Neal Hansch, CEO & Managing Partner at Silicon Foundry chats about the evolution of the technology market and ecosystem in this catch-up with SalesTechStar:
Welcome to this SalesTechStar chat Neal, we’d love to hear about you and Silicon Foundry…
I’ve been here in Silicon Valley for the better part of the last 25 years. I also spent some time in Asia, Africa, and Europe, within their tech ecosystems. My background actually began in tech investment banking. After, I spent nearly two decades as a venture capitalist, investing in early- and late-stage companies. I also did a stint in corporate development at Macromedia, which was acquired by Adobe, as well as working within a handful of startups.
This is really the intersection of our business here at Silicon Foundry. We build bridges between some of the world’s leading corporations and startup ecosystems around the globe. We know what piques the interest of Fortune 2000s and what their needs are. We help them navigate through the noise and identify the best emerging companies they should have on their radar. We’re able to provide expert insights and intel about those companies. First and foremost, we look for those that could be a customer or partner. Beyond, there might be synergy for the corporation to become a strategic investor or even an acquirer of those businesses.
We’d love to hear your thoughts on the evolution of the tech startup economy and how do you feel things in this market will change in the near-future?
I think in terms of the evolution of the technology ecosystem, and I really say the ecosystems, increasingly innovation is coming from everywhere in the world, not just here in Silicon Valley. Israel, Scandinavia, Asia, and even Africa, in certain categories, especially things like financial services, are emerging as investment hot spots. Here in the United States, certainly over the last few years with the pandemic, there is increased awareness, recognition, and appreciation of the growth in secondary markets outside of Silicon Valley, southern California, New York, and Boston, which historically have garnered a majority of where the venture capital dollars have been invested. I think one other part of the evolution is increased innovation across all industries. For example, 20 years ago there were not many startups addressing, attacking, and innovating within the automotive arena. Today, that’s no longer the case. Nearly every industry is being impacted in a positive way by startups.
With the macro environment and stock market performance as of late, we’ll see fundraising related to tech startups cooling off. Once again, the focus will be on cash and profitability, as opposed to growth at all expenses. I think that also means you’ll see a lot of startups grow, especially the mid- and later-stage ones. The latter will grow into the valuations that helped them raise recent rounds of funding. In addition, we might also see increased M&A activity. There are certainly offsetting factors, but often these are the times we’ve seen corporate acquirers become more aggressive as valuations of potential targets go down. But, on the same note, corporate acquirers may be more reluctant to spend the cash they have on the balance sheet. As well, if their own stock prices are down significantly, this could serve as a headwind if that’s the currency they would be using in making acquisitions.
How are enterprise brands using startup partnerships to drive their own processes and innovations: a few recent examples to throw light on?
There are so many different ways to answer this question. Some large enterprises have make significant efforts to adopt lean startup methodologies in terms of being more nimble with their processes and proactively removing barriers that may impede more rapid decision making. We’ve certainly seen these methodologies empowering new venture arms to operate with increased autonomy, especially when they may be ideating new products and new models that don’t necessarily fit into an existing business unit. We’re seeing corporations across the world and all industries do these types of things. We work with a broad range of the global Fortune 2000 leaders, all of whom are active in seeking to engage, collaborate with and at times make strategic investments or acquisitions of category leading startups. Often through their partnerships with these emerging players, they themselves become more nimble and innovative as a byproduct.
In what ways do you feel the start-up ecosystem for tech companies helps innovate industry models and standards?
Models is a pretty interesting one to talk about, because that’s often one of the hardest for an incumbent to change, which is the fundamental business model they’ve been operating on. We’re seeing startups innovating on models. For example, they innovated software licensing. We’ve moved from perpetual licensing to SaaS, with usage based monthly, rather than a big ticket initial upfront and costly perpetual licensing model.
New industries are emerging and old ones evolving, like the sharing economy and automobiles. Car ownership has shifted with the advent of Uber. Many people are subscribing to a car service rather than owning cars outright. We’ve also seen this with lawn equipment. Instead of buying a leaf blower at Home Depot, you could rent one for a short period of time. Again, this goes back to usage-based pricing versus one-time purchases.
There are some other categories, like financial services, where we’ve seen endless examples of disintermediation and innovation in their fundamental models and the ways in which providers of goods or services charge for their wares. Arguably, one of the most challenging shifts is innovating and making moves that feel like you might be cannibalizing your existing business. Yet, these fundamental shifts are often what is needed, critically important, and ultimately recognized by Wall Street, as these companies make those shifts.
To the question of standards and industry standards, historically, many were set by a consortium, perhaps of industry incumbents. Now, the rules are being rewritten. There’s probably no better area or example than crypto, where the standards are certainly not being set, at least at the onset, by the traditional incumbents.
A few thoughts on what startups should keep in mind in this market as they try to gain traction in what is largely seeming like a crowded market today?
Regardless of how crowded the market is, we’re going to see a shift back to the mindset that “cash is king.” For startups, as it relates to selling to corporates or getting traction with corporates and despite market conditions, the same fundamental characteristics to keep in mind are: having patience when working with corporates, focusing on connectivity to the right decision maker at the corporate, understanding the decision maker’s processes and their timelines so that you can set your own expectations, and, ultimately, understanding their definition of success. When you’re clear on what that means to them, you’ll be aligned to do what you need to do to be successful.
Some last thoughts, takeaways, before we wrap up!
If we look at not just the events of the last four or five months, but really the last two plus years, we continue to believe strongly that innovation coming from emerging companies is abundant, evident, and as global as ever. Regardless of the macro environment, Fortune 2000 companies are continuing to identify, engage, and leverage innovation from external players whom they can work with, be customers of, and, in some cases, develop deep and far reaching partnerships with or become strategic investors and share the upside they create or acquire. I believe these types of relationships and partnerships will continue to grow, mature, and evolve, but it’s clear that, regardless of how or where it comes from, innovation is as important today as it has ever been.
Neal Hansch is the CEO and Managing Partner of Silicon Foundry, an innovation advisory firm that builds bridges between leading global corporations and the emerging tech economy. Hansch leverages over 25 years of venture capital, product management, technology operations, corporate development, and trusted advisory experience to lead the firm, which helps its member organizations navigate new technologies and market shifts, discover and engage with key emerging leaders, and unlock high-impact opportunities.
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