Polish Winners of CESA Contest About Innovation
During the Polish edition of Central European Startup Awards we learned the names of the most innovative Polish start-ups according to the start-up community and the Internet. We talk to some of the winners about what innovation actually is and how it influences the business model
On September 17th 2015, the Polish edition of Central European Startup Awards (CESA) took place in the Gdansk Entrepreneurship Incubator Starter. A total of eight awards were given to some of the most innovative representatives of the Polish start-up ecosystem. We reached out to three out of five start-ups that made the list. Blast Lab won the Best Cloud / Data Application category. FriendlyScore was named the Best FinTech Startup, while FiveApp was appreciated as Best Social Impact Startup. The circumstances provide a perfect opportunity to talk to them about the meaning of innovation in the world of new technologies, including the impact it has on their business.
It doesn't take that much to get a general idea why these three start-ups picked the curiosity of the voters.
Blast Lab is a hardware start-up and at the same time a lab that specializes in the Internet of Things, including sensors, beacons and machine to machine (M2M) communication in general. Its most remarkable product is called IndoorNavi. It's a beacon-based system that navigates users from one location to another inside a building. It consists of hardware, a web app and a mobile app. Possible use cases include large stores that might be willing to provide their shoppers with the shortest route to do their shopping based on the shopping list they or their friends/loved ones create in the app.
“It's a lot like Google Maps, but inside a building,” says Mateusz Kuszner, CEO and co-founder at Blast Lab who talks to web.gov.pl today.
FriendlyScore is a fin tech start-up that immediately attracts attention with its unique take on credit scoring. FriendlyScore analyzes data from social media (Facebook, Twitter, LinkedIn) to provide banks with extensive knowledge about the potential borrower. The goal is financial inclusion of those who don't have extensive relevant data for banks to act upon such as students (due to young age and little to no job experience), foreigners or people from underbanked regions. FriendlyScore performs only user-permissioned checks and provides individuals with a list of lenders involved in the program. We're talking to FriendlyScore's CEO and co-founder Maciej Doliński.
Five App is a mobile communication app that allows you to use various signs to exchange information. Conceived by 17-yearold Polish entrepreneur and another of our today's guests Mateusz Mach, Five App eventually evolved into what seems to be a perfect communication tool for deaf people. Thanks to a build-in sign maker, they can create and send signs they and their friends understand best.
What it means 'to be innovative'?
Many start-up entrepreneurs believe that innovation is an overused and misunderstood term in the start-up world. Five App's Mateusz Mach thinks that associating innovation with high tech milestones only is a mistake.
“My real-world experience leads me to argue that innovation is a process leading to a change of human habits in a way that improves upon previous conditions. In the tech world, there is a stereotype defining innovation as a technological breakthrough. I would like to officially disagree with this statement. Innovation can concern every sphere of life.”
Mach believes that Five App is innovative on a basis of providing an actual positive change in the lives of its users, allowing them to communicate with both each other and everyone else in a new efficient way.
“I’m able to say that Five App is changing how people perceive the deaf community. Actually, we’re trying to popularize the issues facing this community as we plan to create the world-first messenger for deaf people,” says Mach for web.gov.pl.
Blast Lab's Mateusz Kuszner is searching for innovation in their products, the manner in which they are used, as well as innovative distribution and business models.
“In tech start-up it comes as a unique product or a service. Innovative could be also a method of delivery or unique business model. One of those element have to be present to think about innovation. Innovation can be found in technology or its application.”
Maciej Doliński from FriendlyScore further stresses the importance of the link between innovation and doing a profitable business. According to Doliński, there is no real innovation when there is no way or ability to monetize it. Innovation must be monetized, because that's a natural consequence of a new solution becoming popular and getting into the habit.
“Innovation is embracing change or disrupting existing industries with the use of new technology in a way that can be implemented and monetized. So an innovation must fit with the current market and technology development.”
