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What Western Companies need to know about Partnering with Startups in India and China
Expansion to emerging markets and collaboration with startups to gain insights on business innovation are the twomajor strategic imperatives, large western corporations are trying to ace. India and China are the markets they are most looking to get a foothold into. However, a mistake committed by many is to consider these two markets as homogeneous whereas they are as apart from each other as they are from the west itself. As a Harvard professor claimed, India is like a chaotic and institutionally-weaker part of the US and the UK, while China is qualitatively different. There is greater state support and consequently interference in China. The ecosystem orchestrators, participants and intermediaries likewise work according to the national priorities. China also has home-grown rivals such as the BAT -Baidu, Alibaba and Tencent. They can take on any western giant. State policy in China is implemented from the ground-up. So, in China, it is advisable for companies to partner in areas of national priority such as right now Artificial Intelligence (AI) and the Internet-of-Things (IoT). Intel’s Mass Makerspace Accelerator Program is one such example. In contrast, Nasscom’s 10k Warehouse Program is India’s response, where MNCs work with private-sector trade bodies.
Uploaded Date:27 June 2018
Why Financial Statements don’t work for Digital Companies
Uber is planning its IPO and is valued at between US$ 48 and 70 billion, about five years after Twitter had a 24 billion-dollar valuation during its. This, was in spite of losses up to seventy-nine million that same financial year for Twitter.Facebook acquired WhatsApp a few years back for a staggering nineteen billion in spite of no revenues since inception for the latter. In sharp contrast, GE’s stock price tumbled down by more than two-fifths of its earlier value after reports about the behemoth’s first losses in half a century. There is a tremendous difference in company valuations between digital and industrial firms. A book written recently by a professor from the NYU Stern The End of Accounting states this conundrum about financial statements mattering less for the capital market decisions. This is because of returns on intangible investments increasing. The balance sheet and the income statement both do not account for intangible or rented assets. Airbnb’s properties, Amazon’s Buttons or Echo which is driven by Alexa, or the cars under Uber are not owner per se by the companies. In comparison, Wal-Mart owns hard assets worth aver one-hundred and sixty billion dollars. The real assets for digital companies are the vast treasure troves of data warehousing generated either by them or others’ which they may leverage. The digital age also works on a winner-takes-all model, so while Facebook is able to leverage billions of dollars being on top of the chain, the likes of Yelp or Twitter can only manage a mere handful in comparison. Management consulting, accounting and other professional services firms are also likewise reliant on human capital. Yet, there is a crucial difference as these companies’ revenues are dependent largely on the investments on the human capital, so the balance sheets invariably reflect the actual state, unlike that of digital firms.
Uploaded Date:03 March 2018
Research: What happens to a Startup when Venture Capitalists replace the Founder
Company founders often enlist the services of Venture Capital (VC) funds in order to raise equity essential for growth. This is particularly true for high-growth industries or highly competitive markets. An unfortunate consequence of this fund borrowing is that entrepreneurs lose control of the board, their financial equity gets reduced and worse, sometimes they could get replaced. VCs are often extra proactive in replacing the founder with their own man, often to simply stamp their authority in the guise of professionalizing the startup. This is truer for those startups that are struggling. In order to study the correlation between the founder and his/her replacement, business intelligence was collected from Venture-source, which tracks round-wise funding from VCs. Up to afifth of founders tend to get replaced, but this is not always bad news. The replacement is often more experienced at such scaling up, so on average the returns per equity and total shareholder value for the founder tends to increase, in spite of lower levels of actual control. Most of these replacements came from within the same states where the company was based in. While most states in the US have a non-compete policy for the exiting founder, it has been turned around in fourteen states.
Uploaded Date:03 March 2018
How Founders kill their own Start-ups
At the outset, start-ups tend to be poorer paymasters, which is why they struggle at talent recruitment of the best people. Yet a lot of talent does get attracted due to the flexibility and growth prospects that start-ups provide away from the stringent bureaucracy at larger corporations. That is why for start-ups, a major hurdle is micromanaging founders. Three major obstacles are encountered by start-ups when founded my micromanagers. Such micromanagers do not let employees be empowered, which is why the organization suffers in its attempts to scale up. It is also a problem for the talent retention at the firm as few would like top continue in such a stifling atmosphere. The biggest problem encountered is that too much time spent on micro issues, takes the focus off the founder from the bigger picture. In order to empower the team, the founder needs to start off by putting trust and belief in the team. Employees need be mentored and supported. There must be some room to fail, so that employees can experiment with innovative ideas.
Source:https://knowledge.insead.edu/blog/insead-blog/how-founders-kill-their-own-start-ups-8051
Uploaded Date:18 January 2018
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