Do we need more physical startups instead of web startups? How innovation is lacking in physical businesses

Henry Mitchell makes the case for entrepeneurs to start turning their attention to more physical, tangible business and apply their innovative ideas to 'improving what the retail business has to offer consumers'.

Physical Businesses Corner Shop

If you could invest in anything right now, what would it be?  Assume that money is no object, what trends do you see, what bubbles do you think are growing and what do you think the future is?  Not many of us really ask ourselves these questions, undoubtedly due to a lack of funds but hypothetically I think it’s good to think about it.  Maybe you think ‘apps’ are the way to go – at least Tech City seems to think so.  Or maybe you think the future lies in social networks, smartphones and voice activated technology.  Or maybe you think the future lies in more physical, tangible, material improvements to our daily lives.  The third one is the one I want to explore.  In the 1980s the almost unanimous prediction of the future was all about hover boards, flying cars, supersonic air travel, space exploration etc. but there was little focus on the change that would take place in the means by which and the way in which we communicate.

Physically Business Corner Shop

That is what I think has taken everybody by surprise.  In real terms, aside from communication, we really haven’t moved on very far.  We’ve lost supersonic air travel for a start (a huge leap backwards) although we can account for communication improvements being responsible for reducing this need and there has been little evolution in construction, green technology, and even retail.  Retail would not be, if you asked most people, a hot industry to get involved in.  It’s probably viewed by many as being a difficult sector to make money in, and they would most likely be right, but what’s to say that it is anymore difficult than social media, app development, or product design?  I would argue that it is fact easier, largely because one of the most difficult tasks a new business faces – marketing and getting new customers, is naturally already starting to do its job as soon as you open.  Granted, you’d have to do some promotion of your own to guarantee success, but at least a shop front allows you some free advertising that you don’t generally get with any other new business.  This is countered by the fact though that the setup costs are significantly higher than launching something online in beta, so there are good arguments for both sides.

Physical Businesses Corner Shop

The point I am making is that perhaps Entrepreneurs should start turning their attention to more physical, tangible business and apply their innovative ideas to improving what the retail business has to offer consumers.  After all, many of Britain’s most successful self made Entrepreneurs have made their fortune in retail, and in fact still do.  And, despite the massive growth in online sales and online consumerism, the high street is still big business and the stores offering real value have survived the recession with relative ease.  What I’m really talking about here is all the things we still buy, still do and always will buy and do, regardless of anything that happens with technology and the internet.  Search for UK Venture Capital funds and you’ll find that 75-90% of them invest primarily in ‘technology’ companies and ‘life sciences’.  Both of these industries offer fantastic opportunities for growth, but I find it worrying that such a narrow viewpoint is being taken by the majority of VC investors.

Were you a multimillionaire right now handing over a portion of your fortune to be managed by a VC fund, would you be happy knowing that your money was being ploughed into these two ‘high growth potential’ sectors?  This could become a particular problem for the UK, as we are widely known for “not really making anything anymore”.  Tech City and the tech entrepreneurial scene in general are doing great here, and that’s a huge leap forwards.  We are however still having trouble developing more tangible businesses, and I meet very, very few entrepreneurs and startups that are not doing something based in the virtual world.  It seems the up and coming entrepreneurs are not seeing opportunities in things like manufacturing, green technology, and as I mentioned earlier – retail.  These sectors should not be ignored!  Where there is less competition, there is more opportunity for growth and expansion.  In the online world for every one of you, there are hundreds and sometimes thousands of people doing something similar.  Your chances of huge success are diminished for this reason alone.  But, if you innovate in an industry with good growth potential, and less people going for that growth then naturally your chances of success increase – it’s very simple.  With this in mind, we must encourage new ventures in all sectors and not just technology.  Over the last couple of years, I have spent a lot of time talking to people involved in internet based ventures.  Many of these were funded, some were not, but I can’t think of one that stood out.  I’m not alone in my thinking, many people are now starting to question whether the Tech City related boom is now becoming a bubble – although I don’t expect this opinion to be taken seriously until it happens!  It is a trend after all.  All that said, if we can achieve this cultural shift across the entire spectrum, then we will be well on the road to making things once more.  It’s what built Britain in the last revolution and it is surely what will do it again.

Henry Mitchell is a social Entrepreneur and founder of The 1 Month Project, a collaboration community created for inciting discussion on social, entrepreneurial and economic issues as well as instigating a series of “1 Month” projects, each designed to impact and change the world, if even in a small way.  Henry’s mission is to connect people together in ways that haven’t been done before, focusing on social interaction as the key factor in making things happen.  He is currently working on some exciting businesses that aim to address the disconnection in English society.  You can contact him through www.the1monthproject.wordpress.com.  He is always open to meeting new people, especially if it involves good conversation, so please do get in touch.

Do you think we need more physical startups? Why do you think we’re seeing less innovation in physical business – namely the retail sector? Why are less entrepreneurs looking to physical business? If you could invest in anything right now, what would it be?  Assume that money is no object, what trends do you see, what bubbles do you think are growing and what do you think the future is?