Deeptech’s scientific and tech-innovation demands bring unique challenges for early-stage companies and their investors. Bee Partners has a long-standing interest in deeptech. We all four have a little science geek in us and we’ve witnessed through our investments the world-changing power of deeply researched and singularly applied solutions that only deeptech can provide.
Our deeptech investments include drone-based companies like Skycatch and Iris Automation, the AI-driven StatMuse and DeepScribe, and straight-from-the-lab companies like EcoPackers and InnerPlant. We proactively source deeptech companies in robotics and spacetech and also look for deeptech solutions to problems facing logistics, manufacturing, supply chain and more.
Deeptech Founders face a sometimes daunting set of challenges in the best of times: heavy capital requirements, elusive network effects, lengthy sales cycles, elaborate supply chains, and regulatory hurdles that produce domino rallies, those necessary events that are completely out of your control. Deeptech companies are also typically undercapitalized relative to the market potential of their technology. The Founders who weather those challenges successfully have the grit and passion we look for in all Bee Founders. They are also those who identify customers early on and surrender to the market shaping their offering by stress testing, iterating, and validating their ideas and designs at every step along the way.
Customer discovery and lean-launchpad best practices are always mission-critical to validate a product offering with prospective customers; they’re even more important now. I’m on the board of an accelerator, LAUNCH, based on Steve Blank’s Lean LaunchPad curriculum. The program teaches entrepreneurs to rapidly validate ideas by seeking out extensive customer feedback in order to overcome the reason most startups fail. I believe in this to my bones. This methodology applies at inception, starting from the customer discovery process, to first customer, to driving toward product-market fit.
The COVID-19 environment has intensified deeptech’s challenges. We recently hosted a COVID-19 AMA for deeptech Founders and shared our ideas on best practices, specifically on early-stage customer relationships and financial issues in these challenging times. Here are some key takeaways.
Customers, present and future
As you launch from the lab into customer relationships, frame your target customers and take into consideration the logistical impacts of your ideal user.
- Is government a target customer? We’re seeing deeptech companies pivot to serve government clients with COVID-19-related resources.
- How do geography and supply-chain issues affect your being able to serve your market in the COVID-19 era? You might find it more efficient and cost-effective to serve domestic customers as travel and shipping logistics remain uncertain. Dream logistics scenarios include having customers and suppliers nearby or at least closely grouped to each other.
As you anticipate your first customers and build customer relationships, here are some things to keep in mind:
- As you interact with customers, do you see an acute need for your product? And even if you do, have you signed your first customer(s)? If not, focus harder on customer discovery. You might technically call these people customers but they’re really your development partners, so treat them that way. Overcommunicate on product offerings and timing. Research value-based pricing. Demonstrate a quantifiable ROI. Offer these “partners” deep discounts and better payment terms. Keeping your customers close is never bad advice, but it’s especially useful to form stable relationships in uncertain times.
- Set out to engage customers who will serve as launch partners with whom you can show early and clear ROI. Make it as easy as possible to onboard them remotely, leaning into the components of your product that simplify massive complexity when possible, so they can witness the company's magic right away. If you already have customers
- Focus on stickiest ones. See what you can learn from them about what they need. Move towards a buy vs. build model on their behalf. Can you create a product to sell them that fulfills that need rather than their having to build it for themselves?
Fundraising in a downturn (and alternative paths)
- Need money? Adjust your expectations in the COVID-19 environment. Be ready to accept a lower valuation and raise smaller amounts to hit nearer milestones.
- Don’t need money right now? Start fundraising anyway, with a six-month plan.
- Overdocument your interim milestones. These could seem minor in the grand scheme, and perhaps they don’t correspond to increasing valuation for investment. But they will set you up for better investor conversations. We’ve watched deeptech companies do this best by translating their complex technology breakthroughs into the business language of achievements and marking that steady progress to build a progressive narrative.
- As you plot the course of your fundraising, make sure you’re pitching with specific milestones in mind. As we adjust to an environment of ongoing uncertainty, the best investor conversations are concrete, specific, and have clearly determined outcomes.