Prof. dr. dr. Mitja Ruzzier from the Faculty of Management in Koper, Jose Antonio Morales, entrepreneur and promoter of start-up companies, and Jakob Gajšek, director of the Ljubljana University Incubator and co-founder of ABC Accelerator, the crème de la crème of the Slovenian startup scene, discussed how and why start-ups fail in Slovenia.
As elsewhere in the world, start-ups fail in Slovenia. The question remains what happens after their failure. In Slovenia, neither the ministry nor the other stakeholders have the funds to deal with them, and their failed hopes, ideas and invested funds.
Unfortunately, new entrepreneurs in Slovenia are no exception to the (un)willingness to learn from the experience of others. However, it is necessary to present a negative experience from time to time, as this may prevent another poorly executed business story.
When asked “Why do startups fail at us?” Mitja Ruzzier replies that it is mainly due to problems with the team that is designing and running the new company. This is followed by a vague understanding of customer needs and the problem that the product is supposed to be solving, wrong estimation of the market size (problem-solution and product-market-fit). Many startups do not take into account indirect competition that meets the same customer needs, and too often we come across nice-to-have solutions. Gajšek adds that most of them fail because they find that there is no market, sometimes they fight or give up because the work is difficult. In reality, they (at least those in the beginning) rarely run out of money but rather motivation, he adds.
From these answers it is clear that the reasons for the failures of Slovenian start-ups are similar, if not the same as in the rest of the world, where the most common reasons for the start-up companies fail are: no need in the market, lack of money, wrong team, problems with sales and the fact that they were overtaken by competition.
Both Ruzzier and Gajšek believe that the statistics of the failures of Slovenian start-ups are similar to those abroad, although they do not have actual data. Gajšek adds that most probably they do not survive the first year or a year and a half. The opposite is also true – surviving companies, in principle, start to cover costs within 3-5 years, which is comparable to the rest of the world.
When asked whether companies involved in accelerators are more successful, both Ruzzier and Gajšek unanimously respond positively, with Gajšek pointing out two key reasons: an accelerator is a great way to find further investment resources or to acquire business partners; It gives startups the connections, as well as credibility. It also helps that accelerators make the pre-selection of startups they accept, and those with little potential are rejected. Morales also agrees, saying that new businesses have two basic needs to be able to increase their chances of success: a successful support system, especially a community of like-minded entrepreneurs to whom they belong, expanding experience and sharing a similar destiny, training for mastering the basics of business and entrepreneurship, as well as understanding the purpose and social responsibility, personal growth, social impact, etc.
Both Ruzzier and Gajšek see the establishment of a d.o.o. as the most appropriate way to start the company, although it also has certain shortcomings related to the specifics of start-up entrepreneurship. Gajšek also thinks that a good solution is d.d., but it is too expensive.
Different funding sources certainly affect the performance of a startup business. However, Ruzzier points out that it is difficult to talk about rules because sources and forms of financing are very different from one another and are suitable for companies in different stages of development. So e.g. VCs usually bring other things, such as knowledge, connections. With banks (debt financing), no one interferes with management, and crowdfunding gives you the opportunity for early market validation. Every type has its advantages and disadvantages. Gajšek agrees, saying that money influences success only in the sense that it extends the life of a startup and so that it can achieve something. More than money, other help from investors – i.e. connections, knowledge, credibility – are key to success. There is no huge difference between what a VC or an angel (or a group of them) adds, it depends mainly on that person’s connections. Therefore, crowdfunding can be (but not necessarily) a worse option because startups do not have someone to help, but a plethora of people they almost have no contact with.
Although digital solutions have been common lately, neither Gajšek nor Ruzzier think that the survival of the company is more likely if the business is based on an online solution. Ruzzier says that with web solutions, it is possible to iterate faster and move from idea to prototype and MVP, which is also reflected in the level of ideas presented and consequently failures.
All three are of the opinion that measures to promote the establishment and successful development of start-ups from the state and the EU are welcome, but they need to be checked to see if they are working and implemented consistently. In particular, Morales emphasizes the advantage of the free movement of things and people, which, in addition to competitive advantage, can also be a source of inspiration, enriching ideas and enhancing the importance of European citizenship.
You can read the full interview here: https://novipodjetnik.si/startup-zakaj-propadejo-zagonska-podjetja/?fbclid=IwAR29hWYt6p2TM2ZXrp0FSZUN8wiMyjeLuiaxeXM67G5yJBhjdUwfQ22bf_Y