This is the 30th article in a continuing series that examines the state of the ecosystem necessary to successfully bring technology to market. Based on dozens of interviews with entrepreneurs, venture capitalists, angel investors, business leaders, academics, tech-transfer experts and policy makers, this series looks at what is working and what can be improved in the go-to-market ecosystem in the United States, Canada and Britain. We invite your feedback.
Six months ago we launched this “12-part” series to put forth ideas, yield practical insights and provoke thoughtful discussion about what it takes to get technology to market. Thanks in no small part to the enthusiastic response of our readers, we let the series evolve and grow as it would.
More than 50 posts later, including 30 we wrote plus another score of contributed articles, it is reasonable to say that we have cast at least a passing spotlight on just about every issue pertinent to such a broad subject. Dozens of individuals have shared their time and expertise with us as interviewees, subject matter experts and guest bloggers, and we thank them all.
But all good things must come to an end. While there will no doubt be the occasional post that will still bear the header, The Commercialization Ecosystem, we will be moving on to new series in a few weeks. But first, what have we learned about what it takes to get technology to market? In a three-part wrap-up, we will recap what we have learned that every entrepreneur and tech executive needs to know.
We begin today with that watershed moment.
1. You must find a problem to solve
John Stokes, a partner at Real Ventures, defined a successful entrepreneur as someone who can put together both “convergent” and “divergent” thinking. The innovator is about convergence, having a problem to solve or premise to challenge. But to get the solution to market requires divergent thinking – the ability to identify and evaluate all of the possible ways to achieve that goal.
Mobile technologist, anthropologist and conservationist Ken Banks summed it up this way: “For me, an entrepreneur is a person who is good with the idea, who is good at formulating a solution and building a good team that can execute on it … you come across something that really switches you on and inspires you to create something and you don’t get that in a school.”
2. The market must be willing to pay for the solution
“Great companies constantly test the market, for validation and feedback. When I look at a new company, I ask, ‘Where did the product come from? Did it come as a result of a market demand?’” said Ronald Weissman, chair of the Software Special Industry Group at Band of Angels.
Ann Miura-Ko, co-founding partner with FLOODGATE said in a lecture last fall at Stanford University, ”A startup is ultimately … not just about whether an idea or a product works, it is about whether or not you can create a business around it. Whether or not the ecosystem will support it, the customers will buy it, if the channels will support it, and if the manufacturers will actually create it.”
3. The old investor normal is hard to find
The venture capital industry of 10, even five, years ago no longer exists. As many VCs have shied away from early stage investments, many angel investors have stepped up to fill the void. However, their support is coming with more strings attached and higher expectations than in the past.
“They want proof points and market validation. They want to see the strength of your management team and your pipeline,” said Weissman.
4. The new normal is there is no normal
In today’s marketplace, where old enterprise sales models have been collapsed by iterative product development driven by the power of Web 2.O, cloud computing, open source and commoditized development platforms, a company has many paths to market.
“Now the capitalization of a company can be a whole combination of different resources and sources of funding. A lot of people think the old normal still exists, but only for a small group of companies,” said Iain Klugman, president and CEO of Communitech.
Added Stokes, “Those companies that are founded today are often able to compete with the ones founded five years ago with a lot fewer dollars and a lot more agility. The tech market has evolved much more quickly than the venture market.”
5. It’s all about who you get to know
Finding investors is about doing your homework and creating opportunities that will allow you to put yourself in front of them. But don’t aggressively pursue them with your elevator pitch. Get to know them and let them get to know you.
“People and relationships are the most critical factors in investment. This is why investors consistently say that the team is the most important factor in a deal. It is also why when talking about an investment, investors will often start out by saying that the founder is a great person with lots of integrity,” wrote Martin Soorjoo, founder of The Investor Pitch Clinic.
6. And how well you can speak their language
It’s not about the bells and whistles of your technology. It is about the business case for your technology.
“Product- or engineering-driven CEOs new to the VC world beg, ‘Please let me demo my product! It will change the world. For $500,000 you will own a piece of the next Facebook.’ But the story that investors need to hear is different. ‘How does your business work? How will you scale to become a profitable market leader? Is this the kind of business that meets my investors’ financial objectives?’” wrote Weissman.
7. Commercialization needs champions
A “champion” could be someone with decision-making authority within an established organization, who sees the value in a new technology and will support it by either investing money and resources into it or adopting it within their own organization.
8. Go out and find your champion
If you have an idea that solves a customer’s problem, preferably a large customer, then you should be able secure “funding” from them, provided you provide them with some form of added incentive to take the risk.
“This funding might come in the form of services, prepayment on the product or even as a strategic investment. While you are out doing your market research — the part where you actually talk to potential customers – seek out these types and arrange meetings by being open about the concept product you are working on and your interest in their feedback,” wrote Jason Flick, co-founder and president of YOU i Labs and president and CEO of Flick Software.
9. Champions come in various forms
Champions can also be defined as successful entrepreneurs who volunteer their time as mentors or play the role of angel investor by reinvesting the proceeds from a profitable exit back into the community. For Scott Annan, founder of Mercury Grove and Network Hippo, his decision to create a new startup accelerator came from a firm belief that “a rising tide floats all ships.”
“For entrepreneurs and executives, being active in the community and supporting other entrepreneurs and programs that are happening is crucial. Really being able to develop that strong network and allocating time to share your thoughts and experience and expertise with other companies is critical. It helps not just the entrepreneurs, but creates an environment of collaboration,” he said.
10. Champions should also be incubators of technology
There is seldom a correlation between what an established company invests in R&D and its future success in terms of revenue, Flick wrote. “Startups are famous for having successful technology R&D because they can iterate and adapt so quickly and tend to be closer to the ground – e.g. the customer. Rather than invest billions in internal R&D, many of our large technology enterprises may find their money better spent if they put a percentage into incubating startups.”
The problem, however, is that the mindset this requires often runs counter to the typical corporate culture.
“Most companies are optimized to protect and keep things inside. The ideal of letting go something that has been invested in goes against the grain of a lot of companies. I think the best thing to encourage people to do it is to show success stories,” said Frank Rimalovski, co-founder and a former partner of New Venture Partners.
We will continue next week.