Innovation and business – friends or foes?
As the majority of media coverage start-ups receive is focused on their innovation, it's not surprising that at times start-ups compromise their business to really deliver on the promise and expectations.
“Innovation has a negative influence on the business model very often. A lot of start-ups do this. We were in a similar situation in the beginning – in the first few months since the founding. Instead of placing the prototype on the market and listening to the voice of early-adopters, we were searching for a product which will revolutionize the world, changing the idea every two-three months,” says Mateusz Kuszner.
As Blast Lab's navigation system provides an innovative solution, Blast Lab also searches for new ways to distribute it in the B2B channels. When it comes to designing a business model, innovation goes hand in hand with innovative start-ups. Kuszner mentions hardware as a service (a model in which hardware is installed at a customer's place who usually pays a periodical fee for using it, manufacturer manages the hardware and handles repairs) as a trend that influences their business model choices.
“It is hard to deliver an OEM (Original Equipment Manufacturer) product in our case. We deliver our product in two options: a complete system (hardware infrastructure, management web application and dedicated mobile application), a technology (hardware infrastructure, management web application and mobile SDK). For us the best model in both options is HaaS (Hardware as a service).”
Mateusz Mach believes that each innovative start-up should find a balance between the time it sacrifices to polish its solution and the immediate need to grow and maximize profits as it burns through money, which often come from VC investors.
“It is possible that the desire to use innovative solutions may lead to a situation when the company can’t maximize their profits. It’s connected with a huge number of variables but the first and most influential one is the necessity to provide the investments for the development of innovative solutions. Finding the „golden mean” is possible but very hard, especially at the initial stage. In our case, we keep in mind a sense of scale. Five App will not need to make moonshots to provide a return on investment, or make a difference in the lives of its userbase.”
According to Maciej Doliński, there is no conflict between innovation and business simply because there is no innovation without business.
“A situation like this would mean that there is no validated business model rather than an attempt to doing innovative business,” says FriendlyScore's CEO for web.gov.pl.
Investor's guide to innovation
While all of the thoughts above make it a bit clearer what innovation is, they don't provide a call to action for those who are most interested in cooperating with start-ups – investors as well as governmental institutions that try facilitate the growth of start-up ecosystems. How much time should they wait for a start-up to be done with research and development? Can they afford to wait? After all, many VC funds only exist a few years and they prefer quick profits.
“I believe in a philosophy that doesn’t involve quickly cashing out. In the majority of cases, development can be combined with a successful revenue stream. I don’t recommend focusing only on development solely in terms of product. The proper distribution of the company’s energy is necessary in order to develop not only the product but the whole team,” says Five App's Mateusz Mach.
Hardware start-ups, which we tackled more deeply in one of the previous articles, usually require even more time to market.
“Hardware is hard and takes a lot of time to build a complete product which you can sell. Unfortunately a lot of people (including investors) do not understand that. Of course time means money, what results in a greater need of funding for the start-up. If you would like to build an innovative hardware product, you need a lot more time and funding,” says Mateusz Kuchta from Blast Lab.
FriendlyScore's CEO thinks that the attitude of investors towards start-ups that take their time is changing, but not everywhere.
“The short term approach of investors is changing. That’s why so many accelerators are opening around the world. Most of them are backed by big corporatations, which allows the start-up to build a product and validate with future customers. That’s why we as FriendlyScore moved in summer of 2014 to London and joined the Startupbootcamp accelerator. After 4 months, we did more progress than during a year before acceleration period. Unfortunately. I don’t see this new approach in Poland. That’s why we moved our business to the UK.”
Innovation will probably remain the number one word associated with tech start-ups. But in order to turn innovation into an advantage, entrepreneurs should think of it as a means that help achieve business results rather than a goal itself. It's something that happens on its own when start-ups search for solutions to problems individuals and businesses have and come up with ideas that are new, unique, scalable and profitable.
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