How we do true market validation and why you should hire an entrepreneur to help you do it - Case PREXELENT®
Coventures' approach to market validation is radically different from what people are used to. In our model, one of our experienced entrepreneurs joins your team, bringing with them the knowledge and tools to validate your business idea. As we see it, our job is to help you make an informed decision about whether or not to proceed with your new venture.
Market validation is a way to determine if a business idea truly has potential with real customers. It can help predict if there is a feasible and attractive market for a product or service, and whether customers are interested in paying for it. Market validation also helps us better understand customers’ pains and needs. When market validation is done early and iteratively, we waste less time and money developing an idea that isn’t truly made for customers.
The process is quite intense, as we want to make sure the validation phase is done as early and speedily as possible. This way, we minimize the risk of investing in a venture that has no future.
Read on how we partnered up with our client Premix to validate their latest corporate startup idea.
Premix is a European market leader and global forerunner in electrically conductive plastics. Their expertise lies in the formulation and production of functional plastic materials.
Their latest innovation is an active antimicrobial technology that prevents threats caused by harmful microbes. Such attributes could be immensely useful in the food ecosystem, agriculture or healthcare. Premix wanted to understand how they could commercialize their new innovation PREXELENT®, and confirm whether there is a market for it.
Premix were also eager to learn more on corporate venturing, and how to leverage startup practices in their other business areas. Often, corporations are great for extracting value, but startups are specialized in creating new value, so there’s much to learn from each other. Premix were particularly interested in how startups focus first on learning about their market.
We are painfully aware that a large majority of ventures fail due to market risk. Most times, the product is simply bad, or we just can’t find suitable customers and distribution for it.
As experienced entrepreneurs, our approach is to first identify and validate/invalidate the main assumptions, and ensure to tackle the biggest risks head-on.
Customer discovery is a process of assessing and validating the market - to see if there's a real customer need for the offering. During the process, we look for market gaps and opportunities, by interviewing industry experts who first-hand experience these problems. With Premix, we conducted +30 interviews with entrepreneurs, business owners and experts. It became clear that the market was not big enough for the original idea, and spending time on R&D would be a waste of resources.
Market discovery saved Premix a lot of money and time, as we were able to invalidate the original idea fast enough. More importantly, we discovered other interesting avenues.
The key is to not get stuck on the original idea, but stay curious and listen to what the market actually needs and wants. During the interviews, we discovered customer problems that could be addressed with the new PREXELENT® technology. This way, even though the initial plan didn't work, we were able to find the right target group and applications.
While working with the customer and market validation, we organized a set of technology development workshops, where we mirrored the market feedback. Our aim was to find a 10x better competitive edge, comparing to existing solutions in the market. In a few months, we learned a lot, not just from the markets, but also from the entire process of customer and market discovery.
In a follow-up with Premix, we were happy to notice that they started using the same entrepreneurial market validation techniques with all PREXELENT® commercialization activities. In a way, our cooperation helped them refine their overall commercialization strategy.
The collaboration between Premix’ owners, business segment partners, technology experts and Coventures’ team was practical and forward-looking. We went from ideas to action, while providing value and new business development tools to Premix.
"We found the process very useful and educational. Although the original business idea didn’t fly, we not only saved valuable time, but also crystallized our goals and strategies for the PREXELENT® business.” - Jyrki Taiminen, Business Director, Premix.
Riku is a serial entrepreneur and venture building professional. From his 10+ years experience as an entrepreneur, he has gained deep knowledge in building science-and-technology-led businesses from the ground up. He is currently working as an Entrepreneur in Residence (EiR) at Coventures. Read more about Riku from our blog.