Start-up Trends Entrepreneurs Should Know

There are a lot of things that start-up founders can do to get their business going and taking current trends into account is one of them. Studying patterns and adapting to them is a useful way of making sure a company is well-positioned to deliver and gain credence with clients. This is understood by business experts such as Henner Diekmann, a partner at law firm Diekmann Associates. The firm specialises in international trade and foreign direct investment in Southern Africa, offering guidance and advice to investors on corporate structures and setups.

The following are some of the trends that entrepreneurs can follow to ensure the success of their ventures.

Increased Competition

With increased internet access and usage, the stakes are higher in establishing start-ups. It's easier for competitors, sometimes far away geographically, to break into a firm's local marketplace and get clients interested. If your business is local, don't ignore the importance of digital marketing and keeping an eye out for good partnerships that help to grow the market share.

More Attention From Larger Companies

As corporations and multinationals see start-ups disrupting the norm, they realise there's more to gain by partnering with entrepreneurs. As a result, larger companies are willing to become investors and mentors to these ventures, leveraging their pool of resources (money and expertise) to bring start-ups into the fold. The benefits derived by the more prominent company include a diversified product portfolio and the chance to add useful solutions and technology it might not otherwise develop.

Adoption of Blockchain Technology

Blockchain technology, an emerging interest area for the financial services industry, can also be used by start-ups seeking to ride the technology wave. Blockchain technology can be adopted for internal databases and, when tied to cryptocurrency such as Bitcoin, as a payment mechanism. The latter use can potentially introduce lower transaction costs to businesses, which may already be looking for means to reduce operating expenses while remaining profitable.

Smarter Offices

The Internet of Things (IoT) is steadily providing solutions that make life at home and work easier. These solutions, when properly adopted, can contribute to a smart office environment for a start-up venture. These advancements can increase efficiency in the workplace, while also ensuring the business can meet client needs.

Smarter offices play into the increased desire by start-ups to be lean spenders; they want to accomplish as much as possible while committing the least amount of finances. Investors place more emphasis on efficiency, and part of achieving that is using the available tools, solutions and platforms.

Additionally, more ventures are running their operations without the classic office setup. Mobile devices make it easier to work from dispersed locations, while digital workspace solutions offer opportunities for team members to collaborate.

Emergence of Niche Technologies

Apart from IoT, start-ups are making use of other niche technologies, including augmented reality and virtual reality (AR/VR), artificial intelligence (AI) and machine learning to boost their service offerings and engage customers. The onus is on start-ups to learn all they can about these technologies and how they can be integrated into the business.

Other trends within the technology sector include cloud solutions, big data and analytics, and chatbots.

An Increased Focus on Cybersecurity

Many start-ups have focused on solutions that can be delivered via web and mobile applications for use on smartphones, tablets and wearables. With these devices capable of storing data, there's a need to secure them from the increasing risk of cybercriminal elements. For business owners, this means an increased focus on ramping up security.

China's Efforts in Boosting Start-up Businesses on the Rise

Entrepreneurs and business founders in China are finding life sweet, thanks to an increased level of investment through venture capital (VC) firms. The fear of being left out has given life to new ideas, as evidenced by the growth of businesses such as Kala Bike, a bike-sharing service that has inspired competitors. In fact, China is giving the United States a run for its money as the top venture capital industry in the world.

Just to put things in perspective, the bike-sharing business attracted so much attention (and investment) that market leaders Ofo and Mobike attained billion-dollar valuations in a matter of months. By the end of 2017, more than ten million shared bikes will have hit Chinese streets. In a country where successful business ideas are replicated almost instantaneously, at least 20 bike-sharing companies are competing for the market, each with its unique appeal to clients.

And it's not just bicycles that triggered an investment craze. The electric car business attracted more than 200 companies, while more than 2,000 mobile apps were created to deliver health advice, with a handful valued at more than $1 billion. A similar rush for beauty apps saw the rise of Meitu, which was estimated in late 2016 to be worth more than $4 billion.

In 2016, VC-backed investments reached a record US$31 billion, with many venture capital firms seeking to get a presence in the increasing number of businesses. This figure came from more than 300 investment rounds and represented a significant rise from the US$26 billion invested through 513 rounds the previous year. Sectors of interest for many investors included big data, artificial intelligence, robotics, fintech, and health care start-ups. Beijing venture capitalists invested more than $18 billion.

