We recently gathered in Belfast with CEOs and CTOs of five of our deep tech portfolio companies to discuss some common challenges and potential solutions.
A common thread was that in order to build a scalable business, teams have to create a platform for other entrepreneurs and companies to build on top of their technology. Doing so creates network effects that drives growth and lowers the cost of customer acquisition.
We all know the definition of ‘platform’ differs depending on the latest podcast or blog published by one of the world’s many thought leaders. What’s for certain is building a globally successful deep tech platform is bloody difficult. Hence its good to share approaches.
These insights are from our portfolio companies and my time at Arm.
Roadmap is fundamental.
Stakeholders need to be able to trust you’re going to be there in the future. Failing to deliver or being constantly late reduces trust amongst your ecosystem. Delivering the products on your roadmap and satisfying the ever changing needs of your partners is vital.
The best company roadmaps drive the industry’s roadmap. Recent examples are Apple with electrocardiogram (ECG) or Google with quantum computing.
Engage your teacher customers.
You will know the ideal customers for your technology. What you won’t know is how they and their peers will engage with your technology in five, ten or twenty years. But you can have a hypothesis. Map out your ecosystem, find the key people and figure out how to reach them.
All large organisations can move slowly and be difficult to influence, but they’re always looking to optimise and stay ahead of their competitors. You’re the key to that.
Don’t over-listen to the market.
You have a 10 year vision. Be confident in its merits whilst recognising it won’t be entirely accurate. Teacher customers don’t know their future and you’re doing some of that thinking for them. Let them influence your roadmap but ensure you remain 2-3 years ahead.
If you over-listen to your customers, they’ll tell you what they need right now. You need to stay focused on your 10 year future but of course near term execution is paramount.
Find your unit of value.
As my colleague Keith Teare writes: “Define what it is you’re building that has economic, not emotional, value. Coca Cola’s unit of value is a can of fizzy drink; Google’s unit of value is a paid click (CPC, CPA or CPM); and Uber’s unit of value is a paid ride or delivery.”
Then you have to ask yourself if it scales. Validating your business model and unit of value is a core early stage business development activity.
Build out your unit economics.
Make sure that in the long run you can sell your unit of value and make a profit at scale. Arm’s unit of value was the microprocessor, the business model was getting someone to pay every time one was shipped within a device (royalties). You may be creating a new business model with your partners.
Its important to be brave enough to model your crazy long term vision in unit economics. This will excite investors; guide your milestones as a team; and help determine your pricing strategy.
Don’t be afraid of trial and error.
Whilst Arm eventually settled on a solid business model and scaled through relentless sales execution, there was a lot of trial and error in the early days. We didn’t just design a CPU, we did consultancy services and software optimisation projects galore.
Eventually we got the engineering and science community to play with our technology. Who is going to play with your technology and how are you going to reach them?
Market yourself as non-threatening and neutral.
To truly become a platform at the centre of an ecosystem you can’t p*ss everyone off. Don’t position your technology as taking over and eating everyone’s lunch. Be seen as complementary to your stakeholders even if you may one day displace them.
Its also important not to get wrapped in exclusivity with one partner who prevents you engaging with their competitors. Be everyone’s friend.
Determine who/what is critical to your future.
Milestones drive your company forward and give investors confidence that you’re growing as well as creating value. Its the founder’s job to set stretch milestones for the company between months, quarters, years, funding rounds or whatever you see fit.
A milestone set recently by one of our portfolio was engaging with the one person who holds the key to their entire ecosystem. That person unlocked the next round of funding and invested themselves.
Get the backing you need.
Make sure your investors are bought into your long term future. I’ve written in the past that deep tech companies often need three seed rounds before finding product market fit. Work out who is comfortable going on that journey with you.
Taking an industry on a journey is tough, but don’t shy away from it and know that others are doing the same.
Say thank you and give back!
We’d like to extend a big thanks to the founders of: B-secur, Biosignatures, Chargifi, Crypto Quantique and Nodes & Links for generously investing their time and brains to this session. Specifically to B-secur and Belfast for their hospitality.