Cleantech Startups 101 – John Bruce, EIR at Foresight
As part of our ongoing “Cleantech Startups 101” blog series, this week we interviewed John Bruce, a Foresight Executive in Residence (EiR) who has been involved in building, managing, and investing in early stage energy- and technology-based ventures for 20 years.
Why is the Customer Discovery process – identifying, classifying and quantifying your customer and their needs – so important?
Your product needs to create benefits for a number of different groups in an organization or ecosystem. During the selling process, different functional groups come into play each with their own value propositions that need to be met: end users, operations people, finance people, channel partners, etc. Any one of them can be a show stopper. Also, it is critical to have strong evidence and validation that there is a sufficiently large number of the subset of potential customers that have a truly incontrovertible and huge value proposition to establish that you have a viable market with enough urgency and needs to get going and overcome the obvious risks of buying from an upstart.
Spending enough time and effort iterating in the Customer Discovery and Product Definition process may be considered even more critical when you’re talking about hardware – especially Cleantech as capital costs can be very high. The development timelines are long and costs are high – you could be $5-10m in before you realize that you don’t really have a viable market. You just don’t have the same margin for iteration and adjusting on the fly as you do with software. The benefits of racing to be first to market needs to be balanced with getting it right the first time. This tension is often a “bet the company” type situation, whether one is aware of it or not.
Do the majority of startups go through the Customer Discover and Product Definition process?
Well, one might argue that the ones that make it from start-up through to sustainable early stage businesses do. So, another consideration might be to think about how capital efficient and how quickly the process is executed. Some startups really don’t know who their customer is and who they should talk to. As a minimum, you need to have detailed and multiple conversations with at least 10 and preferably many more customers to have a chance. One often finds a diversity of needs and wants, and it is critical to have enough data points to separate the main signal from what can be a noisy signal. Sometimes there’s a reluctance because the founders have technical backgrounds, and getting out there and talking to customers isn’t necessarily intuitive or something they have been trained in. It’s important to remember that Customer Discovery is a process: you can define it, do it rigorously and it can be quantitative, just like many business and technical processes and tasks.
Are there any common pitfalls that cleantech entrepreneurs face when it comes to product definition?
There are a couple. Thinking you know your customer when you’ve talked to one person who tells you have a good idea. Or finding you don’t have a market at the end of the customer discovery process and not being able to let go of incorrect assumptions and beliefs. You have to have the courage to fail fast or kill your idea if there is no market. If you’re willing to consider that someone might have a better idea or a bigger problem to solve, it invariably results in a better product. Experiencing futility and hearing objections to a presumed solution is often the source of true innovation. The process of throwing something up on the wall for someone to shoot down and hear that what they don’t want can be an extremely efficient means of understanding what the do want.
Do you see any signs that the market for cleantech products is changing?
Absolutely. Entrepreneurs often think that their job is to invent solutions, but it’s really in finding and defining big problems and unmet needs. Where are the pain points? One of our biggest challenges is climate change: there’s going to be huge pain there. If we’re going to stand any chance of bending the curve on global warming, we’re looking at boosting renewables globally from 1% to 30% or more. There will have to be massive innovations in renewable and carbon capture products to get to these kinds of numbers. It’s a huge business opportunity – The exponential growth in the solar industry we’ve seen to date is just the tip of the iceberg. The challenge is addressing the high cost, but carbon pricing is taking hold in many jurisdictions around the world and this could have a big impact in terms of helping these technologies take off.
Is there anything distinctly “Canadian” about our market or products?
On the market front, we’re obviously a major oil and gas producer so we have a large domestic market for clean technologies – for example, solutions that help address the methane leakage in oil and gas distribution.
In terms of products, we have some really unique pockets of expertise here. For example, the centre of the universe for photovoltaic cells modules is in Asia. However, we have some real strengths in “balance of system” components make those cells work. Some of the greatest players in the world are in Vancouver. The question is, how do we leverage the expertise we do have?
Are there any resources out there on product definition and customer discovery?
In addition to programs and mentoring offered by accelerators and incubators such as Foresight, there are a lot of great – and free – resources out there. Examples include BCIC’s online Market Validation Training and the Kauffman Founders school has an e-book series that is free to download .
Any final advice for cleantech startups?
“A problem well put is half solved” Get out and talk to customers because they’ll tell you what their problems are and they’ll point you in the direction of the right solutions.
For more information on Foresight’s EIR program and other services and support it provides to cleantech startups: www.foresightcac.com/services