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Customer Development Basics for Deep Tech Startups | Deep Tech Catalyst

A chat with Pedro Lopez Sela, Partner @ FrissOn Capital

Welcome back to Deep Tech Catalyst, the channel by

where science meets venture!

Today, we're thrilled to welcome Pedro Lopez Sela, Partner at FrissOn Capital!

Understanding the 'job to be done' and effectively sizing the market are essential for aligning technological inventions with real-world needs, building meaningful innovation, and securing investments.

This episode covers the basics of this critical path from a VC perspective.

In detail, you will learn:

  • 🚀 Customer Development in Deep Tech

  • 🎯 Understanding 'Jobs-to-Be-Done'

  • ⏱️ Optimal Timing for Customer Development in University Labs

  • 📣 Communication Strategies for Deep Tech Entrepreneurs

  • 📊 Fundamentals of Market Sizing in Deep Tech

🎧 Prefer to Listen?


🧗‍♀️Key Challenges for Aspiring Deep Tech Founders

There are 2 main issues scientists face when assessing market potential during the very early stages of starting a business: language and experience.

The Language Barrier

For scientists, transitioning into the business world involves adopting an entirely new language—business lingo—which often feels foreign.

As these emerging entrepreneurs engage with startup programs and begin conversations with investors, there is a noticeable tendency to emphasize technical details. The more nervous they become, the more they retreat into technicalities.

Unfortunately, this approach can be counterproductive.

The conversation's complexity escalates quickly, making it difficult for investors and business community members, who may struggle to understand the technical jargon, to grasp the value of the proposed innovations.

The Experience Gap

Another significant challenge is the experience gap. Many deep-tech entrepreneurs, with backgrounds in hard sciences, diligently read and try to educate themselves about key business concepts like "jobs to be done" or "customer discovery."

While this theoretical preparation is valuable, it falls short without practical application.

These entrepreneurs often believe that understanding a concept through reading is equivalent to mastering it in practice, which is seldom the case. This disconnect can make discussions with business professionals, who recognize the importance of practical experience, particularly challenging.

🚀 Customer Development in Deep Tech

The cornerstone of any business model, particularly in Hard Tech or Deep Tech, hinges on identifying the 'job to be done.' This means pinpointing a pressing need that your technology can address: a foundational step in crafting your business model.

It's crucial for scientific entrepreneurs to understand that just because they believe their technology solves a problem, it doesn't mean the market recognizes or prioritizes this problem.

Integrating Into B2B Existing Business Models

For B2B scenarios, it's also vital for tech developers to realize they might only be part of a solution within a larger business model. No matter how revolutionary the technology might be, it needs to fit logically and financially within the cost structures of other businesses.

Your innovation not only needs to function effectively but must also deliver clear financial benefits to your potential clients.

It's not just about having a great idea or a strong IP, it's about ensuring that your idea fits well within the market's broader ecosystem and responds to a true, pressing need.

🎯 Understanding 'Jobs-to-Be-Done'

One of the foundational concepts in modern business strategy, particularly relevant for deep tech entrepreneurs, is the 'job to be done.'

This term refers to a specific need that must be addressed with a practical solution. While this might sound general, it is about identifying a precise user, typically referred to as an archetype, who has a clearly defined need.

In the context of Deep Tech, we usually discuss a functional job to be done. This isn't about emotional satisfaction or social belonging but about performing a specific, often complex task.

Approaching Customer Development in Scientific Ventures

For scientists who are transitioning from the theoretical and application phases of their research—often marked by securing initial funding or grants—the next step involves a crucial shift: identifying a potential customer.

This transition can be daunting, but it is facilitated by having the right set of questions during customer interviews.

For instance, instead of going into an investor meeting saying, "I think" or "I know," which often signals assumptions rather than evidence.

A Deep Tech entrepreneur should be able to say, "I've spoken to 100 people, and they told me X, Y, and Z." This approach demonstrates a real engagement with the market rather than presumptions based on isolated research.

