"Achievement unlocked: The EUnicorn" - pen, notebook, public domain inspiration

Big things have small beginnings:

Input for an European Innovation Council (EIC)
Piotr Jakubowicz 1
Published on May 4, 2016 2
@p42

It is with great interest that I have followed the initiative of Carlos Moedas, European
Commissioner for Research, Innovation and Science at the 4th Horizon 2020
Conference in Brussels to strengthen the European start-up ecosystem with the
introduction of a strategic framework program [Podium discussion video]. I agree
wholeheartedly on Mr. Moedas approach to build the support in a bottom-up rather than
top-down fashion, and greatly applaud his call for position papers.
My position is that of a middle aged entrepreneur with experience earned as early
contractor and co-founder in multiple ventures. As such, my perspective reflects the
challenges a fledgling start-up is facing before becoming a glorified unicorn company. In
this this brief article I would like to address core points that in my view are essential for an
incentive such as the European Innovation Council (EIC). Also, I would like to share general

observations I was fortunate to make in the start-up sectors in San Francisco, New York,
Warsaw, Paris, Berlin, Istanbul, Cork and Dublin.

Communicate different metrics: Say no to the hyped unicorn, go long-tail

and bottom-up
Currently, there are about 150+ unicorns in existence, and it has been correctly pointed out
that most of them are in the U.S.A. certainly, due to their war chest, these unicorns give
start-ups additional opportunities for a potential exit scenario in the form of an acquisition.
Personally, I find the usage of the number of unicorn sized start-ups as a metric for the
success of an ecosystem not entirely adequate. Their contribution towards the
development of a start-up ecosystem is a bit exaggerated. Firstly, the value of unicorns is
estimated on the potential of future earnings in a highly speculative investment game many of the companies have not yet transitioned into a stable form and have yet to prove
that they will be of long term benefit to the start-up economy. Secondly, while growing up
and scaling, these unicorns do not retain their attributes that makes them a start-up
company. They gradually convert from an entity that is focused to explore the solution of a
highly ambitious and scalable business problem to a well-oiled, but monolithic business
machine.

While having a significantly smaller footprint in media and legendary start-up lore, I suspect
that there is a long tail of smaller start-ups that qualify in the high growth potential
category. However, these companies never end up being a unicorn due to early acquisition.
By challenging the status quo and disrupting business models, these small to medium
enterprises bring important innovative impulses into the industry. They attract and retain
the majority of entrepreneurial start-up talent and have a strong pressure to succeed in
monetizing their innovation. Most importantly, the existence of functioning start-up
networks and problem related infrastructure is imperative for these companies. Their
founders, once successful, often come back to the ecosystem as angel investors or serial
entrepreneurs and form the core of local ecosystems: It is from there that new ventures
start and where a young entrepreneur can get valuable, genuine advice.
As such, my request to a future EIC would be to the drop the unicorn metric as target and
focus on a bottom up strategy that would help the base of the startup community in Europe,
as mentioned on the discussion panel at the Horizon 2020 conference.

Culture culture: No copy-cats, but smarter start-ups

Europe has started to copy the American success model but it comes too late to be able
to capitalize on major trends. Start-up culture - to make a difference - is often adversarial
towards established norms in industry and society. It is not possible to impose it from the

top, and it needs protected space to grow. It comes to existence in hackerspaces (e.g. La
Paillasse, The Chaos Computer Club), grassroots non-governmental organizations (e.g. New
Harvest), technologic hubs such as accelerators programs (e.g. Indie Bio), other new hybrid
organizations in the form of incubator-think-tanks (e.g. SingularityU), and of course,
grandfather's basement or garage - and gives birth to radical ideas and teams that are the
foundation of tech start-ups. Unfortunately, it is hard, if not impossible, to identify the
technological trends that will develop into disruptive innovation. Often, the best start-up
concepts arise on the borders between the possible and the impossible they are poorly
understood, and that makes them a gamble with a high risk and gain.
To make things worse, each business model has a context in society and every technology
a time dependent development where it matures from bleeding edge state to mass
adoption. Copying old concepts (e.g. like Mr. Moedas example Rocket Internet did in the
early days in order to grab markets in the EU and beyond) might work for a time, but is no
recipe for long term success. Internet is not Everything for many reasons, decade old
concepts such as Facebook or Twitter marketing tools can not be replicated endlessly with
success. Focus on important problem domains where the EU might be able to generate the
advantages that come with the access to bleeding edge technology and freedom.
The key of an early stage start-up is the team, and the problem it is attacking. To succeed,
it needs the support of a community and ecosystem that is built around that problem
domain. These include talent for early hires, angel investors with experience in the
business, veteran entrepreneurs as advisers, and an investment culture that gives access to
reasonable valuations and favourable terms.