According to Silicon Valley Bank, venture capital fundraising has increased tremendously in the recent past compared to a decade ago. Back then, a quarter of all venture capital came from domestic sources. Local funding now accounts for more than 70 percent, attributed in part to China's shift of focus from manufacturing and extractive sectors. This development has opened doors for investors, both locally and abroad, in turn creating wealthy entrepreneurs. To investors such as Henner Diekmann, a partner at Diekmann Associates – which specialises in international trade and foreign direct investment in Southern Africa – the situation in China is an appealing and potentially rewarding one.

The Chinese government has contributed to venture capital growth by creating substantial funds that were estimated to be more than $300 billion in 2016. This abundance of financial resources has been boosted by a favourable business environment that is built on speed. In 2016 alone, 1,900 kilometres of high-speed rail came into service. Internet uptake, which was slow at the beginning, has made China an online shopper’s destination, with more online local spending than the US. Cash is being speedily replaced, and the willingness to embrace the digital economy has opened up work and business opportunities for millions of people.

China's rise in the venture capital industry is helped by a booming middle class that has the spending power to invest in local innovation, something that helps businesses scale faster. Additionally, Chinese companies adopt a different strategy to marketing and advertising. Rather than invest heavily in these aspects, businesses have tapped into cultural differences to create a give-and-take nature of customer relationships. Venture capital firms see themselves as mediators between the government and entrepreneurs who remove barriers to progress.

It's not just locally where venture capital investment is booming. Outbound investment is expected to remain stable, according to KPMG, with many investors seeking to acquire solutions that can be integrated into the Chinese market.

Venture Capital Deals in Asia Lead the Way

An increase in venture capital activity in Asia topped a record in the second quarter of 2017, with a total of $47 billion (£35 billion) in deals announced. The record sums spent are representative of what financial experts and investors such as Henner Diekmann have seen in 2017: almost half of global venture capital deal value is in Asia. Mr. Diekmann is a partner at Diekmann Associates, a law firm that offers guidance and advice on company setups, corporate structures and contracts in Southern Africa.

Since 2013, Asia's rise in venture capital dealmaking has been on a consistent rise, with the majority of the deals occurring in Greater China. According to a report by Preqin Private Equity & Venture Capital, transactions in China accounted for $28 billion (£21 billion) of the total deal value, with India coming second ($6 billion/£4.5 billion). Within the southeast region of the continent, a large proportion of deals happened in Singapore, while the largest proportion of deal value happened in Indonesia.

Over the years, Asia has seen a steady rise in the number and value of venture capitals deals. Activity in Greater China has largely spurred this growth, as some companies have become prominent entities on the same level as firms backed by venture capital in the United States. This growth speaks to the rise of several economies in the region, which provides an avenue for investment opportunities by venture capital firms.

As much as the dealmaking is good news for Asia's economic growth, the excitement has not been matched in other areas of the venture capital industry, notably the exit and fundraising sectors. Slow fundraising activity means less capital goes to venture capital managers for acquisitions, while slow movement in exits means these managers are unable to dissociate from their holdings. For Asia's VC industry to thrive, it's going to require robust activity on all fronts.

An Inside Look

Approximately 200 funds are raising capital for investment opportunities in the region, with the China State-Owned Venture Investment Fund among them. The fund has a target of about $29 billion (£21.97 billion), and if successful, could become the largest venture capital fund ever. Activity in Greater China is beginning to rival that of Silicon Valley in the US and could enable the country to become the centre of venture capital activity. The Chinese government's encouragement of entrepreneurship by providing financing is helping reinforce this message.

In early 2017, 183 funds with a focus on Asia had a target of raising $56 billion (£42 billion) in venture capital, nearly triple the amount funds had aimed for at the beginning of 2016.

China's Role

China's prominent role in the growth of venture capital dealmaking in Asia is not by accident. In 2016, investments from venture capital firms reached more than $31 billion (£23 billion) as investors eyed an increasing number of innovative ideas. Venture capitalists located in Beijing invested more than half of the total amount, with the popular sectors being artificial intelligence, big data, and robotics. There was also a continued interest in healthcare, fintech (financial technology) and education.

This strong performance in venture capital investment was driven by a number of big-deals, including Alibaba's affiliate Ant Financial funding round that reached $4.5 billion (£3.39 billion) in April 2016. Additionally, provincial governments got in on the action, with many provinces starting to invest in companies. The Hubei provincial government, for example, armed itself with $81 billion (£60 billion) to invest in venture capital companies such as CBC Capital and Sequoia Capital LLP.

Across the country, local governments are keen to invest as they seek to modernise the economy and spur the development of sectors such as biotechnology, fintech and online solutions, to reduce the dependence on heavy industries for jobs creation and growth.

