Last week at Web Summit, experts across various industries came together to discuss everything from health tech to future societies. Many ideas on startups emerged from the event, and our CEO, Russ Heddleston, shared some best practices for pitching investors in the US. Here are some overall trends the Web Summit experts have seen in startups in 2019.
Teams are going global
More startups are distributing their teams globally. It’s obvious that the ease of remote communication has made this more of a possibility, but more and more founders are discovering the benefits of distributed teams for their companies. Remote employees not only allow you to lower your operational costs, but you can also base your company in any city and recruit employees from anywhere, despite their locations.
In a Web Summit talk called “Small world, big market,” Alex Kayyal of Salesforce Ventures noted, “One of the great things about software is that you can sell to customers anywhere you are.” He mentioned a leading search business called Algolia, which, despite being based in France and employing most of its staff there, takes 75 percent of its revenue from the United States. This isn’t to say it’s a simple solution, but it goes to show that a global team is not an insurmountable barrier to entering a specific market.
A well-distributed team can provide benefits from a business standpoint as well. Diversity of ideas, skill sets, and strategies across cultures can benefit companies, particularly early-stage startups where innovation is key. In fact, studies have indicated links between diversity of talent and innovation.
Companies are shying away from IPO
Another theme that was prevalent at Web Summit was the idea that companies are now delaying going public due to recent IPO performance. Later-stage companies are taking more capital and debt to give them a longer runway.
Founders are nervous about timing the IPO market because of the idea that any sort of volatility is bad. But in fact, that’s often just part of the market. In a talk titled “Is IPO the ultimate sign of success?,” Ravi Viswanathan of NewView capital said, “A lot of times, the rhetoric is, 3 months, 6 months, 9 months later, there’s a judgement on whether an IPO is ‘successful’ or not, and it could be that it is 6 percent down from the day of the launch, and then everyone views it as unsuccessful, which I think is completely the wrong narrative.”
The idea is simply that even if there is a post-IPO dip, there is a lot that goes into determining whether the event, let alone the company itself, is profitable. Viswanathan says you have to think about the fact that through IPO, the public markets have embraced the company. If they have and it’s a durable business model, that’s the ultimate measure of success.
Profitability is back in style
There’s been a lot of press recently about valuations of companies plummeting due to poor unit economics. As a result, profitability is gaining preference over growth at all costs. More and more investors want to see startups with more controlled spend. The goal is to be able to more easily move into profitability.
This doesn’t mean that your company has to be profitable right away or that you can’t spend money. In the talk “Is Silicon Valley pivoting to profits?,” Rytis Vitkauskas of Lightspeed Venture Partners said, “Not all companies are created equal. So long as you’re growing very fast and you’re spending very fast, so long as that duality is sensible, some of the best companies get created that way.” It may take some time to actually become profitable, but the key is that it is possible. To do that, overall, companies need to start to burn less at the beginning.
There’s a lot to be learned from the worldwide startup landscape, no matter where your company is based. Understanding the benefits of a global company, the implications of an IPO, and the current consensus on profitability will put you a step ahead of the rest.