Tom Salmon, CEO and co-founder of open innovation firm The Bakery, and web agency Traffic Digital, operates at the point where corporations, startups, digital and technology intersect. We talked to him about breaking new ground with his own and other businesses.
Already running Traffic Digital, what led you to launch The Bakery, bringing together startups and corporations?
We thought that the way corporations were approaching technology was a bit broken. They would often commission something, view it as ‘done’, and sometimes that would fail. But by connecting them with tech startups they can innovate faster, cheaper, more effectively, test more quickly, learn more and get better results.
We also felt that standard models for accelerating tech startups didn’t translate well to London. They were focused on getting businesses ‘investment ready’ but investment appetite for risk was misaligned. We wanted to help tech startups access the corporate market. It gets them customers, gives them revenue, helps them validate their products and become ‘investable’.
You’ve identified the need for corporations to innovate like entrepreneurs. Why do you think that exists?
There is enormous potential and power in corporations. But it’s difficult to unlock; there are cultural or structural issues. They’re set up to manage risk and they reach scale like that. New things look risky and a new market can seem small, not interesting or addressable.
Corporations have built legacy systems, workforces, manufacturing and partnerships. They don’t want to disrupt their business; they have barriers to entry. They’re also very focused on their day-to-day business of running effectively and delivering shareholder value.
There is interest and fear within business about technology, particularly artificial intelligence (AI). What’s your response to this?
AI or activity on the blockchain can reduce the need for large workforces through smart contracts. We don’t know how quickly it will revolutionise certain businesses or what the effects will be, so it’s really important that companies explore these new territories. We give them the ability to do that, by accessing technical talent.
Corporations have a good sense of what they should be doing but they need time to understand opportunities. Our process is about how to explore opportunities, and validate them. Our programmes can help because corporations start understanding what’s possible.
Working with the Bakery and startups, how can corporations get to new solutions for technology?
Corporations like to define the solution before they spend money. But startups build businesses by being open to change. We believe change is part of the process. We test quickly with real users. We start with the biggest, hardest goal and ask, what’s the value to the business? Then we rewind to the smallest first step.
We’ll run a programme for a client with several startups, working over several months, so the corporation can start validating and adapting quickly. They don’t have to commit money on Day 1. And they can spend time working with the startup, assess from a diligence point of view and build a relationship and trust.
The work you do is very collaborative. Do you have guidelines or a framework for business collaboration?
Collaboration is at the heart of what we do. It’s a stage-gated process and people are constantly making decisions. People buy people ultimately. Here, corporations are meeting startup founders. That’s powerful – not a salesperson but the business creator.
We also produce a ‘win-win’ term sheet laying out what success looks like for each party. Often it’s not purely commercial. A corporation can offer a startup market insight, knowledge, customers, capital, data sets, and systems.
Where the magic happens is when we align the incentives, and open up hidden opportunities. Startups often have great technology but don’t know how to commercialise. A corporation might have a need they hadn’t even thought of.
How do you select or what do you look for in startups that you work with?
We look for companies that are early stage, and have built a product. They’re around that seed investment area, probably through to series A, and are looking for their first big client. We have a huge network: relationships with startups, accelerators, and investors, bringing high quality, pre-validated companies.
Our research team constantly looks for and spends time with startups. We focus on their commercial model before putting them in front of a potential client. We’re constantly vetting them to understand their business – it’s an ongoing process.
What’s your advice for new entrepreneurs, particularly in the digital media space that VIDA supports?
Finding great mentors and support can be transformational. VIDA is powerful because the founders are bringing years of insider knowledge to that market. They understand where the money is, how big brands work, how to reach people, and put a commercial proposal to them. A startup could spend years learning how to do that.
My advice is to get connected to the right people for the type of business you are. Some startup founders have expertise, some don’t. And different accelerators have different flavours. Finding the right mentor with genuine experience is crucial.
How did you develop The Bakery as a new business alongside Traffic?
The Bakery was originally a side project. We grew the business from a part-time project to operating worldwide. It’s been five years to get to Day 1. There’s a quote from Amazon CEO Jeff Bezos who says, “It is always Day 1.” It’s like that for us: a constant process of learning, building and developing. We believe how we work will keep changing.
We’re a networked business, so having a presence worldwide makes sense. We’re a connector and partner, and complementary to how corporations work with others. This is a different way of working and it’s very effective and efficient for certain types of technology.
Where do you draw inspiration or information from, in terms of content?
There’s great content coming out of the startup world, like the podcast series Masters of Scale by LinkedIn founder Reid Hoffman, plus newsletters like Azeem Azhar’s Exponential View and Token Economy, about blockchain, from Stefano Bernardi.
For branded content, Redbull is an interesting one. They’re currently sponsoring Richard Browning who is trying to build a jetsuit! It’s interesting seeing the development. He’s a total fitness nut and has to be really strong. It’s a hybrid of his physical prowess and technology.