How to sustain a start-up

Suranga Chandratillake and Leslie Budd were talking after a recording of The Bottom Line.

Leslie Budd:  I’m with Suranga Chandratillake who’s the Founder and Chief Strategy Officer of Blinkx, the web video search engine.  Recently your share price has been in the news and has had a buy signal but has had some kind of volatility.  I was wondering if you could tell us what the strategic challenges of your start up story are.

Suranga Chandratillake:  So the interesting thing is you mentioned the share price, it rarely has anything to do with that.  The challenges in a startup are usually, particularly the technology startup like Blinkx, are technological, so building a product that can find a context within which it can exist.  We’re a video company.  So for our product to really be a success we need to have lots of people having access to fast enough internet connections to be able to watch that video for example.  And a lot of the other challenges are internal challenges.  They’re all about once you have an idea and maybe even a product, or the beginnings of a product, how you galvanise a team to accelerate their progress, build that product really rapidly, get it out to market and launch it, and compete against in often in many cases much, much, much larger organisations.

Leslie Budd:  Many public policymakers and commentators round the world think all you need is high growth startups as a kind of magic bullet for the economy, but yet there’s lots of here today gone tomorrow technology companies: I wonder what your view is on how you sustain a startup like yours over the longer term?

Suranga Chandratillake:  Well I think the first thing you have to realise is that you won’t sustain most of them, and if you’re trying to you’re probably doing the wrong thing.  The startup failure rate is extremely, extremely high.  In technology startups in the silicon valley for example over the last couple of years, the belief is that only about 1% of all startups are real successes, sustained large successes; maybe about 10% are sort of mediocre successes in the sense that they remain going concerns or return capital one or two times maybe the initial investment; but still the majority, you know, 80% maybe 90% really are failures.  And that’s just the nature of it.  You know, it’s a very Darwinian process.  People have ideas; they run very rapidly towards that idea; sometimes it just doesn’t work, you know.  And accepting that is part of the game.  It’s a difficult pill to swallow and it’s one reason why I think, I always say that while policymakers can certainly help in creating an environment that is ripe for startups, they’re probably the wrong people to actually back those startups and provide the funding.  That I think is something which the private sector does much, much better because there the risk reward profile of what we’re talking about is something which is understood and for some people the thing they want to do.

Leslie Budd:  Okay, supplementary to that, because your own position, you stood down as CEO, and often would-be younger entrepreneurs think that technology companies and start-ups is the way to rapid riches, and yet what you, in sustaining a business over the long term you actually may not want to go for an IPO: again I wonder what your advice would be or what your thoughts would be on that?

Suranga Chandratillake:  Yeah, I think that you should actually treat things like IPOs the way they are supposed to be treated.  An IPO originally was all about going onto a public market in order to be able to raise capital.  They’re really great for that.  That’s why we IPO’d at Blinkx: we raised $50 million, which was basically enough for us to get from being a loss-making technology company into a profitable media company.  We thought that at the beginning and that’s what we did and we got there at the end.  I think when people look at steps like that, which are really structural corporate steps, as a shortcut to getting rich, as you say, then it tends to go wrong, you know, that’s where the problem is.

So yes, there’s always going to be exuberance at times, and there’s always going to be overt negativity at other times, what you have to do is ignore all that quite frankly, you know, in many ways ignore the fluctuations on a daily basis and instead focus on what it is you’re doing.  Make sure that what you’re doing makes sense, that it creates value in some way to somebody, and that you’re extracting that value in some way as a business.  And if you’re doing that and as you keep growing that, then in the end these things work for you.  That’s one of the key skills I think in a startup is there are so many distractions externally that it’s very important to focus on what matters.

Leslie Budd:  And finally, the European Commission estimates that 150 million of its citizens either don’t have direct access or regular access to the internet, and I wondered what web-based companies like your own could do in influencing that environment, and perhaps challenging some of the assumptions about access to the internet?

Suranga Chandratillake:  Yeah, I think that the…. so unfortunately that’s primarily an infrastructural problem, and that means depends on the country you’re talking about it’s either something which is controlled by government regulation, typically, or something which requires massive private investment, usually from very large corporations.  Smaller internet companies like ours can do very little about that.  The big way in which we try to move that wave along is really through influence on policy.

So whether it’s bringing down the cost of access to the internet, therefore lifting the number of people who can afford it above the line, or whether it’s ensuring that the access to it is unregulated in every way, and these things are easy in the UK but tougher in certain other markets.  That’s typically where you see internet companies getting involved.  We’re certainly very aligned with the aim of improving that access, because obviously businesses like mine are all about people accessing services like ours, and we can only do that if they have access to an internet connection.  So it’s in our interests without doubt to get everybody online, and not just online but online on a regular high-speed internet connection.

Leslie Budd:  Suranga Chandratillake, thank you very much.

Suranga Chandratillake:  Thank you.