From Lab to Launch: the Four Components of a Healthy Startup
Good ideas for new optical, photonic, and imaging products are all it takes to launch a successful business, right? Not quite, according to Sujatha Ramanujan, managing director of the Luminate Accelerator Program in Rochester, New York. Before you launch a new business, she recommends answering four important questions.
1. What is your technology?
The first and most important question is, do you have a product that solves a real problem? If there isn't a clear answer, then you might have a product, but you don't have a business. The success or failure of a startup is not dependent on clever marketing or an excellent sales team. It rides on having a product that meets a well-defined customer need. To truly define and validate the problem, interview as many potential customers as you can, not just a handful. This will help identify if the problem is pervasive and will yield a large enough market to go after.
When ride-hailing service Uber launched in San Francisco in 2009, it addressed people's desire for price transparency, which stemmed from a distrust of strangers. By quoting the ride's cost up front, Uber offered the promise of building driver-rider trust through a transparent review system. The problem was clearly defined, and visionary software engineers designed a product that solved them.
2. Who is your market?
Can you identify who, exactly, cares about what you've built? Resist the urge to make assumptions here. Put together a list of companies that you believe will want your product. This list should include who actually makes the decision to buy, in addition to who will influence the decision, such as the user of the technology.
When you are confident that you know your customer, then thoroughly scan the competition. Make sure you haven't reinvented something that's already out there. If you're lucky, you might even hear of someone who tried something similar and failed. Insight into earlier failures can make all the difference in your own success. Look to the Israeli lidar company Oryx Vision, which shut down operations in August 2019, for an example. They saw that the field of lidar was becoming a place for big companies and big players, and as a small company, they couldn't justify the investments that would be needed to stay in the game until lidar took off commercially. They tried to sell, but couldn't. For an entrepreneur wanting to enter the lidar space, their story could be important.
Also, research your market to make sure that it can support the cost of your solution. If your product will cost $200 to manufacture, but your target customer is only willing to pay $50, then you need to either find a way to reduce your costs, or find a new customer to target. Free-space optics company AOptix launched with funding in 2000 but folded sixteen years later when the market was looking for cheaper telecommunication solutions than its $80,000 links.
3. What's your advantage?
Once your product and market are clearly defined, be able to articulate your advantage. Why is your solution the best solution to the problem? Startups often differentiate on one of three different value propositions: a unique outcome, a reduced cost, or an environmental improvement. You must be able to articulate your value proposition.
However, if you are differentiating on cost, be cautious. Supply chains change and manufacturing costs are volatile. Your price advantage can be quickly wiped out by a competitor who is able to make a similar product for even less.
4. Who is on your team?
So, you know you've got a technology that solves a problem, you know exactly who you're going to solve the problem for, and you know why your solution is the best. But do you have the right team? Many great ideas based on solid science fail at this point just because the teams aren't made up of the right people.
Successful teams include a diversity of skills and thought. This diversity manifests in technical strengths, business savvy, contrasting personality types, and market knowledge. For example, in addition to finding someone with the right skills to fill the CFO and CTO roles, look for a pessimist to balance an optimist. If the project leader is a big-picture person, make sure you've got someone who likes to get stuck in the details. If your product is an innovative new moisture sensor for baby diapers, someone on your team better have an infant.
In addition, it's important that the team has a singleness of purpose and shares similar values and business goals. Are you building a lifestyle business that you want to be involved in for the next 20 years, or a business that you want to sell for $2 million five years from now? You'll run the business differently depending on the answer.
Once these four questions are answered, you'll be better prepared to start down the path of a new startup. Remember that you'll likely hear no a thousand times before you hear yes, and that you will learn more from failure than success. Good luck on your journey!
Sujatha Ramanujan, PhD, is the managing director of Luminate, an intensive accelerator program for optics, photonics, and imaging-enabled applications located in Rochester, New York. Each year, ten teams from around the world receive $100,000 each to attend the six-month program, which provides business development training, technical facilities, mentoring, and access to potential partners and investors. The Luminate program also invests an additional $2M annually in follow-on funding to the most promising fledgling companies.
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