European by design

The world of start-ups is constantly changing and that's nothing new. What is new is the time they have to do it and the fact that, like any organisation, they operate in a Volatile, Uncertain, Complex and Ambiguous (VUCA) environment. What has happened in the last 10 years?

Decreasing distances, accelerating time… A new topology

Just as ‘artificial’ is now linked with ‘intelligence’, ‘exponential’ is often associated with ‘growth’, as Salim Ismaël explains in his book ‘ Exponential organisations’. There are several reasons for this hype. Of course, the development costs of software products. In a word, digitalisation. But above all, the changing mentality of entrepreneurs. Feminisation in particular, ‘les déCCIdeuses’ at the Sophia Antipolis Business Pole, Orange’s Women Entrepreneurs... And most importantly, the space in which startups are evolving and their new neighbourhood. The rough term for this is a new topology.

20 years ago, if you had created your start-up, your neighbour was geographically close (Euclidean distance). Today, digitisation (the Web) and communications media (Zoom) have significantly distorted this neighbourhood and your Swedish or Spanish counterpart has become your new neighbour in a new topology that has revolutionised geographical distances.

Time also seems to have accelerated, or at least our perception of it has. The average life of a company quoted on the stock market has fallen from 67 to 15 years and it took YouTube 18 months to reach the billion mark and become a unicorn (IBM took 40 years). In 2007, Nokia (market capitalisation $140m) spent $8bn to buy Navtech, a network of sensors to measure road traffic. What it didn't see coming was a small Israeli start-up, Waze, which provides the same information free of charge, since it is the users who supply it. This cost Nokia $100 billion on the stock market. Moral: in a world of abundance, access (to key information) is more important than ownership (of a market leader).

Molecular growth... An alternative to hypergrowth and organic growth

One of the shortcomings of many start-ups today is that they believe they can only act over time, not space. This mindset gives pride of place to hypergrowth, in which case organic growth is considered too slow, and there is no way out except through external growth. However external growth requires funds. Hence the race for venture capital, the classic pattern of which remains: love money (family and friends if you're lucky), Business Angel before the million mark and finally the Holy Grail of Venture Capitalists (VCs). The problem with this type of approach is that it can quickly cause the entrepreneur to lose sight of his real objective, the customer, because the source of income is no longer turnover, the product of sales, but successive rounds of financing, often labelled: Series A, Series B... This tendency is further exacerbated by an over-reliance on public money in the incubation phases.

However, the start-up entrepreneur can also act on the spatial dimension, even if at first glance the approach seems rather counterintuitive. Let me explain. You can only set up a business if you're convinced that you're the only one who came up with the original idea. You can only survive if you convince yourself otherwise. Let's indulge in a little exercise in probability. An entrepreneur solves a hitherto unsolved problem. It's their innovation and they consider that the probability is very low that their neighbour will have found the same solution. Now if I present the problem they have solved to entrepreneurs in the 27 other European countries who have had more or less the same scientific training, what is the probability that they will come up with the same solution? Very high, of course. Our entrepreneur's mistake was that they misjudged their neighbourhood, in other words, they got the topology wrong.

From a growth point of view, without necessarily calling on Venture Capital, we need to remain a monopoly in our segment, i.e. grow geographically while avoiding the trap of a legacy approach (the example of Nokia cited above). If we use a metaphor and say that your company is an atom, the probability that an atom with the same characteristics existing in another European country is very high. And if you have a neighbour on a European scale that does the same thing as you, why not form a molecule with it? It's the molecular growth model.¹ Very simple to express, this logic is not without its difficulties, which are commensurate with the challenges of European growth. The good news is that many of today's start-ups were born into this new space-time and understand it better than their elders.

Three young entrepreneurs illustrate this trans-European logic. Aurel & Axel are a Franco-Luxembourg company, and I met them in Vienna. It's off to a good start, with three countries in two sentences and their roots in Sophia Antipolis, as all three are Skema alumni. Their concept is to combine traditional agriculture with modern technology, all within a circular economy. By recycling sea containers, they are able to offer modular urban farms in which three types of cultivation take place: indoor cultivation (mushrooms), hydroponic cultivation (micro sprouts, aromatic herbs, edible flowers) and market gardening (vegetables). The waste from the market garden crops is used as fertiliser for the indoor crops. Their customers are restaurants and they are already distributed by major chains (Grosbush Fresh Cut in Luxembourg, Metro and Naturalia in France). Profitable from their first financial year, they are looking to expand across Europe and are the perfect example of how a young start-up can be profitable without relying on venture capital while championing strong values.

European by design. This is the key to molecular growth. And it is my plea for a European business status.

¹ For more information, read La nouvelle Dynamique des Organisations, by A. Brehier and J. Chifflet (forthcoming) Alexandra Brehier is the president and co-founder of the company TalentCoin and was awarded this year with the Trophée Women in Tech Sud in the 'Start-up Founder' category. Jérôme Chifflet, former Deputy Director of Research at the Orange Group, is president and co-founder of the Franco-Austrian company Scale to Global, which he leads in collaboration with Sara Bentsen.