Thinking about deep-tech, particularly in sectors such as energy and the environment, innovative technologies often have the potential to solve multiple challenges across different markets. We’ve seen this with a number of our portfolio companies and while this multifaceted potential is exciting it also means the company faces a significant challenge: identifying the most promising initial market.
The Multi-Market Dilemma
Take Cetogenix, one of our portfolio companies, as an example. Their Ceto-Boost™ platform technology has potential applications in both renewable natural gas production and wastewater treatment plant optimisation. This versatility is a testament to the power of their innovation, but it can result in management making some tought strategic decisions about which way to go and when.
Having multiple market opportunities is, in many ways, a good problem to have. However, it comes with its own set of challenges:
- Focus vs.Versatility: Because of the inherent demands on capital and human resources, deep-tech companies need to find the right balance between showcasing their technology's versatility while maintaining a focused approach to market entry.
- Momentum and Market Timing: Selecting the wrong initial market can lead to lost momentum, asmarkets move on and opportunities shift.
- Resource Allocation: Pursuing multiple market opportunities can stretch a company's resources thin, potentially compromising execution excellence.
Guiding the Decision Process
Our role as an active investor isto help our portfolio companies navigate the challenge of identifying potentialmarkets by focusing on key high-level questions.
- Market Size: Is the potential market large enough to support significant growth?
- Accessibility: Can the company access this market with its current technology and resources, or does it require substantial additional capital?
- Technology Readiness: Does the current stage of technological development align with the chosen market's needs?
- Competitive Landscape: How crowded is the market, and what unique value does the technology bring?
- Regulatory Environment: Are there regulatory tailwinds or headwinds in the potential market?
- Time to Market: How quickly can the technology be commercialised in this specific market?
- Scalability: Does success in this initial market open doors to other applications or markets?
Strategic Flexibility
While identifying a primary market is critical, maintaining strategic flexibility is also key. The ability to pivot or expand into secondary markets can be valuable and we see this with many of our portfolio companies.
Identifying the right initial market for a versatile deep tech innovation is as much an art as it is ascience. The art bit comes from leveraging experience and sector knowledge - asking the right questions and maintaining a balance between focus and flexibility.
