https://www.linkedin.com/pulse/getting-your-robot-startup-big-leagues-abcd-approach-aaron-prather/
For many years, I was an off-ice official for a local minor league hockey team. This league was the equivalent of the A-League if one compared it to the baseball farm system. Over my years, I would see players come and go. Some would move up quickly or within a few seasons, but the majority of them would eventually realize that they were not going to make a living playing the sport they loved and quit. Most of my time in the league, I kept the stats sheet. I would log a player's goals, assists, penalties, and other key bits of data for the position they played on the team. In this role, I knew exactly which players were going to be leaving us soon for nicer ice rinks at the next level and which players were hitting the road to go back home. The stats painted a picture of which players were ready to move on to bigger things and which ones needed to give it up.
It is odd now that I find myself in a similar role when it comes to startups, especially those in the robotics space. For the past couple years, I've come across hundreds of startups in the robotics industry. Similar to those minor league hockey players, I have started to recognize which firms are going to move up the proverbial ladder to the bigger things, which ones that may need more time in the minors to develop their tech, and which ones are going to be going home to try other things.
So what are the things on a robotic startup's "stat sheet" that tells me where they are heading and if they are definitely on a path to joining the big leagues and are ready to work with a Fortune 500 company like FedEx? It all comes down to checking boxes A, B, C, and D:
Assessed and Assigned tech to the right use case.
Bench of Talented Individuals
Capital and Cash Flow
Deployments
These are the biggest success categories I have seen when it comes to robot startups that are now (or soon will be) moving to the top of the industry. So let's take a deeper dive into each one.
Assessed and Assigned Tech to the Right Use Case
Too many times I have been approached by a startup who think they have created something that has never been seen before in the industry. In all honesty, the number of startups that have shown me something I haven't already seen in a similar iteration somewhere else - I can count on one hand. Most of the time I can pull up a news article in The Robot Report or another trade publication and show them a company doing the same thing. So the first thing every startup needs to do is assess the market and see if they are doing something similar to others in the space. If they are, then they need to ask themselves what makes them special/unique/better than the twenty companies doing the same thing? If they can't answer that, it is already time to reassess their technology and business proposition.
No alt text provided for this image
The next thing many startups fail to do is assess the task they want to solve for a potential customer. If you are claiming you have created a robot that does "Job X," but you have never done "Job X" yourself then your credibility is going to drop quickly with a client. For the record, when I started my career with FedEx over 25 years ago, I offload trucks and containers, inducted packages, and loaded trucks and aircraft back up. Even today, I will sometimes find myself back out in operations to ensure I never forget the tasks our frontline employees do day in and day out. This means that when I am sitting across from a young CEO who has been in academics for his whole life tells me he created a solution for one of my tasks, but has never seen it done or done it himself, I am already one foot out the door. The second foot leaves when they tell me that I need to completely change my operations so his tech can actually work in my facilities.
Now it is something completely different for that CEO to say "we think we created something, but we need a subject-matter expert to help us prove this is the right use case for us." That is something the vast majority of us in manufacturing, logistics, retail, and other industries can work with. This is a sign of someone that realizes they don't have all the answers. They need to do their Customer Discovery and learn from their potential clients what the real pain points are and IF there tech makes any sense to those use cases. As the saying goes, "Just because you can build a robot for a use case, doesn't mean you should." There are other solutions that can be just as good if not better than a robot. Just ask Walmart and Bossa Nova.
It is only after doing all of this assessing via an industry and customer discovery process can a startup make the wise decision of assigning their tech to the right use case for them. I've seen some startups actually pivot their plans at this time. Sometimes startups find that their tech is not really needed in an industry like logistics, but is better suited for a completely different industry. This is all a good thing in my opinion, because it proves how much work the startup has done into assessing their tech both internally to itself and externally to the market.
Bench of Talented Individuals
This one gets overlooked by startups and early on it is not their fault. Many robot startups kick off with a handful of passionate engineers. This is always a great place to start, but to get to the big league, a startup is going to need to build a big bench of talented individuals across numerous disciplines to deal with a Fortune 500 company like FedEx.
If I am in discussions with a firm with less than 25 people, there is a ton of extra paperwork I have to fill out. Why? Because I need to ensure this small company can take on the demands of a company with over 500,000 employees and touches 99% of the world's economic activity.
No alt text provided for this image
Many times I tell startups that "just because you can talk to a company like FedEx, doesn't mean you are ready to do business with a company like FedEx." This is not to say we would not be interested in talking to you about your tech. My team can provide some great insight and help in your Customer Discovery process. However, if your team is not ready to deal with a 24/7/365 around the world operation, then don't put yourself in the position. There is no need to be the dog that catches the big bad car and now is just along for the ride.
