Welcome to the 32nd episode of Deep Tech Catalyst, the channel by
where science meets venture!Today I'm thrilled to host Sunil Varghese, Head of Sustainability - Innovation & Ventures at Plug and Play Tech Center!
In this episode, we explored strategies for Deep Tech startups in the advanced materials sector, focusing on building successful corporate synergies.
We discussed key strategies and questions crucial for founders to uncover market potential and validate target customer needs.
Here's a summary of the episode:
⚛️ Advanced Materials & Sustainability Basics
🏢 Framing the Corporate Perspective
🎯 Market Validation Basics in Advanced Materials
🤝 Key Questions to Ask Your Potential Customers: An Example in the Textile Industry
🎧 Prefer to Listen?
KEY INSIGHTS FROM THE EPISODE
⚛️ Advanced Materials & Sustainability
When examining Deep Tech, especially from a sustainability angle, we often focus on new or advanced materials that can revolutionize conventional methodologies and engineering.
For instance, these materials may offer enhanced performance and efficiency, and provide environmental benefits compared to traditional options.
This includes lightweight composites for space technology that emit lower carbon, bio-compostable plastics, and materials for recycling footwear—encompassing a broad spectrum aimed at boosting performance and efficiency.
Scalability is a Key Focus for Investors
When assessing the potential of a venture in the advanced materials sector, begin with 2 fundamental questions:
Can this technology deliver value to customers?
Can it be scaled?
It's crucial to evaluate not only the technological innovation on paper but also its practicality as a business.
Scalability means exploring whether the technology can be validated, integrated into existing supply chains, and replicated extensively.
In other words, it involves assessing whether there are unit economics favorable enough to achieve economies of scale. This would allow for cost reduction while maintaining the efficiencies and performance needed for widespread application.
🏢 Framing the Corporate Perspective
For Deep Tech builders, transforming inventions into an innovative product that fits into the value chain of a potential corporate partner is critical.
However, given the multifaceted applications of advanced materials in Deep Tech, a technology could fit into several market niches.
Therefore, accurately identifying the key challenge of a potential corporate customer is crucial for navigating the venture-building path effectively.
5 Tips for Appropriately Approach Corporates
1. Embrace Collaboration
Firstly, one common hesitation among startups is the fear that their technology will be stolen or suppressed by corporations. This mindset can be a significant barrier to successful collaborations. However, it's crucial to recognize that when emerging ideas and technologies are discussed openly, they gain more visibility and interest from corporations. If you have a promising technology with some level of validation, do not hesitate to reach out. Platforms like Plug and Play can help navigate these waters and position your technology with the right corporates.
2. Adopt a Learning Mindset
When reaching out to corporates, it's essential to come with a learning mindset. Understand that the goal is to transition from a research project to a viable business. Often, startups get so absorbed in the technical merits of their innovation that they overlook the importance of customer validation. Remember, in many Deep Tech scenarios, your customers are other businesses (B2B), so early conversations and interactions can significantly aid in validating your product idea.
3. Progress Over Perfection
However, the approach should not be about creating a perfect product but about finding a pathway to progress. Identify corporates or agencies whose goals align with your technology, and map out a strategy for collaboration and progress. Both sides are eager to engage, but often unsure how to effectively do so. The open innovation mindset that many corporations are adopting is facilitating this engagement.
4. Ensure Product-Market Alignment
When considering your approach, focus on product-market fit to ensure your technology can scale and lead to a sustainable business. While Deep Tech startups often aim to solve significant humanity challenges, they must also engage with those who can help actualize their solutions.
5. Engage Early
Startups should reach out to corporates when they have a confident understanding of what their technology can achieve. Engaging around TRL 3 or 4, where there is enough substance to discuss potential and performance, can be very beneficial. This interaction allows for feedback that can refine the product and prepare it for the market, ultimately aiming for scalability and profitability.
🎯 Market Validation Basics in Advanced Materials
Market validation is a dynamic process that requires startups to be flexible, responsive, and proactive in engaging with potential customers and refining their products based on real-world feedback.
This approach will not only prove the viability of the technology but also lay a solid foundation for future business success.
This step is crucial for any startup, especially for those spinning out from a university and looking to introduce innovations like advanced materials.
In other words, market validation is essentially about proving that there is a market for your innovation, demonstrating not just that the technology works, but that there's a commercial demand for it. Here are some tips to approach market validation in B2B.
