Matthew Rendall developed his first robotic vehicle at the University of Waterloo in 2008. It's original purpose: environmental monitoring. Spanning a meter long, he created a robotic yellow boat that sailed across the water autonomously gathering data on water quality. Capable of performing different functions, this system generated demand from researchers across the university.
With a growing base of users, Mr. Rendall recognized the potential to commercialize this technology and adapt it for other sectors such as defence. In 2009, Mr. Rendall launched Clearpath Robotics with fellow students turned business partners. His first priority: find a first paying customer.
The new entrepreneur pounded the pavement, reaching out to prospective customers to determine market need. Within weeks, his concept gained traction, generating the first of a dozen purchase orders. With minimal investment, business experience and less than $200 in the bank, his challenge flipped from one of demand to supply. Leveraging timely funding and business support from the Centre for Commercialization of Research (CCR), Clearpath collaborated consistently with these early customers and filled each order. More importantly, the firm acquired essential expertise in marketing and sales – just as they were taking flight. This included an embedded executive who helped the firm scale globally and secure 50 clients in Europe, Asia and North America.
Clearpath Robotics is different from most startups. Their customer-centric approach is driving sustainability and generating results. They established customer revenues that enabled them to operate on a profit and loss basis right from the start. Today, the firm counts MIT, Stanford University, DND and the U.S. Department of Defence among more than 350 global customers. It has doubled its sales year over year since its inception, and it is on track to do it again this year. Mr. Rendall attributes a large part of his success to the risk capital and business guidance that was provided at a time when no one else would consider investing. It enabled Clearpath Robotics to acquire its first customers. And customers are the ones that fuel the growth of a business.
A company is not in business to create cool technology – it is in business to make money. And to make money, a company must have paying customers. It is a fundamental success factor in business. And it is one that is often overlooked particularly when a firm is just getting started. Many entrepreneurs focus solely on technology development dedicating little or no time to the customer until they have a finished product ready for sale. These companies often end up searching for a problem to solve with their cool technology.
Given government policies and tax incentives that aim to stimulate much needed R&D, it is no surprise that cash-hungry startups gravitate to technology development activities. There is little funding to support commerce during the initial stages of commercialization – let alone to scale-up internationally as a born global company. This often perpetuates a flawed approach: all focus on R&D and little to no focus on commerce.
Many studies reinforce the critical role of the first customer in building a business – and the need to bring them in early and keep them engaged. Look at Clearpath Robotics.
For a young firm, customer interaction during the early stages of development often leads to a successful product and a successful business. It validates the product idea. It demonstrates that the product solves a problem in the marketplace. And it proves that someone is willing to pay for it.
Entrepreneurs can increase their potential for success by working in partnership with a first customer throughout the product development cycle. A first customer can share pain points and guidance that support the creation of a market driven solution from the get go. This can eliminate years of product reformulation and wasted resources, and accelerate time to market and profitability. Moreover, it can sometimes help a company achieve a key goal in business: the creation of a new market category in which they have first mover advantage –and a true first customer.
Perhaps most importantly, customers generate non-dilutive cash. Seed funding, venture capital and borrowed money all dilute the financial reward that a company works so hard to reap. The earlier a firm can secure a paying customer, the greater its financial reward in the future.
So, how can we help more Canadian entrepreneurs and SMEs engage customers early in the product development process, and achieve the global market success enjoyed by Clearpath Robotics? We can start by:
- Achieving greater balance between R&D and commercialization support policies to help Canadian firms undertake commercial activities such as market research and customer outreach while they are developing their ‘big idea’
- Increasing client focus in publicly funded commercialization services to put more entrepreneurs in front of elusive first customers
- Creating more forums for entrepreneurs to discuss product ideas with prospective customers
- Establishing networks that promote and foster customer linkages, relationships and market opportunities for Canadian firms at home and abroad
- Providing entrepreneurs with customer readiness training and access to experienced executives who can leverage valuable contacts, facilitate introductions and nurture first client relationships
As Mr. Rendall will attest, securing a first paying customer is mission critical for the startup. If we aim to help Canadian firms such as Clearpath Robotics take a larger bite out of the global market, we must help them build a global customer base. It is time to achieve greater balance between our R&D and commercialization support policies.
Dr. Mario Thomas is the managing director of the federally-funded Centre for Commercialization of Research (CCR) which accelerates the commercialization of publically funded research and builds more robust, globally competitive Canadian entrepreneurs and firms across Canada. He also serves as senior vice-president of the Ontario Centres of Excellence (OCE) and founding chairman of the International Commercialization Alliance (ICA).