In part one of our series on How TandemLaunch Evaluates Technologies, we discussed the process of evaluating an invention by first identifying the technological problem it solves and then researching how that problem manifests in different markets. What you would have in hand at this stage is an invention, a clearly articulated technological problem, and a set of industries that have that technological problem in common. At this point we can start constructing narratives which will serve as hypotheses for businesses which we can validate through conversations with potential customers.
You already know how to tell a story
There are numerous narrative structures, but one of the most recognizable ones is the hero story. It goes something like this:
It starts with a world governed by certain rules and its own unique history and players. We meet the future hero: a protagonist who is sent on a journey due to a tension created by a need or large opportunity. This journey is treacherous and many have failed along the way, but this protagonist has a set of unique insights and is armed with unique tools that will help them succeed. As a result, they succeed where others have failed and gain significant wealth along the way.
If the volume of literature that follows this structure is any indication, this story framework is a highly compelling one for people. It’s perhaps no surprise then, that mapped onto a business idea, we can create a compelling story for a deep-tech venture.
“It starts with a world governed by certain rules and its own unique history and players…”
The setting of our startup’s story is the market in question and the technological problem it's looking to solve. The setting answers the question of “Why this?” by illustrating the size of the potential opportunity. The total potential addressable size of the market is the sum value of solving the technological problem you've identified across all industries. Note that you are unlikely to pursue all applications due to differences in customer and supply dynamics across those industries, which make some more reasonable to pursue from your position than others. The purpose of the narrative at this stage is to lay out potential directions that we must later validate.
When quantifying value, a top-down assessment of market size will leave a lot out of the picture. Instead, it is better practice to estimate the number of customers in each industry that share the problem and guess at how much they’d be willing to pay for a solution. Comparables are a good way to estimate pricing. For example, if your invention is a new design of a mobile camera sensor, understanding what the bill of materials is for current mobile camera sensors will provide you with a good estimate of how much a customer would be willing to pay per device.
Another filter can be applied to your analysis depending on the kind of company you plan on building and the source of investment. Since we are looking to build venture-capital backed businesses, we can remove applications and industries that would be too small to attract VC investment.
“…there we meet the future hero, a protagonist…”
This part of the narrative is all about you and your team. It answers the question, “Why you?”. How does your history set you up for the journey ahead? What skills and experience do you and your team bring to the table? Remember to include your inventors in this story: one of the advantages of being in the deep-tech startup business is that you are building on the ingenuity of experts who have been working on your technological problem for many years.
It’s perhaps worth mentioning that this section isn’t only relevant if a founding team is already in place. This section can also act as a framework for the kind of team you’ll need to assemble to make this endeavor a reality. At TandemLaunch, it acts to articulate the profiles of entrepreneurs we will need to recruit to get a venture off the ground.
“…who is sent on a journey due to a tension created by a need or large opportunity…”
Large technological problems are rarely secrets. As such, it’s unlikely that others haven’t tried to solve the same problem you’re attacking. One of the most salient questions following your description of the problem at hand is, “Why now?”. The answer to this can come from multiple sources. For example, the “why now” could be an enabling trend that has increased the value of solving the problem you’ve illustrated so that it’s worth pursuing now (e.g. The proliferation of IoT devices increasing the value of solving speech recognition in noisy environments). It could also be a trend that makes solving the problem now possible where it previously wasn’t (e.g. The democratization of machine learning development tools so that predictive models can be developed to extract valuable insights from complex sensor data).
One of my favorite analogies was developed by Srinivasan Balaji in his Startup 101 Coursera Lectures[1] - the Idea Maze. The Idea Maze is a representation of all the possible branching outcomes that come from the series of choices that a company makes in trying to successfully solve a valuable problem.
“If you can verbally and then graphically diagram a complex decision tree with many alternatives, explaining why your particular plan to navigate the maze is superior to the ten past companies that fell into pits and twenty current competitors lost in the maze, you’ll have gone a long way towards proving that you actually have a good idea that others did not and do not have.”
The analogy of the Idea Maze is relevant here because, while we have not introduced our solution yet, we are setting up for its introduction by describing why previous solutions to the problem have failed as well as presenting an opportunity to traverse the maze in a new way.
“…many have failed along the way, but this protagonist has a set of unique insights and is armed with unique tools that will help them succeed.”
It’s now time to feature your technological advantage – the “unique tools” at your disposal. It’s important to align the features that your technology brings with the needs that you’ve laid out in the early parts of your narrative. How will your technology uniquely address the need, or leverage the opportunity, that you’ve laid out? More importantly, what perspective does this technological approach provide that sets you apart from competing technologies or incumbents?
If we extrapolate the metaphor of the Idea Maze, what we’re trying to describe is the hidden path in the maze that only your company has access to by virtue of the invention. How does your technology enable a new technological or business strategy that will take market share from incumbents or serve a previously underserved category of an attractive market?
The ingredients that will help you lay out your argument at this stage arrive out of the analysis in the first part of this series (steps 3 and 4). From that analysis, you determined how the technology outperforms against the incumbents in your addressable markets. What this part of the narrative attempts to do is explain how and why that advantage arises.
…As a result, they succeed where others have failed and gain significant wealth along the way.
You have a solution to a valuable problem in hand, but that does not guarantee a successful business. What you must be able to articulate is how the solution will be represented as a product, and how that product will be strategically positioned to provide scalable and meaningful revenue. If you’re pitching to investors, you’ll have to go a step further to explain reasonable exit scenarios for your company.
Your narrative is your vision for the future, now we need a path to it.
Startups generally have messy histories; narratives arrive out of the desire to highlight what is important and arrange it into a coherent structure that the human brain can make sense of. It provides the context that a company needs to explain its values, its approach, and its growth strategy. Perhaps one of the most valuable uses for a narrative is as a guiding star from which to develop reasonable development roadmaps and market entry strategies for your business. We will explore this in the final part of our series.
[1] Balaji, S. ‘Market Research, Wireframing, and Design’. Coursera. Available at: https://spark-public.s3.amazonaws.com/startup/lecture_slides/lecture5-market-wireframing-design.pdf