1. Understanding Basic Rules of Market Validation:
Identify Potential Customers: Early identification of who will benefit from your technology is key. For instance, they could be manufacturers of car batteries who are constantly looking to reduce costs and improve the efficiency of their products.
Engage with Potential Customers: Reach out to these potential customers to gauge interest. This can be done through cold calls, emails, LinkedIn connections, or direct engagements at industry conferences.
2. Letter of Intent and Its Role:
A letter of intent (LOI) from a potential customer or partner can be a powerful tool in the early stages. It serves as an initial affirmation that there is interest in your technology. However, it should be viewed as the beginning of the validation process, not the end.
Use the LOI to engage further with the signatories. Ask for detailed feedback on what they find promising about your technology and what concerns they might have. This feedback is crucial as it will guide your next steps in development and refinement.
3. Iterative Development Based on Feedback:
Feedback-driven Development: With every piece of feedback, refine your material or product. If you are working with advanced materials, consider creating samples or swatches that can be tested by potential customers.
Iterative Testing: Instead of a linear process from development to pilot, adopt an iterative approach where you continuously refine your product based on ongoing feedback. This not only enhances the product but also strengthens the relationship with potential customers by showing them you value their input and are responsive to their needs.
4. Moving Towards a Pilot:
Once you have a refined product that has undergone several iterations of feedback and testing, you can start planning for a pilot study. This is where you test your product under industrial conditions.
Engaging with potential customers during the pilot can help you adjust the scale of production, pricing strategies, and further technical adjustments.
5. Building Trust and Transparency:
Throughout this process, maintain transparency with your potential customers and partners. Trust is a vital component in moving from a laboratory setting to a commercial environment. Transparent communication about capabilities, limitations, and timelines helps build this trust.
6. Understanding Business Viability:
Ultimately, the goal is to turn your technological innovation into a viable business. This means not only proving that the technology works but also that it can be manufactured at a competitive price, meets market needs, and can generate profits.
🤝 Key Questions to Ask Your Potential Customers: An Example in the Textile Industry
When you're a founder developing a new sustainable material for textiles and ready to approach a corporate partner, the focus should shift from technology to market validation. Here are some examples of questions you can ask to better understand if there's a market fit for your innovation:
Strategic Alignment:
What are your strategic sustainability goals for the upcoming years?
Are there specific materials or technologies you are currently prioritizing?
How does my material align with your current sustainability initiatives?
Supply Chain and Integration:
How does your current supply chain handle innovative materials?
What challenges do you face in integrating new materials into existing products?
What are your key requirements for new materials in terms of processing and integration?
Performance and Efficiency:
What performance metrics are most crucial for materials in your products?
Are there specific attributes like durability, flexibility, or recyclability that you prioritize?
How do current materials fall short of meeting your sustainability goals?
Cost Optimization:
What cost constraints are associated with your current materials?
How much of a cost reduction is required for a new material to be viable for you?
What steps should be taken to achieve cost parity with existing materials?
Scalability and Volume:
At what production volumes do you start to see economies of scale?
What is the potential volume requirement for a new material like ours in the next five years?
How can we scale production to meet your needs and what are the anticipated challenges?
Geographical and Operational:
Where are your major manufacturing hubs, and how does this influence your material sourcing?
How prepared is your supply chain to handle a transition to a material produced outside your typical sourcing regions?
What logistical challenges might arise from incorporating our material?
Future Integration and Timeline:
If the material proves successful in initial tests, what is the timeline for broader integration?
What steps need to be followed from proof of concept to full-scale deployment?
How can we collaborate to ensure the material meets both our timelines and performance expectations?
These questions help in achieving a comprehensive picture of how a new sustainable material can fit into a corporation’s existing systems and goals. They also uncover potential barriers in the integration process and highlight areas where further development might be required to meet corporate needs.
🧠 Final Thoughts for Aspiring Founders
Feedback and Iterative Development:
Being open to feedback from the beginning is essential. This approach allows for iterative development based on real-world input, which is crucial for refining the technology to better meet market needs. Accepting that some aspects of the project might be flawed or need adjustment is part of the process toward commercial viability.
Emotional Detachment from the Project:
Viewing the project objectively, rather than as a personal endeavor, is important for making rational business decisions. This mindset helps in adapting the project based on feedback and market demands rather than personal attachment to initial ideas.
Driving Down Costs:
Understanding what steps are necessary to reduce costs, whether through supply chain improvements or process integrations, is critical. Cost efficiency not only enhances the attractiveness of the technology but also its viability in competitive markets.
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