The Innovation Forum Innovation Drift was opened at the exhibition centre Litexpo on 12th – 13th of October. The event this year drew over 40 businessmen, scientists and futurologists from 15 different countries. One of the first speakers of the event was Mike Otworth, he explained why great technologies today hand over their ideas to smaller start-ups and how to avoid the failure of the majority of innovative technologies even before they reach the market.
Investing in technologies, which create a market for themselves
M. Otworth, one of the founding members of the Company Innventure, works with technologies, which we haven't seen before. While the Forbes magazine claims 9 out of 10 start-ups fail even in Silicon Valley, Innventure has successfully sold 10 out of 11 projects in the past year. Why do we have such disproportion?
When choosing where to make an investment, M. Otworth is trying to identify the so-called disruptive technologies. These technologies address a certain and so far ultimately unrealized need of the market and has the potential not only to become one of the competitors, but also the only supplier of an invention. The business model of his company is based on sophisticated algorithms and identifies technologies with potential not only to satisfy the customer, but also to radically change the current market.
The lecturer uses the Pure Cycle Technologies Company's technology as an example, which allows extracting 100% polypropylene during the recycling process and to successfully and completely recycling natural and non-biodegradable products. The purpose of Innventure is to successfully take this idea from the laboratory to manufacturing.
Real disruptive technologies have only one barrier, an old business model. They just do the job that no other earlier equipment is capable of doing. If such inventions are appropriately developed and presented, not only they attain success, but also change the entire market. This is a very important quality, another one is to make sure that after it has been developed, no one is be able to replicate it, said M. Otworth in his presentation at Innovation Drift.
These are the ventures, which every international company looks for when aiming to add the most desirable inventions to their services. Such companies like Amazon have recently been changing their model and instead of financing development of the new ideas in their company, they invest into smaller innovators, who would continue creating despite traditional business models.
Investments of large companies may harm
M. Otworth's business model is based on the fact that large companies are capable of selling new versions of an old product, but in best-case scenarios, they successfully develop and prepare for the market one out of five products. The remaining four times innovative thought just dies on the way.
That's why today there is a demand for companies, which are able to take the ideas of creators from large companies and without intervention create a new product, which will return to the hands of the large company at a later stage.
"The multimillion profit companies are often weary of products in which they themselves invest, as they start competing for the same customers and may negatively affect the sales. At the same time, I haven't met any scientists, who are working at large companies in research stage and who didn't have the pressure on them to reduce the budget. And in the end, the main drawback of the large technology companies is the fact, that it may take months or even years to get approval of all investors, while the technology becomes no longer revolutionary," says one of the leaders of Innventure.
Even the risk capital model, which allows large companies to invest without risk in new unlisted companies in the stock market, raises a lot of concerns to the innovators. The multi–million profit companies upon evaluation only rely on the original obligations, which are sometimes impossible to fullfill due to the changed activity concept and they start applying parameters to start ups that better suit large businesses. This is done disregarding the fact that disrupting technologies often cost a lot and give little profit due to their development activity.
The risk is minimised in a closed development circle
The Innventure model for technology investments is based on several principles: to reach the market as soon as possible, a company, especially established for one project for external capital investment management, to have clear positioning of the company in the market, bearing in mind the fact, that unique technologies must be represented to the society completely differently than those already existing and, finally, to allow the investor join only in the last stages of the product development.
"Investment into new technologies is a certain science, where there is no space for guessing. The fact, that from 80% to 90% of start-ups fail is disastrous, a young innovator can't find money without the help from large companies, but while working with them he has bigger chances of going bankrupt than attaining success. It's obvious that such companies just aren't able to take truly unique ideas to the final stage and small companies do it better simply because of their working speed." says M. Otworth in his lecture.
Successful examples of his work are 11 projects completed in the two years that his company has been open, 6 of them have generated the value of $ 4.5 billion during the public share sales and the 4 remaining projects are so far closed to the share buyers, while only one is considered completely unsuccessful.
In the meantime, when asked about the place of such a small country like Lithuania in today's market, M. Otworth compares it with a start-up: "A small company is always faster than a big one. It's likewise when we're looking at countries: if a government level decision is taken faster than that of a large country's, and if the changes are adopted quickly and comprehensively, then it's possible to expect to grow innovations here easier".
The Vilnius Innovation Forum Innovation Drift from 12-13th October is organised by the Ministry of Economy of the Republic of Lithuania and Lithuanian Agency for Science, Innovation and Technology (MITA). The European Regional Development Fund funds the Event, which is held during Innovation week. One of the biggest futuristic events in the Baltic Sea region this year attracted more than forty scientists, businessmen and futurologists from 15 countries of the world.