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👋 Welcome to the 52nd edition of Deep Tech Catalyst, the channel by The Scenarionist where science meets venture!
The Deep Tech sales cycle is unlike any other—marked by long timelines, intricate decision-making processes, and the challenge of educating markets about groundbreaking technologies.
To succeed, founders need a clear strategy: targeting the right customers, aligning their solutions with tangible industry pain points, and leveraging strategic partnerships to shorten sales cycles and build trust.
We are thrilled to welcome Vik Li, Investment Director at Ericsson Ventures, to shed light on this topic and guide us through the intricacies of early-stage B2B sales.
Key Themes Covered:
🤝 How to Approach the Sales Cycle in Deep Tech
🎯 3 Steps to Identify and Prioritize the Right B2B Customers
🏷️ B2B Pricing Strategy Essentials
✅ 3 Key Factors to Close Your First B2B Deal
⏱️ 3 Tips to Shorten Your B2B Sales Cycle
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KEY INSIGHTS FROM THE EPISODE
🤝 How to Approach the Sales Cycle in Deep Tech
The sales cycle in Deep Tech is very different from traditional B2B sales, primarily due to the complexity and novelty of the technology. Here's a breakdown of the typical process.
Educate Your Potential Customers
The Deep Tech sales cycle often starts with education. Potential customers, including research teams, need to understand the technology's unique benefits. This initial interaction may happen at trade shows, conferences, or through proactive outreach by specific corporate arms focused on innovation. For example, a corporate VC might identify startups with solutions that could benefit their parent company and facilitate introductions.
Understanding Needs and Pain Points
After the initial engagement, startups are introduced to the business or development teams. This phase focuses on understanding the client’s specific pain points and needs. Given the unproven nature of Deep Tech solutions, this stage often involves conducting a proof of concept (PoC) or pilot project.
The timelines here can range from 1 month to over a year.
[In Sales] You don't talk about your product first, you talk about their problem, what kind of pain point you can solve for them, and what their needs are. [...] Understand what the customers' needs are before you present your solution.
From Proof of Concept to RFP
If the PoC proves successful, the next step is typically the Request for Proposal (RFP) process. This is a formal and often lengthy stage, involving sourcing and procurement teams.
Unexpected RFPs: Be cautious if an RFP is received unexpectedly or shortly after initial contact with a client. This might indicate the company is including new vendors to meet regulatory requirements or using them as leverage in negotiations with preferred suppliers. While it’s wise to evaluate whether pursuing the RFP aligns with your priorities, don’t dismiss it outright. There are instances where a new player wins the contract by offering a superior solution.
🎯 3 Steps to Identify and Prioritize the Right B2B Customers
Success in Deep Tech sales often comes down to prioritizing the right customers to engage with. Balancing effort, timelines, and potential ROI is key to navigating the lengthy and intricate sales process effectively.
1. Identify the Right Industry
Start by identifying industries where your deep tech solution delivers the most value to avoid wasting time on sectors with limited potential benefits.
Example: Quantum Computing
High Potential Industry: Finance. Quantum computing can transform areas like portfolio optimization, risk management (e.g., Monte Carlo simulations), and option pricing. These use cases provide significant value due to quantum computers’ ability to handle complex calculations and large datasets faster than classical computers.
Lower Potential Industry: Logistics. While quantum technology could assist with NP-hard problems like route optimization, current classical algorithms already address these challenges effectively, limiting the added value of quantum solutions.
2. Target the Right Companies
Once the industry is identified, focus on companies that are open to innovation and have a track record of adopting cutting-edge solutions. Look for:
R&D Investments: Companies with significant spending on research and development often report these details publicly.
Innovation Programs: Firms with structured innovation programs are more likely to engage with startups.
Corporate Venture Capital (CVC): Companies with a CVC arm are typically familiar with startups and willing to take risks on unproven technologies.
These indicators suggest a company is proactive about exploring new technologies and likely has processes to work with startups.
3. Engage the Right Teams and Stakeholders
Even within a suitable company, it’s vital to connect with the right team:
Avoid Scouting Teams Without Decision Power: Some centralized functions act as technology scouts, writing reports and conducting PoCs (Proofs of Concept) but lack the authority to adopt new technologies. While these teams provide awareness, they rarely lead to sales.
Find Teams with Need and Budget: Focus on teams directly impacted by the problem your solution solves and those with a mandate and budget to implement the technology.
Identify Champions and Stakeholders: Cultivate relationships with decision-makers who can advocate for your solution and ensure internal buy-in.
This targeted approach mirrors traditional B2B sales processes but requires extra attention to the unique complexities of Deep Tech and its adoption.
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🏷️ B2B Pricing Strategy Essentials
Pricing in Deep Tech requires a mix of research, value assessment, and customer-centric strategies.
Engage directly with relevant teams for pricing insights, use value-based models to align pricing with customer impact, and prioritize predictability to meet corporate budgeting needs.
