Most Technology Startup Entrepreneurs Have a Terrible Disease and Their Startups Needlessly Die

Over the length of my career at SRI, I have seen entrepreneurs propose hundreds of technology startups. The concepts were based on new technologies that spanned nearly every category:

• AI and Deep Learning
• Medical Devices
• Bio Technology
• Satellite Systems
• Robotic Systems
• Sensor Systems
• Human Interface Systems
• Cyber Security Systems
• And many, many more…

These entrepreneurs usually had deep knowledge and impressive experience in their chosen field. They often had doctorate degrees and multiple patents. They worked on technological breakthroughs that pushed the edge of science.

And as soon as I heard their venture concept—often within only a few minutes of conversation—I had that terrible feeling that they had the Entrepreneur’s Technology Disease (ETD). And I completely lost interest in the venture.

ETD infects the entrepreneur and gives them the belief that the development of the technology is the primary purpose and value of their company. And why not? They have often spent much of their lives advancing their technology and have achieved some real success in its development.

Some of the symptoms of the disease can be:

1. A fatal assumption that their first and most important problem is further advancing the technology from its current state to commercial viability
2. A value proposition that focuses primarily on the technology and its roadmap for future development
3. An intrinsic assumption that once the technology is built, the customers will come
4. A value proposition that attacks a market of billions or trillions of dollars because the technology is applicable to all of it
5. A business plan with a timeline to advance the technology without a concurrent plan to prove that the market is real, large, and has high potential for growth.
6. A business plan bereft of analysis of the adoption or switching costs for customers. A lack of understanding that the customer may have a good-enough solution already
7. A focus on current patents and a belief that the patents will serve as a moat against competition

Take, for example, a fictional company called XFOOD that wants to serve a market of food delivery from restaurants to consumers. The company intends to function within five miles of a given restaurant in a typical urban area and has a new robotic system technology for food delivery. The robot can achieve speeds of up to five miles-per-hour, refrigerate or heat food, and is able to hold a sufficiently large volume to carry ~four boxes of pizza. The robot will use computer vision, speech, natural language processing, and other AI technologies to autonomously navigate the route and deliver the food.

XFOOD has a business plan to develop the robotic system and software in its first eighteen months. Second year they will recruit alpha users and work out any difficulties. After thirty months they will seek their first customers, and in year 3 will begin scaling exponentially. In years four and five, the venture will achieve $100M in revenue.

Unfortunately, the founder of XFOOD entrepreneur has a classic case of ETD. He has focused on the development of this amazing technology and delayed engaging customers and potential customers until the technology is functioning. As such, he is highly unlikely to convince any experienced investor to invest in the company.

Put simply, the risk is “will the dogs eat the dog food?” The entrepreneur (though someone with ETD can arguably be said not to be an entrepreneur) might make this wonderful product, but will customers actually use it? Likely the entrepreneur has very little data or even a plan to answer the question. And that’s fatal.

ETD does not have to be terminal, but entrepreneurs have to have a complete mindset reversal. Any serious investor will recognize ETD, and race away. I often joke to friends when I am about to see a technology venture that I have to take a vaccination against ETD every morning, because I myself am addicted to technology. I have a Ph.D. in mathematics, and love new technology ideas.

The most important thing an entrepreneur has to do is understand that technology can be a solution to a problem for sure, but it is not the point of the venture. As soon as the entrepreneur believes that advancement of the technology is their primary purpose, they are destroying their company. The point of the venture is to find and solve an unmet need and pain point of the customer. And as such, and at its best, a technology should be invisible. The entrepreneur should think of the technology solution as a “black box” that performs the function it needs to for the customer.

Returning to our fictional example of XFOOD, the entrepreneur might best begin his journey by visiting some high quality and representative restaurant owners. He might begin by understanding how food delivery is done today, how much it costs, how it affects their flow of traffic, who the competitors are, how pricing works, whether they could consider robots, and more.

In other words, the goal here is to find the restaurant owners’ unmet need and acute pain point, how deep this pain is, and how valuable the solution might be. Entrepreneurs might brainstorm with restaurant owners the elements of the robotic solution. They might, for example, find out that mundane problems might be critically important for them, such as whether the robots might be immediately available, where they might be housed, who might load them, whether they’re large enough for the contents, and whether customers would mind going out to the door of their home or building to pick up the merchandise.

The entrepreneur might then begin development of a product with a core set of “teacher” customers who will help them identify all the issues and opportunities with their solution. And if the entrepreneur is seeking funding, they will provide a plan for the investor of advancing the venture that puts the customer input first. Beyond that, the entrepreneur can claim a basis of customers ready to purchase within a short period of time, and who are willing to iterate with him.

Returning now to the symptoms of ETD, the entrepreneur—once recovered—will:

1. Recognize that technology is an enabler, but not the basis of the company
2. Base the business plan on the proof that customers have a major pain point and there will be realistic plan for exponential growth
3. Work first on customer unmet needs and pain points, and how their technologies might be able to solve these unmet needs in a way that materially benefits the customer
4. Develop a value proposition that has a focus on the unmet need, the mission, the winning metrics, the bottlenecks for achieving those metrics, the first customers, go-to-market, and market growth
5. Develop a plan that is data-driven by rapid iterations that overcome future bottlenecks
6. Recognize that patents are valuable elements of a venture, but actually patents have little to no value in preventing a major company from competing with you. Their primary value is defensive - preventing you from being sued by others. This point is so important it will be the basis of a future post.

So, my advice to all the entrepreneurs and technology aficionados reading this post: the power of your company does not rest in how “cool” its technology is. Nor in how much progress you have made in advancing the technology alone. Nor in how many patents you have.

Rather, its power lies in your product’s ability to solve the unmet need and pain point you identified. It will be how invisible and seamless and useful your product is. It will be in how satisfied your customers are; indeed, in how many new customers are banging at your door and how quickly you can serve them!

Have you ever experienced this directly?

Do you have a counterargument?

Do you have a question?

Tell us in the comments, or reply on Linkedin or Twitter!