I am often asked by entrepreneurs, ‘when is the right time to apply for AC’? In short, I would say it is when you are beyond the research stage, roughly after you have nailed the right problem/solution fit and are now working towards your product/market fit. Many people have the misconception that after having built their first prototype or an MVP (minimum viable product), they are in a position to raise more capital to then build more features and “scale” the solution to the market. And that is when a lot of people approach us for funding through the AC program.
However, there is still quite a lot of work to do between completing your MVP and being ready for AC. From my experience, many companies fail during this time. The challenge is in discovering the ideal customer segment with the right motivation to buy your product right now. When we come up with a new idea, usually we have a preconceived decision of who should use the product and how they will use it. However, often early adopters are not who you think they are, nor do they use the product as you intended. It is extremely important for startup founders to start engaging with their potential customers early before they even think about building anything. Unfortunately, many of us build solutions looking for a problem, not the other way around. The ‘build it and they will come’ approach. The reason I bring this up is that this is a large part of my daily job – to mentor and coach entrepreneurs to find problem/solution fit, with the aim of subsequently becoming investible, to then potentially be in a position to seek funding from AC.
AC funds distinct projects that will lead to a commercial outcome – that gets you to first sales or to a point where you can raise significant capital in the market. We only look at projects that can demonstrate significant market pull, and we do not entertain technology push propositions. I will give you two examples to illustrate the differences – the first is technology push and the second is market pull.
Say you have developed this proprietary technology where you can potentially democratise solar energy, meaning even people living in apartments or even renting can enjoy all the benefits of solar power affordably. You have built a prototype, the maths works, you use minimal solar panels, and along with your unique battery storage mechanism (patented), it can easily handle the power usage of a 2- or 3-bedroom apartment dwelling. You have the vision that everyone living in an apartment should buy one of these, and you plan to build out your manufacturing line, engage in further product design so it can be flat packed, and eventually you can sell it in Ikea, or your local department store. You come to us, seeking $1m worth of funding to work on a $2m project that spans 24 months (because AC is a 1 to 1 matched funding grant). The first two questions I am going to ask you are, 1) who says they want to buy your product, and 2) has Ikea agreed to stock up and distribute your product? In these situations, 10 out of 10 times the answers are: we have a lot of interest from people, and not yet, we are a small company and Ikea would need to see the real product and our ability to scale manufacturing, before I would be comfortable talking to them. This is the classic technology push scenario. The strategy and pathway to market in theory works, but very likely your cashflow will dry up before you get there. In a sense you want funding to build your ideal vision, but this vision was not backed by demonstrable market pull. You have not found problem/solution fit yet.
Let’s try another way – the same company and same technology. This time round, you take your prototype and started talking to apartment developers because it seems like the product might be a good fit for their new developments. During the conversation, you are getting a sense that there is interest, but you could not get them over the line just yet. You dug deeper, and started talking to all kinds of stakeholders within the industry, like strata managers, asset managers etc. And eventually you come to a realisation that capturing solar power in apartment buildings is not the real problem, in fact, there are other better-funded companies who have already partnered with strata managers and property developers to install apartment-ready solar panels on roof tops. However, you have found a gap in the market – there is not a small and efficient enough battery storage mechanism that fit apartment usages which means that solar energy captured on apartment building roofs is wasted because it can’t all be stored for when you need it. For instance, the Telsa battery is too expensive, and is an overkill for a 2-bedroom apartment. Ah-ha! So, your right early adopter with the right motivation to buy right now are property developers and strata managers – and your patented battery storage mechanism is the right solution, not your original ‘solar in a flat pack for everyone’ vision.
This is the essence of commercialisation. This time round, you presented a project involving a property developer and a strata manager, along with a technology partner who will be responsible for the roof top solar panels. All parties are on board, and you have letters of intent or even MOUs with these parties. The objective of the project is clear. You want to test out the integrated solution in two scenarios: first in new apartment building working with the property developer, and secondly in an existing building, which is where the strata manager comes in.
What I have described, is a potential project that fits AC’s parameters. It is not just the inventor claiming that the world needs this, you actually have interested parties all putting their hands up to work towards a common goal. Importantly, there is a clear commercial outcome at the completion of the proposed project, that is, sales contracts with the property developer and strata manager to deploy the solution to other buildings, and very likely, with that kind of traction, the company would be investment-ready to take on venture capital to scale.
If you want to know about Accelerating Commercialisation, feel free to check out our blog, videos, and other educational content. Or else, reach out to one of us and we are more than happy to have a chat with you. Bye for now.