Starting start-ups

Last week I had an interesting conversation with the Head of IT from one of London's arts theatres. They were contemplating the replacement of their ticketing systems, and in our chat it seemed that cloud platforms might offer an interesting alternative approach for them.

My first question was why ticketing wasn't just outsourced entirely to the likes of Ticketmaster? The answer was simple – cost – and reading between the lines I guess that those services are more geared for commercial events (films remade as musicals, Lloyd Webber extravaganzas, and pop gigs) than the low, no or negative margin world of 'proper' theatre.

The system that they had in place was originally developed for the Met in New York, and presumably came out of the old tradition of bespoke development of software that works that is then spun out as a product. The challenge for the London group is that sadly the failure rates for bespoke developments are disturbingly high still, as requirements gathering turns into scope creep turns into delay and ultimately disappointment. Don't get me wrong, this isn't a technology issue – it is a socio-technology issue that is of the people and the way in which they manage and are managed. The added complication for the London initiative is that a number of arts institutions are coming together on this, and the smell of a committee of committees hangs heavy in the air.

So what is the alternative? Well, suppose that rather than setting up a project to deliver a system that meets the requirements of the various stakeholders, the institutions set up a start-up to deliver a product that would appeal to customers?

Yeah, it is a matter of semantics. But an important one. If the institutions were able to provide an amount of seed funding, with a view to selling the eventual service to more organisations in the future, and the basis for decisions throughout the project was on the basis of "will this make the product more successful with customers?" not "how do we balance these conflicting requirements?", there seems to me to be a greater chance of successful delivery (and some chance of greater future reward too).

Cloud platforms offer the ability for this kind of flexible, innovative approach because they take out a whole tranche of the traditional investment required in hardware and core software that would be required to set up such a project in earlier times. Taking entirely new approaches to development decision making gives an exciting new set of opportunities to deliver technology that ultimately provides better support to businesses.

3 thoughts on “Starting start-ups

  1. I’ve been thinking about this strategy a lot lately but I’m stuck on Intellectual Property. How do the stakeholders structure the startup or the agreement with the startup such that incentives are aligned?

    The stakeholders want to gurantee continuity of service availability.

    The startup wants to make money and have enough revenue to be able to invest in maintenance, new features and business development.

    If the stakeholders take a stake in the startup or an escrow agreement to the code and rights then their incentive to keep funding the startup is minimal because they will inherit an asset when the company fails. They are motivated to fund it until they have the features they want and then cease funding and take the IP.

    If the stakeholders have no interest in the company then the will find it hard to influence the direction of the software and they cannot be sure that the company won’t fail or exit in a way which denies them continued use of the product.

    What are your thoughts?

    1. Been a while since the original article, Andy. Thoughts now are…

      Stakeholders should be shareholders. The seed capital should hold (maybe non-majority) influence over the startup. Maybe I’m being a little too logical, but if the startup fails, the product is a turkey and therefore the IP value in the end is pretty low. There is of course a problem that the stakeholders micro-manage the startup, but that would defeat the whole point (doesn’t make it an impossibility, mind). The whole point is that the idea *might* fail, and if so it’s better that happens a bit at arm’s length rather than embedded within an organisation where it can be very difficult to say “stop” to a doomed initiative…

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