often considered as given. But this is not so obvious, because why should entrepreneurs with little experience and even fewer resources automatically have better ideas? After all, these are people who, in addition to a day job, work on new business ideas in the evenings and on weekends without a market research department at ­their side. Here are a few possible reasons:

The long road to success

We know that only about 20% of all startups survive the first three years. The build-up time resembles a roller coaster ride, behind every bend comes a surprise: After the first big customer was celebrated yesterday, today insolvency can threaten. For adrenaline is always taken care of! No founder, no innovative lateral thinker can do it alone, it needs a broad-based team with complementary skills (“The Hipster”, “The Hacker”, “The Hustler”). In addition to the quality of the team, however, a few other possible success factors have been found:

Some of these approaches originate from agile thinking, The focus is on how to learn more and what data these learnings are based on. Data is the key to success.

Making innovations cheaper

Even well-established companies need innovations to survive, and they spend a lot of time on it. But the result is sobering for many, because small product improvements swallow huge investments, and a high percentage of innovations turns out to be a flop. By startups they can learn how to make flops cheaper, and if they get cheaper, they can make more of them. The key are smart experiments, the more the better.

In practice, the approach of “internal startups” has become known, these are teams that enjoy a high degree of autonomy in established companies and drive innovations there that are not trusted with the normal organization. However, these teams should consider the insights of startups to become more effective:

It is obvious that this means to build up entrepreneurial thinking in technically oriented teams. Ideally, this will make innovations faster and cheaper.