Teams that are ready to move into the big time have built out a deep bench of not only highly talented engineers, programmers, and roboticists, but also business talent on the sales, marketing, and customer service side. Sometimes this bench growth doesn't happen until the next item on this ABCD list. However, it is critical a firm has this bench of talented individuals with numerous different types of skills to deal with a plethora of demands that will come with a big league client.
Capital and Cash Flow
Robotic startups are some of the most expensive, capital intensive enterprises on the planet. Unlike startups in the software or mobile app space, iterating on robot designs is an expensive endeavor. Robot firms can burn through cash at an alarming rate as they try to build their hardware and their software to support it. This is why it is not surprising that many of the big successes right now in the industry are more on the software side of industry where costs and burn rates can be kept in check, because hardware development is minimized by using off the shelf components.
So what does a startup do when it comes to capital and cash flow? Besides trying to use as much free stuff as possible when it comes to building their application (thank you ROS), it is also wise to work with small to medium enterprises that cannot only help them prove out their tech, but hopefully pay them for it. Capital and cash flow are sometimes the biggest obstacles to a startup. This is where many startups with a great idea/product have perished through no fault of their own. There is no silver bullet for many startups here. How resourceful you can be is probably your only winning path here. This is why wasting resources on chasing a single large customer is probably not the best use of your limited resources early on. Yes, a big customer can get that cash flow going, but it is highly unlikely early on a big client will take the risk on you.
No alt text provided for this image
As stated earlier, when I am in talks with a small firm of less than 25 employees, there is extra paperwork to fill out. One of the forms that will need to be filled out is a financial one to ensure the firm is financially healthy to work long term with FedEx. This is another reason, we stress to startup firms that they need to build up their operations prior to engaging a big customer, because we will ask these types of financial questions.
I have seen some robotic firms completely bootstrap themselves. So it is possible to do that. For some firms, they will get Venture Capital funding that will allow them to grow their bench of employees and to further enhance their technology. That will help them in getting to the big time. However, having a cash flow from sales to customers is a sure fire way to keep moving up the ladder to the major league. Why? Because that gives bigger customers some very important validation that your tech works. That leads to the next key stat to build.
Deployments
Nothing proves that a robot startup is ready for the big time than having numerous deployments under their belt. The more deployments a company has, the more likely a big firm is going to want to do business with them. They have proven themselves that not only their tech works, but they have been out there in the "real world" working with other customers and providing them solutions. It also gives the bigger firm a chance to talk to one of those clients and get their thoughts on the tech and how it works for them. Smart startup CEOs will actually offer their early clients up to talk to the bigger potential client to actual speed that process up.
Deployments also indicate that the firm has some sort of cash flow coming in which makes the financial picture a bit clearer. Now this cash flow may not be enough to sustain the firm long term, but it does indicate the start of a revenue stream for them, even a small one.
So what is the magic number for a Fortune 500 when it comes to deployments? 10? 30? 50? Each Fortune 500 company will be different. It really depends on the firm and the technology they are selling. It also depends if the startup has really nailed down the earlier items on this list. A team that has a top notch solution and has put it in the ideal use case will get more leeway on the number of deployments. The flipside to that is if a firm that has a solution similar to a dozen others, but has the vast majority of the deployments in the market, they will get more attention by a large firm. One just needs to look at Universal Robots domination of the Collaborative Robot space. When you think Collaborative Robot which company pops in your head first? Same with many executives.
Conclusions
So what is the takeaway from all of this? What is the best way to sum up this ABCD approach? It really comes down to this:
Ask a lot of questions about your technology and the market. Make sure you understand everything that you need to know about the problem you think you want to solve for your customer. Reach out to the Subject Matter Experts in the industries that you want to go after. Do not be scared to admit your idea/tech will not work as you originally thought. Adapt and move on to where you do think it will work.
Build up a top notch team. Before even thinking of talking to a large customer, ask yourself are you ready to support them every hour they are open. If you are not capable of supporting the 24/7/365 operations of a large customer, then you are not ready for that customer. Get the talent that will allow you to land and then KEEP those big clients.
Cash on hand and cash coming in. This can be a difficult one for many startup founders, because they want to land a big client like a FedEx to not only get cash flow, but also get VCs to jump on board. However, a Fortune 500 company is not going to take the risk on a firm that is "living paycheck to paycheck" especially if it is their company keeping the smaller firm alive. Get those small wins with small and medium size enterprises.
Deploy and delivery your product to as many of those small and medium sized customers as soon as possible. This not only proves that your technology is valuable to numerous clients, you are also showing you are not dependent on a single client for your revenue stream. This one may take the longest to get to, but if you focus on getting those small wins in the minor leagues of small and medium enterprises you are growing your image in the eyes of the major players.
