Wednesday, April 18, 2012

A Look at the Startup Genome

I have been following the “Startup Genome,” a developing benchmarking tool for (and blog relating to) start-ups. The tool allows a start-up to measure its progress—or lack thereof—compared to other similar companies against a database developed and standardized by Startup Genome.
The initial results are fascinating. Over 16,000 companies signed up for Startup Compass and have been feeding valuable data to Startup Genome. Startup Genome has used this data to identify not only key ecosystems for successful entrepreneurial activity, but factors which make entrepreneurial efforts either more successful or more likely to fail.  
The initial report, the “Startup Genome Report,” takes data from over 650 web startups, and provides initial findings that, if developed as anticipated, will be an extremely valuable tool for entrepreneurs. 
What may be ultimately less valuable than the underlying tool is the analysis of certain geographic areas where start-ups develop and how they succeed and fail in those environments. In the references to “ecosystems,” a key input for companies submitting data is “where are they,” and clearly some ecosystems come out on top compared to others in the world. Among the top are Silicon Valley (no surprise), London, and New York City (which is experiencing a “Renaissance-like” resurgence as an “entrepreneurial ecosystem.”)
Ecosystems that support entrepreneurial activity are extremely important, but the companies are important to the Ecosystems as well. Case in point: as pointed out here, according to the White House, “companies less than five years old created 44 million jobs over the last three decades and accounted for all net new jobs created in the U.S. over that period.”  
One can only imagine how economic development departments from cities in the heart of these ecosystems will latch on to where their cities rank among the other ecosystems to promote what they are doing right. And, if you live in one of the lucky “top three” or find comparative analysis among the three interesting, there are some great comparisons here. 
The fact that there are geographic areas that have developed into entrepreneur-friendly environments is not the news. On the contrary, the study gives credence to the argument that you can seek out or even make your own ecosystem just about anywhere, a point made in Bryan Keplesy’s article entitled, “Your Community as a Start-up Ecosystem.” Because so much of communication and collaboration is done virtually, having access to a particular ecosystem is far more valuable than being in the ecosystem itself. Is residing in Silicon Valley an advantage if you’re a start-up? Sure. Is it necessary? Maybe. Is access to Silicon Valley and its ecosystem critical? Absolutely.  
The Genome Report takes basic steps to categorize start-ups for better identification and study. This is not an easy task. Companies are divided into type and stage of success. What is valuable about even the more intuitive observations (for example, a start-up in one industry will behave and need to take different steps than its counterpart in a different industry) is that the Genome Report provides data that shows tangible reasons why basic observations have clear distinctions that can provide start-ups with useful benchmarks. Firms can now more properly align their actions according to their type, and not act on general advice that does not pertain to them.  
The Genome Report also goes to great lengths to categorize the stages of a Start-up listed as follows:
  1. Discovery
  2. Validation
  3. Efficiency
  4. Scale
  5. Profit maximization
  6. Renewal
The Genome Report does not report on #5 and #6. The overview of the results showed very consistent data from successful and unsuccessful companies by industry. To view the complete report, which requires a sign-in process, click here.
The goal of the project is to develop a tool where start-ups can measure whether they are making progress, and how they should allocate their time and energy to increase their chances of success. The report suggests that successful VCs identify firms that have well-developed processes for identifying market fits that are scalable and are not fixated on traditional criteria of the team, the market, traction, etc. 
Keep an eye on the Startup Genome. Using it could be the next big part of your business strategy. 

1 comment :

  1. Kermit,

    I went to the start up genome site - after the survey you get a report with really great information! Thank you for sharing!