Understanding and applying the tools and knowledge research offers can be critical for entrepreneurial success. If you want your startup to thrive, consider combining your intuition skills with rigorous data and experimentation. But how can you do it?
Entrepreneurship is the engine that drives growth, innovation, and job creation, making it a crucial factor in the success of any economy. With the rise of technology and globalization, the world of entrepreneurship has become more complex and competitive than ever. In this constantly evolving field, research can assist entrepreneurs stay up to date with the newest technologies and best practices.
Various research methods and techniques are available for entrepreneurial research:
- With surveys and questionnaires entrepreneurs can collect information about the views, preferences, and behaviors of many respondents in relation to entrepreneurship.
- Case studies offer in-depth analyses of a certain business, sector, or market and offer insightful information on the tactics and routines of prosperous entrepreneurs.
- Interviews with entrepreneurs, investors, and other stakeholders in the entrepreneurship ecosystem can be utilized to collect detailed qualitative data.
- Testing several variables to determine which ones have the biggest effects on a company's success is known as experimentation. Examples of this include analyzing the efficiency of various pricing methods, marketing tactics, and other business procedures.
- Secondary research is to analyze already published data from sources like academic research, industry journals, and market reports to gain new information.
Moreover, conducting diverse research in the field of entrepreneurship offers numerous benefits:
- First, research provides entrepreneurs with data and information they need to make informed decisions about the business. It helps them assess the feasibility of their ideas, evaluate different options, and make strategic decisions about their operations.
- Besides enhancing decision-making, research provides insights into market trends and consumer preferences. Research may assist business owners in understanding the wants and needs of the market they are targeting, spotting new market trends, and creating goods and services that satisfy these demands, thereby providing opportunities for scaling up.
- Additionally, research can also help entrepreneurs to secure funding by providing evidence-based data on market size, customer demand, and potential revenue streams. Because of this evidence, entrepreneurs can build a compelling case and can attract investors and secure funding for a business.
And what lessons have been learnt from research done in these areas? The event “Promoting Entrepreneurship: Lessons Learnt from Research” organized by the Esade Entrepreneurship Institute answered this question by bringing together a diverse group of researchers, practitioners, startup founders, and managers specialized in entrepreneurial strategy, scale-ups, and entrepreneurial finance. The symposium provided a platform for sharing experiences and discussing the best practices for promoting high-growth, high-quality entrepreneurship. In this article, we summarize the main thoughts of the participants and the key takeaways from the discussions.
Experimentation: a key factor in success
Entrepreneurship is undoubtedly a challenging path to follow, as it is rife with obstacles and uncertainties that entrepreneurs must navigate to establish and grow their businesses. With no universal recipe for success, decision-making can become particularly challenging for entrepreneurs. However, having multiple theories, strategies, and understanding of higher-level mechanisms can serve as a solution to these uncertainties. Having a theory to test allows entrepreneurs to understand what actions need to be taken, enabling them to make informed decisions.
You observe, you theorize, you test hypothesis and with the outcome of that experiment you learn and then take action
To gain valuable insights and knowledge about business ideas, it is crucial to systematically collect and analyze data to test hypotheses. By employing a scientific approach and utilizing data-driven decision-making, entrepreneurs can minimize risks and optimize their chances of success. Data can provide entrepreneurs with insights into their target market, competitors, and customer needs, allowing them to refine their business strategies accordingly.
However, sometimes entrepreneurs may not have all the necessary elements to formulate a theory, which can make it challenging to develop a solution. To overcome this, entrepreneurs need to be exposed to many different things and expose themselves to as many diverse experiences as possible. This exposure can help them gain unconventional ideas that can be the missing pieces needed to hypothesize a solution.
Don´t let the fear stop you!
Experimentation and intuition are two critical components of the entrepreneurial process. Entrepreneurs must have patience and test their ideas before launching a product or service, but many times fear of taking action is a significant obstacle for entrepreneurs, as it can prevent them from taking the necessary risks to create innovative solutions. Therefore, it is important for entrepreneurs to strike a balance between having data and knowledge while still taking risks to launch innovative projects.
Myths vs. realities about scaling up
Scaling up has been a hot topic in the startup world in recent years and because of the popularity of the topic there are many myths about it. Scaling as the main goal of a company is one of the most frequently mentioned, but research shows that only a small percentage of startups start to scale. The reasons behind this include entrepreneurs not wanting to grow, the fact that scaling can put a lot of pressure on a company, and that it can be challenging to retain the right employees after scaling. Having a good onboarding process and company culture can be critical to keep the core employees at the firm. It's important to understand that scaling is not for everyone and that it's okay to choose a different path.
Continuous growth puts a lot of pressure to the companies and employees, and it is difficult to maintain
Another myth about scaleups is that they all raise venture capital (VC). An ongoing research project lead by prof. Collewaert exposes that in Europe only 30% of scaleups use external equity, and over half of scaleups do not need VC. However, giving up control over the company is a major concern for many entrepreneurs, which is why some scaleups prefer to avoid raising venture capital altogether.
Contrary to popular belief that scaleups predominantly constitute technology firms, studies indicate that a considerable proportion of these enterprises comprise business products. Furthermore, while scaleups are often viewed as innovative, Collewart’s research reveals that in Europe, around 1 in 3 of such firms lack novelty and instead excel in their execution.
Problems between co-founders can be a significant obstacle especially if the visions of the co-founders change over time
Also, there are many barriers that can hold startups back from scaling up. These include co-founder disagreements, lack of experience, transitioning from exploration to exploitation, and not knowing what key matters to focus on. Going international also brings a whole new set of challenges, such as formalizing operations, building trust with the team, finding the right partners, adapting to local cultures, and developing relationships with local markets. Having senior people with experience in scaling up can provide guidance and support to help overcome these barriers.
Different ventures = different financing options
Startups are an essential driver of a country’s employment, innovation, and economic growth. To thrive, startups require a supportive entrepreneurial ecosystem, which includes upstream and downstream markets of investors, acquirers, and consumers. The US has been successful in this regard because of its large consumer market, high investor availability, and comprehensive efforts to enhance its startup ecosystem. However, Europe's ecosystem is maturing fast due to the new generation of entrepreneurs — who are very focused on certain industries — and diversity in investment types. Therefore, it is important to understand the investor´s interest to find out which investors fit your company better. Entrepreneurs seeking funding often fixate on venture capital, but there are many other financing options available, and each startup has unique needs that require a different financing approach.
Entrepreneurship boosts a country’s employment, innovation, and economic growth
The current market conditions are favorable for investment, but investors must prioritize the delivery of value by generating traction using key data and metrics. Practitioners emphasize the importance of including unit economics in an investor pitch because investors want to see the results and achievements of the company, and they want to have an honest and direct conversation.
Different types of businesses require different types of financing
It is essential for entrepreneurs to know how to contact investors. The best approach is to get an introduction from someone in their network, but they can also apply through the investors' platforms. Sometimes, it is advisable to first pitch to a business angel who can help validate the pitch or even introduce the startup to a VC to stand out in front of the investors.
The participants of the symposium agreed on the importance of academic research in entrepreneurship, as it provides a platform for entrepreneurs to learn and develop new ideas. Closing the event, prof. George Chondrakis, Director of the Esade Entrepreneurship Institute emphasized, that, as an academic institute, Esade “is capable of bringing together people who can start and build startups that positively affect local problems”.
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