Here are 3 strategies to navigate this path effectively.
1. Engage the Right Teams for Insights
The best source of information is often the customer’s internal teams. When engaging with potential customers, they may share expected price levels, which can serve as a reference point. Additionally, commercial intelligence reports and market spending data can provide useful indications about industry benchmarks.
2. Focus on Value-Based Pricing
In the Deep Tech space, pricing is typically not fixed and often depends on the value your solution delivers.
Quantify the Value: Estimate how much your solution saves or enhances for the customer, such as time, cost, or performance improvements.
Example: If a quantum computing solution accelerates risk management processes or reduces computation times, calculate the financial impact of those benefits and base your pricing on that value.
While cost-plus pricing (pricing based on production costs plus a margin) is a straightforward approach, value-based pricing aligns better with the transformative potential of deep tech solutions.
3. Offer Predictable Pricing
Big enterprises often have strict budget cycles and prefer predictable pricing over variable or consumption-based models. Unpredictable costs can create friction in the decision-making process.
To address this:
Offer fixed pricing or clear consumption caps to give customers confidence in budgeting.
Alternatively, provide tiered pricing models to balance flexibility and predictability.
✅ 3 Key Factors to Close Your First B2B Deal
Once you've identified the right industry, prioritized the ideal corporate partner, and engaged with the right team, closing the first deal becomes the critical next step.
This is where a VC can be invaluable, especially if they are well-connected with corporates. In the absence of such facilitation, persistence and strategic networking are crucial. Engage multiple contacts within the company to ensure you connect with those who have the authority to approve budgets and close deals.
Here are 3 important elements to consider before approaching your first B2B deal.
1. Engage the Right Stakeholders Early
Closing deals often hinges on involving the right people throughout the process. Understanding a corporation's structure is essential for identifying decision-makers who can approve and allocate budgets for your solution.
In large corporations, decisions typically involve multiple stakeholders, such as technical teams, procurement departments, and even C-level executives.
Smart questions to navigate this maze include:
Who oversees the budget for this type of solution?
Which team benefits most directly from solving the problem your product addresses?
If available, corporate VCs can introduce you to the appropriate teams and streamline engagement. Without external support, your team will need to speak with various departments and individuals to map the organization.
Be strategic:
Start Early: Build relationships with key stakeholders as soon as possible to align their interests and secure buy-in.
Tailor Your Approach: Understand the dynamics of the organization and customize your messaging to match each decision-maker's priorities.
2. Align Your Value Proposition with Strategic and Personal Goals
To win the deal, your solution must resonate with both the company's broader objectives and individual stakeholder ambitions. Ensure your product supports the company’s goals, such as efficiency improvements or other key priorities.
Personal Goals: Recognize that stakeholders often tie their career progress to the success of key projects. Show how your solution can help them succeed, turning them into champions for your product.
3. Address Objections Proactively
In complex sales involving multiple stakeholders, objections are inevitable.
Identify Concerns Early: Stakeholders may question the maturity of your technology or hesitate to work with a startup.
Address Objections with Evidence: Address doubts with clear evidence, such as successful proofs of concept or relevant use cases. Engage skeptics directly to build trust and resolve concerns.
⏱️ 3 Tips to Shorten Your B2B Sales Cycle
For startups with long sales cycles, it’s essential to focus on understanding customer problems, involve founders in driving early sales, and consider leveraging channel partners to shorten sales timelines.
Here are 3 tips to consider for addressing this.
1. Adopt a Problem-Focused Sales Approach
Avoid focusing solely on the product when pitching to potential customers. Instead, prioritize understanding and addressing their pain points—AKA, start with the problem.
Before presenting your solution, deeply understand the customer's challenges and needs. Frame your pitch around how your product will solve those issues.
Problem>Solution: A common mistake is dedicating most of the presentation to the product itself without showing its relevance to the customer's problems. Ensure your pitch centers on the value your solution delivers.
2. Founders Should Lead Sales Efforts
At the early stage of a company, the founders must take an active role in sales.
Here are 2 reasons why:
Firsthand Learning: By engaging directly with customers, founders can better understand pain points and refine the product roadmap.
Founder Mode vs. Manager Mode: Founders should overcome any discomfort with selling, especially those from academic or technical backgrounds. While founders may eventually delegate, early-stage sales are best driven by those who have a deep understanding of the product vision.
3. Leverage Channel Partners
Selling directly to large corporations can be time-consuming and resource-intensive, but partnering with established sales channels can ease the process. Here’s how they can help:
Accelerate Sales Cycles: Channel partners often have existing relationships and contracts with your target customers, bypassing lengthy procurement processes.
Reduce Financial Strain: Partners can shield startups from challenging terms, such as long payment cycles (e.g., 90-day terms), which can pose significant financial risks for a startup.
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