Mid-sized businesses should consider working with start-ups to stay ahead of the competition, says Seedcamp co-founder Reshma Sohoni
Reshma Sohoni is one of the UK’s most prolific investors in start-ups. As co-founder, partner and former CEO of Seedcamp, she is part of a team that is fostering the next generation of corporate success stories globally.
Here, she describes the UK’s bubbling entrepreneurial sector and explains what bigger, more established businesses must do to survive – and perhaps benefit from – the tidal wave of innovative and ambitious British start-ups.
‘Start-ups have no fear about bigger competition’
How does Seedcamp work?
Seedcamp is an acceleration fund; it invests between £75,000 and £200,000 as a first-round investor in pre-seed and seed-stage European start-ups. We also have a platform of support for our companies across three pillars: learning, network and capital.
Who do you work with?
Property Partner is one example. It’s revolutionising home ownership for ‘generation rent’. As it gets harder for people to own a property outright, Property Partner helps them to own partial properties across London and beyond.
We knew the founding team from other businesses before they started Property Partner. One was a mentor and one was already in one of our other companies.
TransferWise is another high-profile example. It’s a well-known company now; it’s revolutionising peer-to-peer currency transfer.
What do you think established businesses can learn from start-ups?
One of the key aspects today about start-ups is that there’s no fear about bigger competition. There’s no fear of ambition and capacity. This is really important for a corporate to understand because it completely changes the vector of competition between corporates and start-ups.
‘Start-ups are extremely lean and can execute their plans quickly’
Another aspect is the relentless focus on customers. For all the start-ups we back, it’s one of the things we look for specifically. It’s core; the concept of making a business work around customer needs.
And it goes without saying that start-ups are extremely lean and can execute their plans quickly. Decisions are made quickly and multiple experiments can be run in parallel. This way of working can be difficult for larger organisations to emulate.
What are the most successful start-ups right now?
In financial technology. Fintech is undergoing a revolution across the entire value chain of the industry. There is disruption inside and outside the organisations that dominate fintech. We refer to it as ‘Death by a Thousand Cuts’ to the traditionalists.
Proptech, or technology supporting the property sector, is another area. Similar to fintech, customers are unhappy with the way this industry functions, particularly in the way that it still has slow and unresponsive systems that operate on information arbitrage.
‘Fintech, proptech and enterprisetech are all hot areas’
They want transparent services where they know how they are being delivered value. Millennials are used to on-demand and apps that fulfil their needs immediately.
Enterprisetech – you can see a theme here – is another hot area. As customers get used to on-demand, customer-led services and transparency in their personal lives, they demand this more and more in their corporate lives as well.
The cost of doing business for corporates across sectors such as finance, agriculture, property, aviation and telecoms is marginally much higher using old, closed systems.
It’s no longer possible for enterprises to ignore innovation and to conduct their internal processes and customer services in the same way. They have to adopt innovation within their own organisations.
How are start-ups competing with larger businesses?
Start-ups are doing a couple of things as they scale up. They are being very pointed about the problems they are solving and are building complete solutions to address this problem better than a large business can serve that particular need. As they scale up, they broaden out the functionality and features.
Start-ups are hiring better talent than they did historically. They can raise bigger funding rounds, so are able to hire talent at a higher level. They are also arming their teams with experience on policy, regulations and customer service.
What technologies do start-ups use that bigger companies should consider?
Open-source and third-party technologies. Fundamentally, for start-ups to scale they can’t build everything in-house at speed, so they tend to focus on core competences and then use as much off-the-shelf technology as possible to deliver what customers want.
Should bigger companies be ‘thinking lean’?
It’s actually about acting lean, not just thinking lean. Big companies sometimes get distracted by financial pressures to the detriment of bringing value to customers. So there’s a completely different way of thinking about the purpose of the business that big companies need to undertake; a true customer service-oriented thinking.
Do start-ups you work with partner with larger firms. If so, in what ways?
Yes, we certainly have start-ups that partner with larger firms as they scale up. If a large firm is a customer, the start-up tends to deploy its solutions within one part of the organisation, either one geography or one business unit. Once it proves itself, it scales to the rest of the organisation.
Sometimes a larger firm acts as a reseller or partner. Companies such as Starcom Media, WPP, Nielsen, Cisco and others can be very valuable partners and resellers. The key is to navigate the decision-makers in these organisations to get them deployed quickly.
‘Act lean, deploy across smaller units and then scale start-up solutions across your business’
Do you think more established firms should work with start-ups and, if so, why?
Established firms such as Blockbuster and others absolutely should have worked with start-ups, and others should certainly do so, going forward.
It’s difficult to predict disruption and to know what you don’t know. It’s best to stay connected and work with start-ups. That said, there has to be action, not just paying lip service.
What is your tip for mid-sized UK firms that want to become more dynamic?
Act lean, deploy across smaller units and then scale start-up solutions across your business.
This applies especially to mid-sized businesses that are in a chokepoint by not being a big firm nor a nimble start-up… and of course they should work with Seedcamp to help them work the start-up way better.
For more on fintech, read Fintech – where financial services and tech combine.
Words: Dan Matthews; photography: Greg Funnell