Aug 31, 2020 by Hsu Han Ooi
While recruiting for our first batch, we spoke with many deep tech startups in Southeast Asia. It’s no secret that the Singapore government has been pushing for more and with the abundance of strong academic institutions they were bound to pop up. Just a few months ago the Singapore government injected S$300m into Startup SG Equity for deep-technology startups. As we listened to some pitches within this vertical we noticed a few areas that could be improved and hopefully it’ll help a few of you pitch your next great idea.
Great startups typically start pitches with the problem they are trying to solve. They spend considerable time ensuring investors can understand and relate to the pain point they want to focus on, before talking about their solution.
On the other hand, deep tech pitches will sometimes skip the problem slide altogether or spend one short slide on the problem and spend 5-10 slides on their solution.
This happens because deep tech founders usually come from technical backgrounds and/or from academia. Working in academia you have a singular focus of testing state of the art ideas in domains that are relatively well-defined. However, translating your state of the art idea into a solution that handles specific customer pain points usually isn’t that simple. Remember that by definition a solution must have a problem and in the case of startups it also needs an audience.
So when you reach the problem slide in your pitch. Make sure you clearly define what is the problem, what are the pain points associated with it, who has this problem and why it’s important. While you’re pitching try to gauge the audience’s response and see if your pain points are resonating and is understood. If not, try to ask questions and see if you can clarify your problem statement.
Most deep tech startups do a great job explaining their solution and how it works but usually don’t explain enough about their competitive advantage. Just being a deep tech startup doesn’t shield you from competitors and investors want to know there’s some kind of unique competitive advantage.
Let’s take an AI company for example. For most AI companies, just being able to build the model isn’t a sufficient competitive advantage. Open source tooling and the availability of online resources makes model building extremely accessible. A better competitive advantage would revolve around your data acquisition strategy. Although tooling is accessible, it’s generally difficult to create a large, clean, and representative dataset. It’s the reason why Tesla has such a huge advantage in self-driving cars. All too often I see companies forgo this explanation on their strategy.
Basic questions include:
Building deep tech startups is hard, but that in itself isn’t a competitive advantage. Any sufficiently large market with a specific problem will attract competitors and talent. Make sure you clearly define what your competitive advantage is and how you plan to develop that over time. I gave an example in AI around using data as your advantage but this could be a variety of things from unique partnerships, access to capital, insights you’ve gathered, or more.
Just building a product or having the best solution won’t bring paying customers. Deep tech founders normally come from technical backgrounds which generally lack in traditional sales skills. Not having a sales background they tend to underestimate the amount of work it takes to market and close that initial set of customers. Deep tech can also take more time and funding to develop an initial minimum viable product (MVP) so it may not have had a chance to test their product with customers before fundraising.
This is why having a convincing acquisition strategy and initial testing with users is critical. Especially since you’ll be raising more capital at a typically earlier stage of your product lifecycle. If you do the three things below you’ll already be ahead of the game.
If the first question for deep tech startups revolves around whether your technology will work, the second question is how will you gain distribution and find potential customers.
“Any sufficiently advanced technology is indistinguishable from magic” said Arthur C. Clarke. Whereas normal technology companies are incremental steps forward, when a deep tech company succeeds it should be a leap ahead of the rest. In the pitch this needs to be clearly conveyed. How will your company’s success create that magic moment for your customers? Similar to #1, we sometimes see companies spend way too much time on proving how the technology works as opposed to why it matters so much. This should be accurately conveyed in your deck and should answer the following.
One recent example of this was a materials company I met with. They spent 4 slides talking about the current market for biodegradable plastics and then dove into how they made their material easier to produce and that it degrades faster. I was sufficiently convinced they could do it after one slide (considering I’m not materials expert) but what they failed to convince me of is why that matters. If it degrades much faster than other plastics can I just throw it anywhere outside and not worry about having garbage everywhere? Or if it’s that much easier to produce will that result in faster delivery times or cost reduction for customers?
Take the time to convince investors you are an expert in your field and have a reasonably high probability to succeed. After that, lean into how your innovation will affect those around you and ultimately the global ecosystem.
As governments push for more technical innovation through grants we are bound to see an increase in deep tech startups within Southeast Asia in the next several years. That means it’s more and more important your deep tech startup stands out above the crowd. If you follow the tips listed above you’ll be at least 4 steps ahead but if you want even more help on your pitch email us at email@example.com we’d be happy to look over your deck and provide feedback.