Innovation is super high-risk if you want to have a big impact.

1. Majority World Report 2013
Risks & Rewards
@cape
Dublin Web Summit, 2013

2. Some home truths about business of innovation

3. Professor
Edmund
Phelps
Less than 10% of business ideas even get started
Nobel
Prize in
Economics
2006
10k business ideas
1k firms started
100 VC funded
20 IPO
2
market
leaders

4. 55% of US venture capital investments are written
off
50
45
40
35
30
25
20
15
10
5
0
x<0.5
0.5<=x<1
x=1
1<x<2
% Cost
% Value
2<=x<5
x>=5

5. 62% of EU investments are written off
60
50
40
30
20
10
0
x<0.5
0.5<=x<1
x=1
1<x<2
% Cost
% Value
2<=x<5
x>=5

6. But the capital which survives, backs businesses
accounting for 21% of US GDP…..
1978
1981
1987
1995
1995
1997
1999
1999
2005
serving >1bn customers
creating 440k new jobs
with $545bn in new annual revenue
and $1.4tn in new market value
Source: HIS Global Insight

7. And in Europe we are starting to build waves of similar dimensions

8. So are venture capitalists just bad at assessing risk
or do they really understand innovation economics?

9. Aren’t accelerators just applying logic of venture
economics even more aggressively….?

10. And marketplaces adding further scale to open up risk adjusted
and scaleable funding to new sectors…..
Creative & Consumer Electronics
Microfinance
Startups
SMEs

11. We’ve had almost 60 years of evidence on how innovation economics
can drive explosive social and economic value creation…..
Hardware
Crowd
Software
Internet
Semis
Networking
Mobile
Cloud

12. But can venture’s real legacy be a broader understanding
and application of innovation economics?

13. Extreme risk of 62% write-offs is definitely
not for everyone, including many
entrepreneurs and venture investors…..
.

14. .
In fact a 2% loss ratio for banks lending
to SMEs is already pushing the boundaries

15. But there is so much cash out there….
$85tn global AUM
($12k per human)
$266bn FTSE100
($5k per UK citizen)

16. Can’t we be more adventurous on how we
allocate and manage it?

17. We know 7% of small companies create
>50% of new jobs
.

18. We know innovation creates priceless
economic and political capital
.

19. So given the evidence, shouldn’t we be
prepared to risk more on radical innovation?
.

20. Even in the US we are still falling short

21. Which is a shame, as radical risks create biggest rewards….

22. There is a huge area between 2% and 62% loss, surely we can
loosen our view of risk a little?
2%
Corporate
Finance
.
62%
Venture
Capital

23. Look at the facts again
60
50
40
30
20
10
0
x<0.5
0.5<=x<1
x=1
1<x<2
% Cost
% Value
2<=x<5
x>=5

24. Power laws mean you have spectacular losses or wins
60
50
40
30
£200bn
mkt cap
£10bn
IT write off
20
10
0
x<0.5
0.5<=x<1
x=1
1<x<2
% Cost
% Value
2<=x<5
x>=5

25. If you feel comfortable managing risk, you might
as well shoot for the moon

26. And in Europe we have a generation with nothing to lose….

27. But how can we expect people to embrace risk when large
corporates, governments and educators won’t?
2%
Corporate
.
62%
Venture

28. We have grown up in cultures with relative excellence
in health, education, security and political stability

29. But what skills have we developed to navigate this
new chaotic and risky environment?

30. Almost none

31. Europe is ahead of US and Japan despite itself

33. 1.2bn can like

34. > 1bn can search

35. >500m can pay

36. >750m can Tweet, Skype, Whatsapp or
Snapchat

37. But growth is somewhere else

38. And it’s a big world out there

39. So how we can get more value from $4tn we spend annually on
educating and preparing people for their future
60
???
50
40
30
$570 per
person
20
10
0
x<0.5
0.5<=x<1
x=1
1<x<2
% Cost
% Value
2<=x<5
x>=5

41. So how can you help
yourself?

42. Learn to work on the network

43. Get out there and explore

44. No short cut to being a grandmaster
“achievement is talent plus preparation.”
- Malcolm Gladwell

45. Learn by doing

46. Use your time – do tasks

47. Use your expertise in almost any field you can
imagine – curate, contribute, consult, teach

48. Use your talent – write, make music, take
pictures, make movies, make stuff

49. Invest and share your major assets –
savings, car, house

50. If you have something to offer there are now 3bn people connected
to you – already 10x world’s most efficient market EVER

51. Some advice for your trip

52. You have to learn take risks
Time
Emotions
Money

53. Understand
Markets
Watch for
Demand Signals
Study People

54. You can never de-risk people element, so look
for…
Self-awareness & honesty
Intrinsic Motivation & social capital
Determination & humility
Creativity & ability to inspire
Emotional intelligence
….. Are they lucky?

55. Take your losses as early and cheaply as you can and move on
60
50
40
30
20
10
0
x<0.5
0.5<=x<1
x=1
1<x<2
% Cost
% Value
2<=x<5
x>=5

56. Spread your risks
Impossible to know where success will come from
Just try stuff out
Be open, not closed
Always reinvest some of your winnings
Embrace the network – its your greatest untapped resource and now it can talk back

57. But if you find the wave and you know what you’re doing, you
can climb the power curve, and win – spectacularly and globally

58. So aim too high.
The prize is huge and we all have an
amazing start just by being here

59. @cape
♯risk62
Embrace
your 62%