Intro
As a strategist and an investor, working closely with and building early-stage deep technology companies and ventures with scientists, I see how different the approach needs to be when thinking about the markets and commercial strategy for these frontier technologies.
In this article, I want to share some insights about how early-stage deep technology companies can start thinking about their commercial viability and the markets they could enter from day one.
Sequoia Capital’s founder, the world-renowned venture capitalist Don Valentine, said, “Great markets make great companies.” He believed that if you’re not targeting a large market, it is highly unlikely that you'll build a big company. Valentine and most VC firms emphasize the existence of markets and the magnitude of the problem when investing in pioneering technology companies.
However, in the case of deep technologies and scientific companies, the fundamental nature of the technologies is so different that it becomes difficult to size a market. Deep technologies create and transform markets. They fundamentally change the nature of things and solve complex problems in groundbreaking ways. Therefore, it requires very different thinking and innovation to understand how the technology would be able to shape the world while building deep tech ventures.
Ways to Think About Markets in Early-Stage Deep Technology Companies
Deep Tech Ventures are Market Creators
When building deep technology companies, we are fundamentally de-risking a novel technology or a scientific breakthrough based on new knowledge. These new technologies and breakthroughs entirely enhance and change the way we could deploy and use them in the world, often reshaping human progress, our collective future, and solving complex problems. In such cases, these ventures, when built around certain use cases, have the enormous potential to diffuse out to the world, create entirely new and non-existent markets, and transform industries. Therefore, when building or evaluating them as an investor, we focus on the potential of the technology to radically change the world and assess the magnitude of the problem being solved and the value that could be unlocked. Most often, we would not be able to fit these foundational new technologies into existing markets. Most deep tech founders try sizing existing markets and replacing current markets, calling it the market for these new deep technology ventures, while the technologies find fit very differently and create new non-existent markets and shape industries.
Speculate and Find Multiple Markets and Use Cases for the Technology
While building deep tech companies, it becomes very important to speculate into the future and understand how these ventures can create newly possible, plausible, or probable futures. Bringing this thinking helps us determine and envision the far-reaching use cases and problems the technology can solve. Most first- and second-degree use cases that come out of technology-first thinking deep tech ventures fail to have either real problems or markets. Some founders may have already identified a market need based on their own experience or may have been approached by potential customers. However, we need to ask the question before jumping in: Could there be better prospects (larger, growing, and more profitable markets) for your unique technology?
But answering this question takes time and bandwidth. Instead of taking a step back to understand the market opportunities, founders often try to run before they can walk. This may create the necessity for a costly pivot down the line if you jump into the first use-case ideas you get and want to build around.
Deeply assess multiple use cases and markets across various parameters and variables.
Anchor to a Problem or a Use Case or a Customer Type
Identifying the best possible initial market and validating a market need are crucial first steps. This is especially true in deep tech, as it is hard to predict customer acceptance and widespread usage of disruptive technology.
At Unusual., we work with deep tech founders and take them through our process called Anchoring. It involves product innovation and use-case development. Founders need to assess different use cases, validate their market potential early on, and choose a use case that is easily executable, has low friction, and a large number of eager customers to try out the technology. Finding this anchor, which could be a customer type, use case, or a specific market need, is crucial as it would help the deep tech company engineer its technology into a product that fits the anchor.
The anchor provides a clear pathway for the initial commercialization of the technology and brings in revenues for the company. This allows the ventures to channel their resources efficiently so that they can prioritize and explore other wider use cases and markets later on.
Scientific Method Applied to Market Finding
Scientific entrepreneurs are at an advantage when assessing different use cases and arriving at an anchor market segment to build the product around because their backgrounds equip them well to apply the scientific method to testing out and validating the right use cases. This method involves hypothesizing around different market use cases, experimenting through conversations and partnerships, and iteratively solving problems based on feedback. This structured approach to prioritizing markets would significantly improve the venture’s chances of commercialization.
Track Analogous Technologies and Indirect Solutions to the Problem You Are Trying to Solve in the Markets and Know Why You Would Win Over Them in Terms of Adoption
If you are a new technology replacing the old one, run away from that market. Because unless your technology fundamentally provides exponential value, cost savings, and efficiency for that use case, you would just become another option for solving the same problem. Do not become an option in the markets you want to pursue. Become the only solution that can make things happen. For example, in the climate materials space, I see hundreds of startups wanting to be a replacement material for packaging. There are a plethora of options for buyers to choose from and adopt. The material innovation might be ingenious and novel, but in the end, the product is the same.
When you become an option in the industry, then you do not have large markets. Either you work on variables that give you an edge in a specific niche market and help you capture that entire market, or you just become another option. However superior the science or novel the technology is, it doesn’t matter.
Engineer the technologies to cater to the right markets where your technology and approach to science have properties that give you an uncontested edge.
Partnerships are Ways to Quickly Explore Different Markets and Use Cases of the Technology and, in Some Cases, Also a Great Way to Enter the Specific Market
When systematically evaluating different markets and use cases to productize your technology, founders need to lean into strategic partnerships and pilots with larger companies to reach the markets.
Partnerships should provide access to the users and help deep tech companies establish feedback loops to shape their technology. This feedback loop is crucial for steering the venture towards market relevance and commercial viability.
Even if the technology is still being de-risked, the founders can stay ahead by collaborating with partners to get customer insights around specific markets.
Stories Matter + Cross-Industry Storytelling
Every tech startup needs a great story to take the product to market. However, in the case of deep tech ventures, storytelling, educating the market about technology, and shaping the narrative around it become even more critical in opening up and shaping new markets and entire industries.
Deep tech founders should focus on these three aspects to shape industries and proactively create markets for their technologies:
Cross-industry storytelling:
Illustrating how the technology can fundamentally impact multiple industries and creating narratives that demonstrate the versatility and far-reaching potential of the technology across sectors becomes useful in attracting investors, industry interest, and partnerships.
Uncomplicating the technology and science:
Sharing notes about the technology through illustrations, metaphor-based explanations, showcasing it through experiences, future scenarios, and concept design sharing will create the spectacle and capture public and industry imagination in understanding the technology and helping it in its diffusion.
Educating the industry:
Proactively reaching out, creating demos, and educating the industry about the benefits of the technology would help reduce friction and pave the way for market entry for deep tech companies.
These are some of the unique thinking and approaches about markets that founders can bring to deep tech venture creation.
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