Running out of runway...

?“Running out of runway” is one of those expressions used in the world of start-ups. The concept is that you have this brilliant idea, and for it to fly, you need a decent runway of cash: it’s a heavy beast, so a long runway is needed, right?

The idea will fly eventually… it just needs that bit more runway to be built, while your plane is both trying to take off and is in the process of being designed! ? And, if the runway runs out, instead of smoothly taking off, the start-up splutters to a standstill, or worse, crashes into the trees at the end.

The metaphor should also cause pause for thought. Are the passengers, customers, or indeed investors sold on an idea that’s only running on hot air and hype??? And there’s the rub: a strong idea generally needs both the design and development spend plus the marketing and advertising spend to be sufficient in order to get airborne.?? The promotional spend can give the idea of a solid design, and enable the suggestible to be sucked in: but can it ultimately fly?

Hanger A or Hanger B?

To answer the question, the brutal approach is to put start-ups into one of two hangers.

Hanger A, contains the prototypes the design is good, the idea is inspired, and is likely to fly. And the other, hanger B, is full of the fool’s errands, where the idea is superficially compelling, but once the serious implementation is underway, the inventors or engineers or designers realise that there were some false premises, which render it forever grounded.?

But how do you know if an idea has lift? A key question to guide this is: Can it achieve profitability?

Furthermore, if a start-up or early stage company, is profitable, or indeed has been profitable for three-plus years, it’s a key credibility hurdle to have passed. But also, if there are clear benefits justifying engaging with a start-up, with little or no downside risk, even if the company is not profitable as yet: provided that company has a compelling proposition it will still make sense to engage.? Any company wanting to achieve competitive advantage needs to exploit the good ideas from the ground-breaking start-ups, and all for the better if it is before the competition get wind.

If the spend by the start-up is all on marketing and sales, and not so much on product development and design, or indeed MVP is not established, the idea is not likely to get airborne, so better to keep to your seat in the waiting room rather than getting on board.

A few companies launching a new idea or concept can get to flight just via boot strapping, achieving that critical lift to get airborne. The ideal is where the idea gets momentum, and the concept is so obviously sound and needed: then everyone gets on board, with little encouragement. Others will need that further funding, for both development and marketing spend to get airborne – which also can result in that runway being built out in front of them while mechanics are still working on finessing the design, on a craft that is already taxiing along!?

To take an example: WeWork was always about the hype; the governance and financials were less than rigorous, but there was little risk for companies joining WeWork on the journey, as the proposition, given additional appeal by vast waves of funding, was strong. Investors though should have been more wary.

Deep tech, biopharma, medicine development, and science based start-ups typically need that significant funding to even get to MVP. ?The product design spend, the manufacturing process design spend, commercial and medical trials, legislative approval spend, and the marketing spend required can be vast in order to become a market player.? That pitch deck needs to be compelling!

On the other hand, with respect to the broader tech landscapes, there are many pretty lean start-ups: CIOs, CISOs, and procurement teams need to be on the lookout for the great ideas - the valuable new companies - and how to find, sort and assess them before onboarding into the supplier ecosystem.

Large corporations are starting to manage internal ecosystems of start-ups, often using platforms such as Bloomflow , a useful “Hanger A”, to do so: that way internally developing a knowledge framework of companies many of which will ultimately bring in critical skills, technologies and competitive advantage.?

One stage earlier in the sourcing process, the start-up Hifo enables buyers, at the beginning of the sourcing journey to discover companies listed under compelling, relevant offerings: letting them be more easily found.? On Hifo buyers and procurement teams can find Bloomflow and other innovative procurement platforms & toolsets listed: for the initial sourcing, the source to pay, the contract lifecycle management and more. Critical metrics, such as profitability and growth, can be included - and while even the best ideas take a year or two before they are profitable: companies that are showing both profitability and growth have a strong likelihood of being a sound business choice.?

Hifo by comparison does not, like Bloomflow, have a specific start-up focus: any companies can self list on Hifo provided they have a product or service that has passed MVP stage, and deserves to be found, up to and including of course the established players.

A runway for landing?

When entrepreneurs, with perhaps a starry evangelical look in their eyes, talk about the runway needed for their start-up – it’s not clear if the metaphor is in fact for take-off, or for landing, when their start-up will have finally “arrived”.

It’s worth briefly considering the runway metaphor in the context of the landing.? You could be in flight, all going swimmingly, exhilarating views, panoramic visions, and then, when arriving at the destination, the runway is not quite long enough, and you end up again crashing into the trees...? the start-up has failed to arrive!? It might be that the limitations of the runway of cash were not quite enough to get that great idea known enough in the marketplace – and perhaps other features, such as poor operational decisions or poor navigation, contributed to the failure that could have been a success.

Splash landing?

And this takes us to the photo shown: showing the product of the ambition of the eccentric American billionaire and aeronautical engineer Howard Hughes: to make the largest plane that had ever flown.? Driven by the need to move troops and material across the Atlantic Ocean when large numbers of Allied ships were being sunk by German U boats, the "Spruce Goose" was flight tested in 1942. Designed as a seaplane - to allow mid-Atlantic refuelling - it needed no runway!

With a government budget of $18m, a further $7m of Hughes own money, and a capacity to carry 750 troops… it still seemed too ambitious a project: on the flight test day itself, the press and other onlookers sat by, thinking the enormous beast would flounder in the shallows.

Except it flew!? The Spruce Goose had just enough lift to get airborne but only by a few meters above the water… nevertheless it had a number of design issues which were ultimately unsolvable and the plane never flew again.? The Spruce Goose though was far from a complete design failure: for example, in order to control the vast alerions, the design necessitated the pioneering use of hydraulic controls, replacing wire controls: the first time hydraulics were used in an aircraft.

Where the runway metaphor does not apply.

The problem with the runway metaphor, is it infers that early adopters need to be “onboard”, putting their company at risk, before getting involved.? The reality is that with many start-ups, there is often value in engaging early, provided the offering does deliver value above that of the other players in the market.? A great start-up succeeds both due to the inspiration, strong implementation, but also due to those first clients, the early adopters, who understand the value provided, supporting the innovation, and gaining the competitive advantage ahead of the competition.? The early adoption can be as part of providing a broader “incubation” environment or can be simply in that first customer cohort.? Some well-conceived start-ups might not ultimately succeed, such as WeWork, but provided this represents little or no negative risk to the early adopter, the return will outweigh the risk.

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