Council for the innovators

The four critical prerequisites for the rise of start-up ecosystems such as Silicon Valley are
network density, abundance of capital, low industry regulations and access to
international, motivated talent. I would hope that a future EIC to become a hub for
innovators from the start-up scene one that would give early stage teams, seasoned
entrepreneurs, high growth potential small and medium sized companies, and networkers
such as non-governmental organizations and conference organizers a platform to quickly
access important information such as an overview of possible funding possibilities and
consulting support (market research, intellectual property, marketing). In order to improve
local start-up ecosystems, I propose to attach the following problems:
Improve existing startup network quality and connectivity
When it comes to networking and network density, there are only few larger conferences in
Europe (e.g. Pioneers 500, Hello Tomorrow) that understand to put the respective actors of
the ecosystem in the correct position and offer events that create a symbiotic interaction
innovators, networkers and investors. Too often, conference organizers try to capitalize on
start-ups with high participation fees with the promise of publicity and investment, or build
networks in the form of "intrapreneurial" programs or competitions in order to support
their own brand image and marketing operations. In all these cases, the results are very

mediocre in terms of participants and impact. I would hope that the EIC would identify and
provide financial support to start-up communities (e.g. hackerspaces and event organizers)
that have a track record in community building and a friendlier approach to innovators and
give European start-ups and effective networkers visibility in the form of a portfolio website
and newsletter.
Offer and incentivise fast, sufficient and fair investment possibilities
The EIC should incentivise an investment culture that gives entrepreneurs fast access to
sufficient seed capital at favourable terms. There are many models that can be taken as a
benchmark. For example, it takes a half a day to make an application for the benchmark
accelerator YCombinator, and a couple of emails to clarify questions regarding the business
model. The airplane tickets to San Francisco are paid for, so is the stay in the hotel. After a
10 minute long interview, the decision to get an investment at 120 K$ for approximately 7%
equity or convertible loan notes is made on the same day. The terms are simple, friendly
and give the company many options for future investment rounds. Investment rounds, in
which the company is able to leverage the vast network of high potential investors.
In comparison to the dynamic and adaptable investment culture, the tedious application
process that comes with the funding for the Horizon 2020 SME instrument is unbearable for
a start-up company. The paperwork is a significant hindrance towards the successful
application for EU grant money (e.g. a Phase 1 application takes the equivalent of 6 weeks
working time to complete). This state of grant funding is reflected by the fact that there are
a great number of consulting companies that specialize on H2020 applications.
Bureaucracy kills innovation and favours networks which know how to navigate around the
obstacles and have the best connections in the administration. I would hope the EIC to give
financial incentives to investment deals that come with friendly terms to newcomer startups that want to change the industrial space.
Help to decrease regulatory hindrances for of small projects
It is sad to see that the paperwork to start a company is still a horrible process in many
European countries. Unfortunately for the entrepreneur, the end of the process comes with
a masochistic beginning: The voodoo of tax systems and regulations that come with
running a company put small players at disadvantage against historically evolved big
corporations, as they have to allocate relatively more precious resources to deal with these
inefficiencies in the economy. Moreover, Europe's partially backward stance to future
technologies (e.g. certain key areas of biotechnology) is also a major obstacle when it
comes to building a project that not in the domain of software but hardwareor wetware. I
would like to see the EIC as a strong advocate for Europe wide deregulation of regulatory
barriers that both hinder company operations and - where containable when it comes to
risk - the introduction of novel technologic developments into the industry.
As a last point, the EIC could develop programs that create positive incentives to conduct
technology transfer from the academic sector to the industry.

Last words
In the global competition for talent and ideas, a European Innovation Council needs to
create a viable alternative to the dynamic start-up ecosystem and entrepreneurial culture
of the U.S. and strong Asian initiatives such as the giant program to support
entrepreneurship in China. It is imperative that it does so by working closely together with
existing ecosystems and experienced entrepreneurs rather than creating a large
bureaucratic apparatus and supporting existing business models. Only then it can retain
potential disruptive companies and strengthen its innovate potential.
_______________
Dr. Piotr Jakubowicz is co-founder/COO of the Irish biotechnology start-up Sothic Bioscience.
Follow @p42 on Twitter to keep in touch.
1

This article has been published on May 4, 2016 on Linkedin:

https://www.linkedin.com/pulse/big-things-have-small-beginnings-input-european-eic-piotr-jakubowicz
2