News UK Opens Incubator Lab for Start-Ups

News UK is a British newspaper publisher that is a subsidiary of the American media company News Corp. It publishes various newspapers in the UK, including The Sunday Times, The Times and The Sun. Between the late 1980s and 1995, News UK owned the first national newspaper printed in colour. In the years since, the company has strived to maintain a steady presence with readers and boost its revenues.

In 2017, News UK decided to venture into the start-up market by launching an accelerator programme aimed at helping start-ups improve their revenue streams. In a first for the newspaper publisher, the programme will be undertaken in partnership with Unruly, a video advertising firm, and Fluxx, a product innovation company. Unruly will host the programme, while Flux will run and staff it.

The venture is open to businesses from any sector that can use News UK's data, expertise and journalism to come up with new products and revenue streams for the publisher. The focus for the selected start-ups will be to work with News UK to generate more value for the start-up, the publisher and its audience. Furthermore, News UK will provide the mentoring and insights needed to get the start-ups working. When the month-long incubator programme ends, the publisher has yet to reveal concrete plans to invest or acquire the start-ups, instead choosing to support them and become champions of innovation.

Start-ups selected for the programme will spend four weeks at Unruly working on their proposition. To motivate them, they will receive £5,000 in cash, mentorship from other entrepreneurs, the use of News UK's image and written content, and product testing opportunities with the publisher's vast audience.

Incubator programmes have been around for a few decades, with their presence helping boost growth and innovation in the UK. Many investment experts such as Henner Diekmann – a partner at Diekmann Associates – appreciate their importance in speeding up the development of small businesses and guiding them to success. Entrepreneurs stand to benefit a lot by choosing to sign up for incubator programmes.

A Focus On Development

Incubators play an essential role in offering businesses the guidance and resources needed in their infancy. Many provide tangible benefits such as office space, legal advice and accounting guidance to start-ups. Having this infrastructure in place allows the start-up team to focus on the important matters – the core business of developing products and services.

Access To Business Networks

Many incubator programmes are run by a network of business partners, something the participating start-ups can use to their advantage. Having access to a reliable business network is beneficial in various ways. From a business perspective, it allows the entrepreneurs to cultivate meaningful relationships that can come in handy in the future. From a public relations angle, this network can help a small start-up gain the credibility and traction needed to position itself in the business market.

Worthy Support

Many of the mentors who guide start-ups through incubator programmes have learned through experience, making them the best sources of knowledge and guidance. These mentors are better placed to help young companies define their strategy and vision.

In the UK, it is estimated there are more than 300 business incubator programmes that have collectively supported thousands of businesses. Many of these ventures have been early-stage businesses that have reaped the benefits of access to funding, mentorship, business networks and infrastructure to achieve success, both domestically and internationally.

For entrepreneurs looking to establish their ventures, considering an incubator programme is increasingly becoming a more attractive option. 

Projecting the Future of Venture Capital

Predicting the future is a notoriously difficult thing, but in many instances it is well worth the effort. However, if it's venture capital investing you're hoping to get the jump on… be ready for some whiplash. The sheer number of VC investments tops billions of dollars globally, money that's helping entrepreneurs and start-ups gain the financial support they require to make a difference. 

Trying to determine the fate of the venture capital industry is important to both insiders and business leaders outside the VC community. For years, venture capital has been a major force in business and technical innovation. Investment activity by the VC community gives outsiders a glimpse of key trends in various sectors, helping executives track the developments that may eventually disrupt established processes. For example, the flow of venture capital dollars into computing technology in the 1980s made up a big chunk of all venture investments in that decade, indicating the next wave of development was to come through computing advancement. 

The venture capital industry has progressed since then. Henner Diekmann, a partner at Diekmann Associates, specialises in international trade and foreign direct investment in Southern Africa. He's worked on numerous investments in the region, and he has good knowledge of the workings of venture capital. To investors such as him, the future of the VC industry is an important aspect to consider.

It's Going Global

The VC industry looks to become globalised. It is slowly evolving from an industry centred around happenings in Silicon Valley, with more hubs opening up around the world. The growth prospects of emerging markets are helping drive this evolution.

Countries such as India and China are emerging as attractive hubs for venture capital. Together, they are overtaking Europe, with China being home to almost half of all unicorns (start-up companies valued at over one billion dollars). Even though VC activity remains high in the United States, other cities across the globe are starting to emerge as serious contenders, with emerging markets offering the most potential. 

One result of going global on VC firms will be the decentralisation of decision-making activities. More professionals will have the ability to make investment decisions. In the long run, however, these changes are not expected to have a big impact on the hierarchical structures of VC firms.

