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Evaluating Startups: What Metrics Matter the Most?

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In the previous blog, we have discusses what are the “5 most important questions to ask your organization and yourself before going to bed with startups?” Now that you are ready to dive into the startup world, let’s review the essential metrics for startup evaluation to determine how suitable the case is for your needs and how likely it is to survive long-term.

It is important to understand that the company evaluation for early-stage startups and more advanced growth companies (aka scale-ups) can and will differ. The younger (the more early-stage) the company is, the more essential it is to remain focused on finding the first paying customers as soon as possible to find and prove the product-market-fit. Wherein growth companies fight for the firm position on a market space comparing to its competitors, set a steady revenue stream, scale its operations, grow the team and attract new investment/partnership opportunities. Hence, identifying what stage company your corporate seeks for will then determine what metrics matter the most in startup evaluation.

Since Catapult’s services rely heavily on data, only more advanced growth companies are to be seen in the data-pool, and consequently to be validated for startup-corporate collaboration. Metrics presented below correspond to the needs of corporates to find and collaborate with more advanced cases.


What metrics matter the most when evaluating a startup from corporate perspective?

 
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FINANCE DATA

  • Investments & Investors

  • Turnover

  • Valuation estimations

  • Estimates of the runway with present funding


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TRACK DATA

  • Descriptions of the product/service

  • Growth speed

  • Growth speed of the company compared to competitors

  • Presence in different medias weekly compared to competitors


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TEAM DATA

  • Founders & their success with previous ventures

  • Team members & their background

  • Employees growth

  • Board members & Advisers

 

In the next blog posts, we’re going to dive deeper into each data-driven metric and understand how to comprehend data to make conclusions on startup evaluation.

 

5 Questions to Ask Your Organization Before Partnering with Startups

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The global business landscape is transforming at a speed of light. Why? - Rapid digitization. Not only did it boost the creation of many new products and services, but a new way of thinking. Big companies, aka corporates, are now stepping up and speeding up the game by finding external technologies and innovations rather than developing those in-house.

In fact, based on the results of a recent survey (study by the Unilever Foundation) of 204 corporate brand managers and 114 startups about how their companies planned to collaborate together: 80% of corporates believe that startups can have a positive impact on a large company’s approach to innovation; 89% of startups believe they’re able to deliver business solutions which can scale. Great numbers, right?

Before acting on them and starting collaboration with startups, let's review some crucial questions that each corporate and its CTO (or Head of Digital) has to answer. 


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What questions you should ask your organization and yourself before going to bed with startups?

 

Question #1: Do you know what you want to achieve?

Sounds basic and trivial? Maybe. But often companies embrace startup-corporate collaboration for the wrong reasons, that are not aligned with company’s short-term and long-term strategies, across departments or among corporate’s leaders. Understanding what is the main target and why to partner with startup is crucial. It is also about setting preliminary goals in accordance with available resources (budget, people, time, know-how etc.) within organization.


Question #2: Did you decide what type of collaboration is suitable for your organization?

There are many ways to build collaboration with startups. Are you seeking for new technologies, innovations and solution providers to collaborate with? Is your main goal to find an investable company? Are you serious about acquiring a promising startup? Or perhaps you are looking into establishing in-house acceleration program? Or it is just about becoming a client for an interesting startup company utilizing / redistributing their products and services? Could it be something entirely different? Drawing a clear path for partnership is not only one of the main criteria for startup scouting and validation, but a fundamental internal strategy to be agreed upon in advance with staff involved in venture collaboration.


Question #3: Do you have a dedicated person or a team for venture collaboration?

Undertaking a project like finding new technologies or building sustainable relationship with startup(s) is a herculean task, that is not to be tackled alone. It would mean recruiting/assigning a dedicated person, or a team, or even an entire department to oversee venture-collaboration activities. It is of the essence to ask: Can we validate ourselves which startups/technologies are the right ones, or we do recruit an external partner with in-depth knowledge about startup ecosystem? Are we going to scout relevant technologies through digital tools, consulting firms, events or elsewhere, and what human resource do we need in accordance to the chosen path? Assigning roles and responsibilities before diving into the world of startups and growth companies is one way to minimize risks and assure successful collaboration.


Question #4: How do you feel about the future of your industry, and your company’s place in it?

Take a look at your industry, its trends, its market leaders, its growth. Nowadays, timing is a pressing matter. With more Ubers and AirBnBs challenging big traditional players, corporate giants need to act fast to the changes in the industry, predict future trends and compete with new, more agile growth companies and technologies. Approach it as a standard interview question: “How do you see your organization in 5 years?!” And continuing: Will the industry still exist? Are you confident that your current direction will strengthen your position on the market in the near future? Are you fast enough to find promising technologies, growth companies and innovators? What are other corporates doing in this focus area and are they succeeding?“ Senior management needs to understand how new technologies may impact their business field in order to recognize and develop relevant solutions.