Each startup is going to have their own path to winning that first big time client. A few may have a killer technology that allows them to not need the deployments or a lot of capital on hand to get there. These are the unicorns of the startup world and have that once in a generation idea/tech. The vast majority of robot startups however will take a very measured approach and be open to building gradually to the big time. It is very true that the slow and steady approach wins more than forcing your way to the top and then finding you are not at all ready.
It is odd now that I find myself in a similar role when it comes to startups, especially those in the robotics space. For the past couple years, I've come across hundreds of startups in the robotics industry. Similar to those minor league hockey players, I have started to recognize which firms are going to move up the proverbial ladder to the bigger things, which ones that may need more time in the minors to develop their tech, and which ones are going to be going home to try other things.
So what are the things on a robotic startup's "stat sheet" that tells me where they are heading and if they are definitely on a path to joining the big leagues and are ready to work with a Fortune 500 company like FedEx? It all comes down to checking boxes A, B, C, and D:
Assessed and Assigned tech to the right use case.
Bench of Talented Individuals
Capital and Cash Flow
Deployments
These are the biggest success categories I have seen when it comes to robot startups that are now (or soon will be) moving to the top of the industry. So let's take a deeper dive into each one.
Assessed and Assigned Tech to the Right Use Case
Too many times I have been approached by a startup who think they have created something that has never been seen before in the industry. In all honesty, the number of startups that have shown me something I haven't already seen in a similar iteration somewhere else - I can count on one hand. Most of the time I can pull up a news article in The Robot Report or another trade publication and show them a company doing the same thing. So the first thing every startup needs to do is assess the market and see if they are doing something similar to others in the space. If they are, then they need to ask themselves what makes them special/unique/better than the twenty companies doing the same thing? If they can't answer that, it is already time to reassess their technology and business proposition.
No alt text provided for this image
The next thing many startups fail to do is assess the task they want to solve for a potential customer. If you are claiming you have created a robot that does "Job X," but you have never done "Job X" yourself then your credibility is going to drop quickly with a client. For the record, when I started my career with FedEx over 25 years ago, I offload trucks and containers, inducted packages, and loaded trucks and aircraft back up. Even today, I will sometimes find myself back out in operations to ensure I never forget the tasks our frontline employees do day in and day out. This means that when I am sitting across from a young CEO who has been in academics for his whole life tells me he created a solution for one of my tasks, but has never seen it done or done it himself, I am already one foot out the door. The second foot leaves when they tell me that I need to completely change my operations so his tech can actually work in my facilities.
Now it is something completely different for that CEO to say "we think we created something, but we need a subject-matter expert to help us prove this is the right use case for us." That is something the vast majority of us in manufacturing, logistics, retail, and other industries can work with. This is a sign of someone that realizes they don't have all the answers. They need to do their Customer Discovery and learn from their potential clients what the real pain points are and IF there tech makes any sense to those use cases. As the saying goes, "Just because you can build a robot for a use case, doesn't mean you should." There are other solutions that can be just as good if not better than a robot. Just ask Walmart and Bossa Nova.
It is only after doing all of this assessing via an industry and customer discovery process can a startup make the wise decision of assigning their tech to the right use case for them. I've seen some startups actually pivot their plans at this time. Sometimes startups find that their tech is not really needed in an industry like logistics, but is better suited for a completely different industry. This is all a good thing in my opinion, because it proves how much work the startup has done into assessing their tech both internally to itself and externally to the market.
Bench of Talented Individuals
This one gets overlooked by startups and early on it is not their fault. Many robot startups kick off with a handful of passionate engineers. This is always a great place to start, but to get to the big league, a startup is going to need to build a big bench of talented individuals across numerous disciplines to deal with a Fortune 500 company like FedEx.
If I am in discussions with a firm with less than 25 people, there is a ton of extra paperwork I have to fill out. Why? Because I need to ensure this small company can take on the demands of a company with over 500,000 employees and touches 99% of the world's economic activity.
No alt text provided for this image
Many times I tell startups that "just because you can talk to a company like FedEx, doesn't mean you are ready to do business with a company like FedEx." This is not to say we would not be interested in talking to you about your tech. My team can provide some great insight and help in your Customer Discovery process. However, if your team is not ready to deal with a 24/7/365 around the world operation, then don't put yourself in the position. There is no need to be the dog that catches the big bad car and now is just along for the ride.
Teams that are ready to move into the big time have built out a deep bench of not only highly talented engineers, programmers, and roboticists, but also business talent on the sales, marketing, and customer service side. Sometimes this bench growth doesn't happen until the next item on this ABCD list. However, it is critical a firm has this bench of talented individuals with numerous different types of skills to deal with a plethora of demands that will come with a big league client.
