Start-ups rarely fail because of lack of financing, inappropriate location, ineffective mentoring training programs and many others so often mentioned on the papers and articles. In all my years of experience I can assure you I have never contemplated a single star-up failing due to any of the above mentioned reasons, but because it lack of ability on how to capture the created value.

Most entrepreneurs fail on their ventures because since the beginning of the journey, these entrepreneurs fail to understand the meaning and the implications of the two most important elements on any new business venture. These are value creation and value capture.

Entrepreneurs approach creating products and services from many different directions. Some hunt for any customer´s real problem and dedicate themselves to solving this problem. On the other hand, others follow the technological path (as many entrepreneurs do, due to their educational and training backgrounds) and endeavour to deliver solutions that, most time, are just now feasible. While others like to study the competition and deliver better solutions. All these perspectives are fine. However, Should they be considering something else while proceeding with any of these perspectives? Have any of them considered the “capture of the value created” even before thinking about the creation of the value itself (a solution to a problem)? Please entrepreneurs. Do freeze this sentence on your minds: “There is no point on creating any value unless you have considered the capture of it; this is, how to do capture it and much of it”.

When it comes to help any entrepreneur I always start by asking for their understanding on the differences between value creation and value capture., to follow then with how they will approach both concepts and how they will balance the efforts upon both concepts. It is still shocking to me how after so many months in pre-incubators, incubators, and businesses plans written by expert consultants, and hours of mentoring, many entrepreneurs fail to answer the most relevant questions any mentor should have addressed to them since week 1.

I am sick and tired of listening to certain number of managers and mentors in charge of many incubators, accelerators and business and innovation centres how entrepreneurs must create value, and continue to fail delivering results along their mentoring programs. I remember the last time I meet a great project (a golden nugget), also supported by a great entrepreneur himself who after months of official local support yet failed to answers to these critical questions. I could not help myself and unleashed a storm of epic proportions upon the mentoring agent and the local institution itself. Interesting things happened after, but at least I saved the savings the entrepreneur had initially committed to the about to fail venture.

Fortunately, things already changed years ago in the states and in certain number of northern European countries, while many others are still following the value creation rhetoric as to assist their entrepreneurs.

Another issue is now how to capture a meaningful portion of the created value sufficient enough as to sustain the competitive status of the venture; the work of mastering the art of designing the supply chain; the ultimate temporary advantage. But this will be the theme of another article.
 

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