Starting a new business can be an exhilarating journey, but without a clear understanding of your target market, your startup might be sailing in uncharted waters. This is where customer discovery can be vital. It is a systematic process of understanding your potential customers, their needs, and the pain points that your product or service can solve.
The customer discovery process is even more complicated for DeepTech founders, as the timelines and complexity associated with building a successful DeepTech company need to be considered when talking to customers and incorporating their feedback.
Promus Ventures has been investing in DeepTech companies for over a decade, and during that time, we have seen both incredible success and total failure. The portfolio of over 100 startups that Promus Ventures has backed provides an incredible corpus of data about the benefits and difficulties of different approaches and perspectives.
Our founders have used so many approaches to understanding (a) who their customer is, and (b) what their customer wants, that it is obvious that there is no one-size-fits-all approach. However, some common themes can be identified, which can be helpful as a founder frames how to approach finding that all-important product-market fit.
There are exceptions to this, like there are with most things in life — visionaries from Henry Ford to Steve Jobs would maybe never have developed their iconic category-defining products if they had relied solely on listening to what customers wanted. For most founders, however, talking to potential customers can be incredibly valuable. Here are some things to consider as you start that discovery process with a DeepTech twist.
1. Identifying Real Problems
Customer discovery enables startups to identify real problems that potential customers face. By engaging in conversations and surveys, you can uncover pain points that your product or service can address. This sets the foundation for a business model that truly serves a need in the market.
For DeepTech founders, this can often be a challenge. As a founder building a company with a real technology moat, it is important not to fall in love with your technology. You need to find a problem that your technology helps solve — that is what a customer will pay for. There is an aphorism that says, “For a person with a hammer, every problem looks like a nail” — but what if your customer doesn’t need any nails hammered?
2. Continuously Fine-Tuning Your Value Proposition
Understanding customers’ problems allows founders to craft a compelling value proposition. This clear and concise statement outlines your product or service benefits and is crucial for attracting early customers and investors. For DeepTech founders, getting this right can often take too much of your valuable time — many DeepTech companies require longer development cycles than a traditional SaaS startup for example. Don’t be afraid to rework your value proposition continuously — you may find that your initial hypothesis as a founder is not quite right, and that as you refine your value proposition, it starts to resonate more and more with potential customers.
This can have additional benefits for DeepTech startups, as many founding teams are solving really significant issues that people care about. In tandem with identifying real problems as described above, communicating the incredible impact of a DeepTech startup can help with everything from recruiting to fundraising.
3. Minimizing Risk
Startups often face significant risks, and one of the most common is building a product or service that nobody wants. This is especially true with DeepTech startups, where founders can burn lots of time and money on products and features that never gain traction with customers.
Customer discovery helps minimize this risk by ensuring there is a real, genuine demand for your product. There are often some creative ways for DeepTech founders to minimize risk, especially in DeepTech sectors that have some form of geopolitical or strategic importance — for example, non-dilutive government funding can often help a founding team build out their product roadmap and shorten time to market.
Your customer discovery process can also be helpful when talking to and educating the DeepTech investor community. Showing that you are minimizing risk and stretching your runway always helps when convincing investors.
4. Tailoring Your Product
By gathering feedback and insights from potential customers, you can make informed decisions about your product’s features, design, and functionality. This customer-centric approach ensures that your product aligns with what the market wants. For DeepTech sectors where development timelines can be long and expensive, early feedback from customers can be very helpful.
5. Finding Early Adopters
Identifying and nurturing early adopters is crucial for any startup’s success, not just for DeepTech companies. These enthusiastic customers can serve as advocates with other potential customers, provide valuable feedback, and help you refine your product for a broader audience.
We find that governments are often the first customer and frequently the largest and best customer for many DeepTech companies during the startup’s initial stages. Building a strong relationship with a customer like the US DOD can provide the foundation for success with other customers.
6. Optimizing Resource Allocation
Limited resources are a common challenge for startups, especially for DeepTech founders, where the amount of capital required can often be a significant constraint. Customer discovery helps a DeepTech founder allocate resources more efficiently by focusing on what truly matters to the target market. Avoiding costly missteps is not just about efficiency for a DeepTech founder — it can ultimately mean survival instead of failure.
7. Winning Through Competitive Advantage
DeepTech startups often have something unique in terms of technology or capability that is the basis of their company. It is very unusual for DeepTech startups not to have any competitors, though — often, there are other founders approaching the same problem in a slightly different way or incumbent/legacy industry competitors who have advantages in terms of scale and resources. A Deeptech founder can gain a vital competitive advantage by thoroughly understanding your customers and their preferences. You can position your startup in a unique way, differentiating yourself from competitors and providing more value to your target audience.
8. Feedback Loop for Iteration
Startups must be agile and ready to adapt. This is challenging for DeepTech companies, given that they are often based on fundamental science and engineering innovation. Being open and receptive to feedback and always seeking ways to hear your customers can help maximize the chance of success. Customer discovery helps to create a feedback loop that allows a founder to iterate and improve a product or service over time, ensuring it stays relevant in the ever-changing market landscape.
9. Investor Confidence
DeepTech investors typically understand many of the specific challenges and complexities that DeepTech founders face. Raising money for a DeepTech startup is never easy, though — even when you pitch to sophisticated investors, there are always reasons for them to say “no”. Investors look for startups with a strong understanding of their market and customer base. By demonstrating an unwavering commitment to customer discovery, a founder can increase investor confidence in a team and a product and should make it easier to secure funding.
Ingrain Customer Discovery in Your Startup’s DNA
Customer discovery is essential for all startups, but it is especially important for DeepTech founders, given how hard it is to build a successful DeepTech startup. Customer discovery is not a one-time activity but an ongoing process that should be ingrained in your startup’s DNA.
It serves as a compass, guiding you through the turbulent seas of entrepreneurship. By listening to your potential customers, you can confidently navigate, refine your offerings, and build a successful startup that meets real market needs. Remember, it’s not just about having a great DeepTech idea; it’s about knowing how to make that idea work for the customers who need it most.
Recipients of this post are not to construe it as investment, legal, or tax advice, and it is not intended to provide the basis for any evaluation of an investment in any fund. Prospective investors should consult with their own legal, investment, tax, accounting, and other advisors to determine the potential benefits, burdens, and risks associated with making an investment in any fund.