The globalisation of venture capital has benefits not just for the entrepreneurs, but the communities around them as well. Once entrepreneurs in Africa and India start building global enterprises – in the mould of Alibaba – expect to see the impact of innovation increase, producing positive results to the host communities and the world at large. 

More Specialization

Most venture capital firms will prefer to go the specialist route. Essentially, they'll seek to focus their investments on a particular industry (or set of sectors) such as pharmaceutical, energy, or big data. This specialisation will also trickle down to the stage of investment (early or late state funding), or geographical region. 

Increased Competition

From institutional investors to angel firms and micro-VC investors, traditional venture capital players have more groups to keep an eye out for. Favourable changes in funding regulations may serve to attract new sources of interest. What increased competition does is provide entrepreneurs with more leverage during negotiations, leading to investment deals that favour start-ups.

Competition will also spur more VC firms to consolidate efforts to gain a greater share of capital. The projected trend is that VCs will pool efforts, resulting in fewer, more diverse firms competing for deals. 

Knowledge for the Future

For many investors, the future can only get better if the present is taken care of. The journey towards a successful start-up has its challenges and excitements, but far more important as a venture capital firm is laying a foundation in the present to set up the potential for future gains.

This can happen in the following ways:

• Encourage more ownership. If investors are going to be part of the venture for long, they have to show commitment. This is true especially in hard times, when individual investors need to show confidence in the long-term success of the VC firm.
• Demand more than social proof. Finding the true gems requires being more diligent in learning about ideas and the startups behind them. Media coverage on the "next big thing" can be deceptive.
• Stay patient. It's common to find VC firms concerned with finding the next unicorn, but you have to be patient and invest for the right reasons. Businesses that believe in the idea work out a way to give enough to keep the start-up going, while also keeping an eye on progress.
• Let founders be founders. Too many venture capitalists dabble in the startup's leadership process, extending themselves into matters they have no business in. It leads to wasted hours, and staff trying to please the financiers rather than focusing on building a product that meets customers' needs.

What Is the Key to Startup Success?

Many people try to start their own business. It’s an attractive dream. You get to be your own boss, do what you love and you might even make a lot of money. The passion, enthusiasm and excitement are all there at the beginning. People work hard and pour hours into their own fledgling businesses. But in the end, most fail. According to a FastCompany article in 2012, 75% of startups fail. After 5 years, 50% have failed. Over 70% fail after 10 years. These are gloomy numbers, especially if you’re one of those people who dreams of beginning their own business. 

So what’s the trick? How can you make the top 25%? 

Fortunately, there is some advice to follow and, after many years of guiding and advising startup companies, Henner Diekmann of Diekmann Associates has learned many tricks of the trade. 

First, let’s take a look at what you should try to avoid if you’re starting up a new business. 

Management is a key element of any new business. There are plenty of mistakes to be made here. But the three most common mistakes are:

1.    Poor Focus – Perhaps there are too many projects or there are too many things going on at once. These prevent the business from focusing its energies on a main objective and achieving it, resulting in failure.

2.    Lack of Motivation – Yes, most people start a business precisely because they’re motivated. However, not everyone is ready for the great amount of commitment a business requires. So, what started out as great motivation can easily turn into low commitment and little passion.

3.    Being Too Proud – Some people are so proud of their business and their efforts that they fail to see a storm brewing. Whether it is financial or otherwise, failing to see or listen to others who try to warn of impending disaster can result in the business’s demise.

On a more general level, businesses fail because of major problems in the company. Obviously, management is also responsible for these problems, but it’s more difficult to pinpoint a precise error. A series of errors may produce these issues that result in company failure. What are the top 3 most common issues?

1.    No Market – No one will buy the product or service because there’s no need for it.

2.    Ran out of Money – When funding comes to a dead-end, so does the company.

3.    Wrong Team – People are the key players in any business. Without the right combination of skills, knowledge and chemistry on your team, the company won’t take flight.

Now, we’ll address the brighter side. Some companies do make it past these failures and soar on to success. What do these startups do differently? Successful companies also follow some patterns that you can learn from. Here are a few main points:

Commitment

Startups that succeed create a plan for their business and strive to make it happen. Rather than constantly changing the plan, they are committed to their goals and work passionately towards achieving them.

Flexibility

Commitment is important, but so is flexibility, to a degree. Startups and their founders need to be willing to make adjustments to the plan without drastically changing their end goals. Remember the issue of being too proud to see a problem? This is where flexibility comes in. Founders must be willing to see what’s happening in the company and adjust to meet new challenges and changing conditions.

