The technology start-up community is a critical element of the digital economy. These new players are constantly looking to push the boundaries using emerging and disruptive technologies. They are also important ‘idea generators’ that constantly challenge the status quo for traditional incumbents (or the digital dinosaurs as they are often called). Over the past decade, most of the start-up activity has been driven out of the US (and in Silicon Valley in particular). However, more recently, European countries have set up similar ‘start-up hubs’ in key cities such as London, Berlin and Paris. One such example is the Engine Shed in Bristol. We recently visited the Engine Shed, hosted by a start-up incubator by name of SETsquared to get a sense of what these startups in Bristol and broader South Western parts of the UK were focusing on. SETsquared was founded in 2003 and is borne out of a partnership of five universities: Bath, Bristol, Exeter, Southampton and Surrey. It focuses on commercialization of research, student and business incubation. What distinguishes it from many start-up incubators is that it is a not for profit, in other words, it doesn’t have commercial interests in any of the companies it incubates.
One of the interesting startups that IDC spoke as part of the meetings set up by SETsquared was a company called YellowDog. YellowDog was set up in Bristol in 2015 by Gareth Williams (who is currently the Managing Director of the company). As of the beginning of 2017, it has more than 500 customers and has raised approximately US$ 1.48 million in funding. It is at an exciting juncture on its growth curve, with plans to run a Series A funding round this year to help quadruple its existing business by 2020.
Its initial business model was based on providing cloud rendering services to animation film studios and artists via a crowdsourced model (i.e. the YellowDog application will leverage your PC’s spare processing power, and leverage that additional capacity to provide rendering services for animation work at these studios). This model has served it well for the last 2 years. However, it is a fairly niche market. Gareth and his team have got their sights focused on the next phase is focusing its attention using this type of model in the enterprise. YellowDog believes that despite all of the cloud offerings available (whether those be general purpose IaaS or dedicated application compute (i.e. private cloud)) enterprises still do not fully take utilize existing capacity in their data centers. It plans to use an on-premise version of its offering to help enterprises first fully utilize their existing compute stock before helping them burst to the right public cloud for their needs, in the most cost efficient way.
Whilst there is a clear opportunity for this type of cloud service ‘brokering’, it is very much dependent on the maturity of the company (and where they are on the journey of cloud adoption). It is moving into ‘multi-cloud’ which involves leveraging and managing multiple cloud services – which is at a very nascent stage of development within the broader cloud market. YellowDog’s ability to execute on this new strategy will depend largely on the extent (and the pace) at which the adoption of these multi-cloud services moves into mainstream.
Some of these emerging start-ups like YellowDog might become partners, some might become competitors and others are potential customers. In order to work these important stakeholders on a proactive basis, we recommend the following:
- Evaluate start-ups in Europe as part of your broader Merger & Acquisition (M&A) strategy. Take an ecosystem-first approach to go-to-market strategies.
- Create links to start-up incubators so that your organization can raise its profile and brand as a ‘start-up friendly’ player – this could also involve providing these incubators (and associated start-ups) with booth space at industry events or sitting on panels to highlight their offerings.
- Provide access to start-ups to your innovation labs (and your customer innovation labs).
The start-up community is a critical element of the digital economy, and is a key driver of digital innovation adoption and disruption to the technology industry status quo. As part of this technology start-up hubs are gaining momentum across Europe leveraging local support and talent. We believe that the clustering of technology start-ups can lead to co-innovation and synergies that can lead to truly discontinuous and market disruptive products, services and business models.