⏱️ When Should You Start Customer Development in University Labs?

When venturing into deep tech, many scientists begin their journey with a focus on technology development. This common path often starts in the lab, driven by the potential of the technology itself, before seeking a market or customer. However, this technology-first approach can delay crucial engagement with potential customers.

Customer-Centered Design Approach

In contrast to a purely technology-driven approach, a need-driven design strategy starts with the customer.

This method involves understanding the customer's needs from the very beginning, even before the technology is fully developed. So, when is the ideal time for a scientist to start thinking about customer development?

Waiting until technology reaches Technology Readiness Levels (TRL) 3 or 4 can be too late.

Ideally, customer development should begin at TRL 0—right when the idea is being planned. Engaging with potential customers from the outset not only refines the focus of the R&D but also enhances the efficiency and relevance of the technology being developed.

Integrating Customer Discovery into Academic Research

Some universities in the United States now require researchers to engage in customer discovery programs as a condition for tenure or research grants.

This requirement aims to shift the mindset from purely academic to market-driven research. When applying for an R&D position or proposing new research, faculty members may now ask about potential customers, even if the research is in its early, basic stages.

This integration of business and market analysis into academic research ensures that by the time a patent is filed, there is already a clear plan for market entry. This is crucial because once a patent is filed, the clock starts ticking.

Therefore, in Deep Tech, where the path from lab to market can be long, maximizing the patent's protective years is essential to attracting investment. From filing patents to developing and marketing the technology, every step needs careful planning.

The strategic timing of patent filings, coupled with ongoing development and market engagement, is vital for converting technology into a viable product.

📣 Communication: An Essential Skill for Deep Tech Entrepreneurs

Effective communication is crucial, particularly for scientists transitioning into the entrepreneurial world. When bridging the gap between technology and finance or business profiles, the way you communicate can significantly influence your success.

Simplifying Complex Ideas

The key to successful pitching for deep tech entrepreneurs can be summed up by the phrase "less is more". Scientists often overload their presentations with information, which can overwhelm and confuse potential investors.

The essential skill is to simplify the communication without diluting the message.

Your pitch deck should not be a deep dive into the technology alone, it must also clearly outline your business plan and how your technology solves a real-world problem.

Communication Barriers

One common pitfall in communication is the tendency for deep tech founders to revert to dense scientific terminology, especially when under pressure. This approach can come off as either defensive or arrogant, neither of which helps in securing investment.

Entrepreneurs, instead, need to extensively practice their pitch to ensure they can explain their technology concisely and engagingly.

A well-crafted pitch deck is vital. It should not resemble a detailed research project but rather focus on key points that highlight the market potential, the solution your technology offers, and the business model.

📊 Market Sizing 101

When showcasing the market opportunity, it's essential to link back to the job to be done. It all starts with pinpointing the significant problem you're tackling. It has to be incredibly specific: no vague notions allowed.

This approach helps define the specific market need your technology addresses, which is a critical metric for investors.

Basically, the market sizing should reflect this scheme:

  • Total Addressable Market (TAM)

  • Serviceable Addressable Market (SAM)

  • Serviceable Obtainable Market (SOM)

TAM reflects the numbers of the big (specific) problem you are trying to solve. Then, moving on to SAM, you need to identify the market where you can potentially offer your solution, even if you're not equipped to serve it fully yet due to its size. Next up, SOM—what's your plan for the upcoming year? How many people can you realistically serve?

Ideally, you'd attach a dollar figure to this, but if it's a new market and you can't quantify it precisely, at least try to estimate the number of people facing the problem you're addressing.

A common mistake entrepreneurs make is overestimating their market size by associating their products with broadly related industries.

For example, if you’re selling coffee lids, your market isn’t the entire fast food industry, but rather the specific segment of that market that purchases coffee lids. This distinction is crucial for investors who are gauging the precision of your market understanding and the viability of your business within that market.

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