As a deep tech fund, we come across a fair share of platform-tech startups. The promise of supposedly expandable market opportunities is auspicious for growth and return. Though oftentimes, many fall into execution traps, especially earlier on in the life cycle.
While some missteps may be reversible, others exhaust already limited resources and lead to a point of no return.
Advanced technology platform
If you come from a science/engineering background, you know you’re working on a high impact project if it’s “platform.” Essentially, it’s a core technology that can be applied to multiple use cases. For example, a brilliant postdoc and his team from my PhD lab were working on a method to edit multiple genes simultaneously using CRISPR. Their approach could be used to speed up metabolic engineering for any gene targets, and/or screen for desirable traits from mutated genetic varieties.
To point out the obvious, CRISPR is a prime example of a “platform” technology, probably to a whole other level.
The versatility of the platform technology is enticing; the opportunities seem endless. This is especially so for first-time technical co-founders, who often spin off the work from their respective academic labs.
The caveat: platform technology is a solution looking for a problem
It could take years to go from ideation to proving that the technology works— sometimes decades. It’s unfortunate, but unavoidable.
At the end of that long and arduous process, you may come out on the other side with a fully developed platform technology. Despite its very nature of having multiple applications, a platform technology is still a solution nonetheless. It still needs that one ideal use case within a market to kick things off the commercialization curve.
My favorite metaphor is to compare the technology solution to a key in search of a lock. Only this lock needs to (1) want to be opened, and (2) be able to be opened by this key that has taken years to forge.
The lock, or specific problem in the market, needs to also represent a sufficiently large opportunity for the whole endeavor to be worth the risk and the invested resources.
The danger of optionality
A true platform technology should be able to address many market problems. But that very promise is also its worst enemy.
With limited time and capital, it’s just shy of delusional to think that an early-stage startup can capture all the potential market opportunities from the get-go.
Or perhaps it’s a false sense of optionality. Though this leads to the same outcome, where the team is usually not focused and fails to hit relevant milestones for what should have been prioritized as a target market.
As discussed in detail here, we invest in “product-ready” technologies with a clear market-fit. This is what we believe makes sense for a venture model. Explore all the optionality you want on non-dilutive grants, but pick your winner segment and execute on it when raising a venture round.
Different market, different go-to-market strategy
When approached with a market-first lens, this is obvious. Yet, as pointed out above, advanced technology is very much a solution-first tactic by nature. An all too common mistake is assuming that the platform technology is a magic wand that solves all problems for all markets.
So, why not try to sell the derivatives to all the applicable customer segments to hedge the risk? The problem is, at the very least, that each customer group and each market have their own stakeholder dynamic, they care about different value propositions, and they have different sales cycles.
Consider a hypothetical startup with the best core technology in AI facial-recognition platform; while the core know-how might be identical, the products targeting police departments would look different from those to be sold to smartphone companies. And even though you might be able to put together a rough prototype for each market, the often-overlooked aspect is that the customer pipeline, the customer pitches, and the overall go-to-market strategies are nothing alike. The time spent figuring out each market dynamic, coupled with the sales cycle, is the time early-stage startups can rarely afford to waste.
Unfortunately, companies that try to target multiple markets at the same time end up spreading themselves way too thin. Often, they stall at an R&D phase, and fail to show sufficiently convincing evidence for product-market-fit needed for growth.
Discipline and focus
With all that said, platform technology startups are still quite favorable from an investment perspective. It doesn’t hurt to have an arsenal of deliverables beyond the primary focus, so long as the initial market is adequately large and truly prioritized.
We know full well that developing advanced tech platforms is arduous, but there is a long road ahead as the techs enter the commercialization phase. Having the versatility of the platform-tech is assuring, but the optionality does not make “market-first” principle obsolete. On the contrary, it might require even more discipline and focus to succeed.