Capital and Cash Flow
Robotic startups are some of the most expensive, capital intensive enterprises on the planet. Unlike startups in the software or mobile app space, iterating on robot designs is an expensive endeavor. Robot firms can burn through cash at an alarming rate as they try to build their hardware and their software to support it. This is why it is not surprising that many of the big successes right now in the industry are more on the software side of industry where costs and burn rates can be kept in check, because hardware development is minimized by using off the shelf components.
So what does a startup do when it comes to capital and cash flow? Besides trying to use as much free stuff as possible when it comes to building their application (thank you ROS), it is also wise to work with small to medium enterprises that cannot only help them prove out their tech, but hopefully pay them for it. Capital and cash flow are sometimes the biggest obstacles to a startup. This is where many startups with a great idea/product have perished through no fault of their own. There is no silver bullet for many startups here. How resourceful you can be is probably your only winning path here. This is why wasting resources on chasing a single large customer is probably not the best use of your limited resources early on. Yes, a big customer can get that cash flow going, but it is highly unlikely early on a big client will take the risk on you.
No alt text provided for this image
As stated earlier, when I am in talks with a small firm of less than 25 employees, there is extra paperwork to fill out. One of the forms that will need to be filled out is a financial one to ensure the firm is financially healthy to work long term with FedEx. This is another reason, we stress to startup firms that they need to build up their operations prior to engaging a big customer, because we will ask these types of financial questions.
I have seen some robotic firms completely bootstrap themselves. So it is possible to do that. For some firms, they will get Venture Capital funding that will allow them to grow their bench of employees and to further enhance their technology. That will help them in getting to the big time. However, having a cash flow from sales to customers is a sure fire way to keep moving up the ladder to the major league. Why? Because that gives bigger customers some very important validation that your tech works. That leads to the next key stat to build.
Deployments
Nothing proves that a robot startup is ready for the big time than having numerous deployments under their belt. The more deployments a company has, the more likely a big firm is going to want to do business with them. They have proven themselves that not only their tech works, but they have been out there in the "real world" working with other customers and providing them solutions. It also gives the bigger firm a chance to talk to one of those clients and get their thoughts on the tech and how it works for them. Smart startup CEOs will actually offer their early clients up to talk to the bigger potential client to actual speed that process up.
Deployments also indicate that the firm has some sort of cash flow coming in which makes the financial picture a bit clearer. Now this cash flow may not be enough to sustain the firm long term, but it does indicate the start of a revenue stream for them, even a small one.
So what is the magic number for a Fortune 500 when it comes to deployments? 10? 30? 50? Each Fortune 500 company will be different. It really depends on the firm and the technology they are selling. It also depends if the startup has really nailed down the earlier items on this list. A team that has a top notch solution and has put it in the ideal use case will get more leeway on the number of deployments. The flipside to that is if a firm that has a solution similar to a dozen others, but has the vast majority of the deployments in the market, they will get more attention by a large firm. One just needs to look at Universal Robots domination of the Collaborative Robot space. When you think Collaborative Robot which company pops in your head first? Same with many executives.
Conclusions
So what is the takeaway from all of this? What is the best way to sum up this ABCD approach? It really comes down to this:
Ask a lot of questions about your technology and the market. Make sure you understand everything that you need to know about the problem you think you want to solve for your customer. Reach out to the Subject Matter Experts in the industries that you want to go after. Do not be scared to admit your idea/tech will not work as you originally thought. Adapt and move on to where you do think it will work.
Build up a top notch team. Before even thinking of talking to a large customer, ask yourself are you ready to support them every hour they are open. If you are not capable of supporting the 24/7/365 operations of a large customer, then you are not ready for that customer. Get the talent that will allow you to land and then KEEP those big clients.
Cash on hand and cash coming in. This can be a difficult one for many startup founders, because they want to land a big client like a FedEx to not only get cash flow, but also get VCs to jump on board. However, a Fortune 500 company is not going to take the risk on a firm that is "living paycheck to paycheck" especially if it is their company keeping the smaller firm alive. Get those small wins with small and medium size enterprises.
Deploy and delivery your product to as many of those small and medium sized customers as soon as possible. This not only proves that your technology is valuable to numerous clients, you are also showing you are not dependent on a single client for your revenue stream. This one may take the longest to get to, but if you focus on getting those small wins in the minor leagues of small and medium enterprises you are growing your image in the eyes of the major players.
Each startup is going to have their own path to winning that first big time client. A few may have a killer technology that allows them to not need the deployments or a lot of capital on hand to get there. These are the unicorns of the startup world and have that once in a generation idea/tech. The vast majority of robot startups however will take a very measured approach and be open to building gradually to the big time. It is very true that the slow and steady approach wins more than forcing your way to the top and then finding you are not at all ready.
No comments:
Post a Comment