Use Business Principles

Many people who startup their own company aren’t business experts. That doesn’t mean they can’t begin successful businesses though. Instead, it means that they must seek expertise and mentorship to make sure they’re covering their bases. For example, if you’re an engineer, artist or other expert outside the business arena, you may want to seek business advice when beginning your company to ensure that your financial ducks are all in a row and procedures are in place to protect the business. Bring on an accountant early in your business’s life to ensure you’re meeting the bottom line.

Plans

Finally, successful startups are strong in planning goals. Raise enough funding for each stage of the plan. You need to know approximately how long it will take for you to reach your goals and use intermediate milestones in between so you are constantly able to evaluate your progress.

Beginning a successful startup is no easy task, that’s certain, but it’s not impossible either. By studying and carefully creating a business plan, committing to it, but adjusting as you go along and seeking mentorship, you can work towards adding your business to the list of successful startup companies. 

Have you begun your own startup company? Are you thinking about it? Tell us about your biggest challenge or fear in the comments below.

Green Technologies Get Boost from EU’s Venture Capital Funds

There’s good news for green technologies these days. Last year, 2016, marked the largest increase in investments in green technologies by European venture capitalists in 9 years. Venture capital funds from Europe targeting clean energy are reported to have reached $834 million last year. Green technologies of interest include everything from anaerobic digesters to rooftop solar panels. But why has there been a shift in the focus of European venture capital funds towards this industry?

Specialists in venture capital and startups, such as Henner Diekmann of Diekmann Associates, judge that this shift in interest is tied to an opening of the green energy market due to the fact that private equity is seeking the next big boom. Research shows that 2010 was marked by a large funnelling of funds towards green technologies, pioneered mostly by private investors. However, since 2014, venture capitalist funds have started to grow steadily, funding the green technology market after the private equity interest dropped off. 

Now the investments venture capitalists are making are more targeted, seeking to support niche investments that come with smaller scales and bigger risks. Mainstream investment isn’t as attracted to these offers, leaving them open to VC. Basically, venture capitalist firms are filling an investment need that has great potential, but isn’t the right one for private or mainstream investors.

Let’s take a look at some examples of what some main venture capitalist firms are working on:

Terra Firma Capital Partners

This London based company is focusing on big green technologies including wind and solar power. However, the twist is that Terra Firma is looking to markets on continents other than Europe such as Africa, Asia and Latin America. According to a senior advisor, they are no longer looking to invest in Western Europe. The trend of looking abroad is one many others are following.

Oxford Capital Partners

This venture capital firm based in Oxford is focusing its investments on batteries, solar and anaerobic digestion. Specifically, the firm is interested in solar panels that will go on rooftops. One of the unique projects the firm is working on is an anaerobic digestion plant using farm waste to make electricity. 

Octopus Investments

In addition to investing in wind and solar, Octopus is also considering batteries. A part of their interest is linked to the enhanced frequency response tender that the National Grid in the UK is using. 

Zouk Capital

Taking a different approach, this venture capital firm based in London is focusing on investing in projects that address resource efficiency. In their eyes, solar and wind power are now more mainstream. These electricity makers now rely on gaining economies of scale. With resource efficiency, the firm hopes to invest in projects that recover materials that would otherwise be wasted, and use them to create energy.

As you can see, one of the key new areas that firms are interested in is batteries. What does this have to do with renewable or green energy? Solar and wind power are great, but they tend to be relatively unstable or unpredictable. You can’t be sure you’ll get the same amount of solar or wind energy each day; it’s just not constant. So, batteries are the solution for keeping grids steady even on a second to second basis. The National Grid in the UK says that flexibility is a principal concern and need as they move towards using more renewable energy. Batteries appear to be filling this need. 

The staples of wind and solar power also continue to attract investment. It’s only natural that this is the case as by 2040, it’s estimated that wind and solar energy will account for the majority of the UK’s power generating capacity, led by wind. This suggests that the industry is going to grow, a lot. According to the predictions, both solar and wind will at least double what they currently produce.

Anaerobic digesters are another technology that venture capitalists are interested in. Food waste turned into energy is a pretty exciting prospect. In addition to turning waste into energy, using anaerobic digesters is also more economically attractive than getting rid of food waste in landfills and incinerators. 

There are many other smaller technologies and projects that venture capital is supporting, giving green technology an overall boost within the UK and abroad. In this case, venture capital is working for the future of the planet, financing the energy revolution that we desperately need. This trend towards financing green technologies could very well change many aspects of our daily lives, helping eliminate harmful energy production strategies and moving towards a renewable future.

Are you interested in venture capital or green technology? Tell us how you see venture capital shaping the future of renewable energy in the comments below.