Question #5: Are you ready to adapt startup culture?

Good startups are like good programmers. You don't choose them, they choose you. Ask yourself: what can we offer to a startup? Are we sexy enough? Can we move along with the same speed? Here are just a few major differences and pitfalls in innovation and organizational structure that you might face: (1) Startups cannot be approached top-down way, but rather at eye level. (2) Failure is a natural milestone for a young company, wherein in many corporates even the slightest sign of failure has a heavy cost for those involved, hence are often avoided and not openly acknowledged. (3) Things move at a speed of light in a startup company - few months can mean growth or death valley, new corporate deals, radical pivoting etc., wherein corporates might take months just to make a decision on venture collaboration.

At the end of the day, it’s all about expectation management, ambition level, speed and adaptability. Senior management has to be ready to adapt, make fast decisions, and throw overboard conventional and tested ways of thinking, i.e. be curious and open-minded.


Let’s see whether you’re ready to collaborate with startups?

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Top 10 Digital Transformation Trends in 2019

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SMEs and corporates alike are in the process of planning next year’s budget, KPIs and strategies. Here is what to expect in the upcoming 2019: the reappearing trends in digital transformation and the new ones that are expected to kick off.

Most organizations project that 50%+ of their revenue will come from digital by 2020, while the World Economic Forum estimated that digital transformation will contribute over $100 trillion in value to businesses and society by 2025. Spoiler alert: one of the biggest digital transformation trends that organizations will take a note of is the change in leadership innovation. A recent Randstad study found that 95% of 3,000 surveyed companies believed they needed a new and different types of leadership to address the impact that digitization will have on their operations.

In today’s era of volatility, there is no other way but to re-invent. The only sustainable advantage you can have over others is agility, that’s it. Because nothing else is sustainable, everything else you create, somebody else will replicate.
— Jeff Bezos, Amazon founder
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The fundamental trend which is seen throughout this year and is expected to grow even stronger in the upcoming 2019 is the corporate ability to stay lean, agile, innovative, make fast decisions on digital transformation, experiment and deploy new emerging startup technologies to take digitalization to the next level - both internally (company-wide infrastructure) and externally (services/products for customers).

Stay tuned for more industry insights and digital sneak peeks!

Yours, Catapult team.


Source:

https://www.zdnet.com/article/the-biggest-lessons-learned-in-digital-transformation/

https://www.forbes.com/sites/danielnewman/2018/09/11/top-10-digital-transformation-trends-for-2019/#4e7644d23c30

https://aimconsulting.com/insights/blog/digital-transformation-emerging-trends-for-2019/

Banks are Undergoing a Massive Digital Transformation

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Let’s talk numbers.

In 2017, mobile banking grew by 18% compared with just 9% in 2016 enabling businesses to realign their channels through the phone. This trend of “not-queuing-in-the-bank-anymore” among millennials is drastically increasing.

According to the forecast by the end of 2018 various banks and financial institutions in Scandinavia, the United Kingdom and Western Europe will have half (or even more) of their new inflow revenue in most products coming from digital sales.

With the rapid technological advancement and changes in consumer behavior, banks have 3-5 years at most to become digitally proficient.

A sneak peek to the total revenue of global mobile payment market was astonishing. Annual transaction volume reached $450B in 2016 which more than doubled in 2018 with a total sum of $930B. And the forecast shows steady growth with the expected $1080B by year 2019.

Not so long ago it was announced that JPMorgan, an American multinational investment bank and financial services company, has spent nearly $20B in the past 2 years to scale its technology and prepare itself for the next generation of banking. Its strategy, also known as “Mobile First, Digital Everything” is already showing positive early results.

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And this is just scratching the surface. One thing is clear - the urgency of acting on digitalization is acute.

Digital transformation of any enterprise is a herculean task, and you shouldn't do it alone.

Moving away from offline legacy platforms and into the digital age is no walk in the park. It takes a massive shift in attitude to become “digital to the core”. Well stated in the interview with DBS Bank CIO David Gledhill: “The digital transformation of any enterprise is a herculean task requiring a willingness to embrace cultural change, the ability to immerse the entire organization in the customer journey, and a total commitment to digitize to the core.”  

At the verge of digital transformation, banks and, naturally, other industries, need to start from understanding the consumer needs and, ultimately, finding relevant technologies and solution providers across the globe to step up the digital game. Catapult, being already “digital to the core”, finds the most valuable solutions by scouting through 100.000 growth companies across Europe, using advance AI and ML algorithms.


Stay tuned for more industry insights and digital sneak peeks!

Yours, Catapult team.