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The startup world is known for creativity and innovation around the world. Brave entrepreneurs may give up corporate security and branch out to pursue their dreams. While this can be scary, it’s also how the most innovative ideas in the world develop into products or services.
As an experienced entrepreneur and venture capital (VC) investor, I encourage startup founders to pursue their passion without hesitation. They can improve the world and enhance the lives of customers and employees.
The importance of innovation in business and technology
The business and technology worlds are competitive, so it’s important that companies — including startups and corporations — strive for innovation to stand out. Creativity, part of a startup founder’s DNA, is important but not sufficient. The term innovation refers to ideas that are creative but valuable to potential customers. Business problems continually evolve, and so must their solutions. Innovation is the key to making that happen.
It’s not just my opinion. The Brookings Institution reports that innovation raises wages and drives economic growth, improves life expectancy in the U.S. and makes technology affordable.
Ongoing innovation is typically pursued by corporations in an effort to stay ahead. Companies might form an innovation team, often connected to their research and development efforts. Even with the best intentions, forcing innovation is hard, leaving some companies stuck with the status quo. I recommend that corporations consider investing in startups as a way to get access to some of the best ideas in the world.
Disruptive innovation is often the foundation of startup success. This type of innovation allows startups to carve out a portion of existing markets, or it might create an entirely new market. Examples from our portfolio include Airbnb, which changed the lodging industry by making everyday people guest hosts. DoorDash introduced a new customer-friendly delivery model. 23andMe offers personalized genetic insights to consumers from the comfort of home.
Related: How Business Leaders Can Foster an Innovative Work Culture
Businesses must evolve to survive
Innovation is important because it allows businesses to differentiate themselves. They find ways to solve both old problems and emerging problems. Memorable examples of companies that did not evolve successfully include Blockbuster, a thriving rental business that failed to see the market evolution to streaming services. Kodak was wildly successful in film but did not transition effectively to digital photography. MySpace was an early leader in social media, but Facebook emerged with a more appealing offering.
Related: Don’t Make the Same Mistake Leaders at Kodak, Blockbuster and Xerox Made When Disruption Comes to Your Industry
How startup competitions spur innovation
Although startup founders may be inherently creative, I’ve seen first-hand the positive impact of startup competitions to spur innovation. Such competitions motivate startups to fine-tune their pitch and their value proposition.
One type of competition takes place in MBA programs, which allow entrepreneurs to pitch their ideas while still in school. The founders benefit from collaboration with professors and fellow students, as well as from judges’ advice – often including VCs – in these competitions. Many MBA students finish school and start working at their startups full-time.
Related: Here’s Why Innovation is the Key to Success of Any Business
Shark Tank is a high-profile example of a televised startup competition that receives many more applications than it can support. Founders who make the cut pitch to some of the most successful entrepreneurs in the world. They answer challenging questions, and even if an investment doesn’t work out, the startups get high-profile exposure that is hard to beat.
Other competition examples include Web Summit PITCH, taking place at one of the top technology conferences worldwide. Web Summit is hosted each year in Lisbon and attracts 50K+ attendees. Early-stage founders battle it out on stage with a global audience. The Startup World Cup, organized by Pegasus Tech Ventures, attracts entrepreneurs, corporations and investors in a series of 70+ regional competitions around the globe. The grand finale winner receives a US$1 million investment prize.
Improving the world, one startup at a time
Ultimately, innovation and the improving world inspire me to lead a VC firm. Startups can give people better access to technology, allowing them to become better educated even if they live somewhere remote or can’t afford tuition. Healthcare innovation allows medical professionals to diagnose and treat diseases affordably and without unnecessary travel.
Startups in the sharing economy let people improve their lives by renting out extra space or selling their skills and goods online. I find it amazing to see the innovation that startups already offer and to think about what amazing ideas have yet to materialize.