A few insights on deeply technical startups

Building a DeepTech team

Image by Gerd Altmann from Pixabay

TL;DR

  • If you are assuming the role of CEO, delegate product and technology leadership.
  • Build the sales team to convey commercial (more than technical) credibility.
  • Assign different people to manage the product development and the technology roadmap.

I. Building a DeepTech team

This is the second of a series of articles that Armilar is producing covering the DeepTech theme, heavily inspired by interviews we ran with amazing founders of some of the companies we’ve been privileged to invest in. In the first article we simply introduced topic and shared our take on (Deep)Tech investing.

Because people are (always) the foundation of a company, this article addresses the “team” dimension, dealing with two specific topics: (i) a deeply technical founder’s decision to become CEO and (ii) building the leadership team.

II. The CEO

Every putative founder faces a tough (career, financial, personal and family) decision of whether or not to jump into the crazy journey of starting a company from scratch. Taking on the role of CEO is particularly challenging — the buck does stop with her, as does the ultimate responsibility towards all stakeholders, including towards the other founders who followed her. DeepTech founders are no different in this respect.

What we have found is that, for DeepTech startups, the role of CEO is sometimes not easily attributed to one of the founders. Frequently, several founders have deeply technical backgrounds and some (or all) may even have full-time, or part-time, academic or research careers. The choice of who should take on the role of CEO is not always straightforward, but both the individual reflection and, ultimately, the team’s decision are critical for the startup’s success.

For the sake of simplicity, let’s assume that there are two prototypes of CEO choices for a DeepTech startup about to launch: i) the first-time, deeply technical founder (typically, a researcher closely related to the development of the scientific or technological breakthrough that originated the company) and ii) the business-oriented non-deeply technical founder (often a manager invited to join the deeply technical founders).

Each will face rather different journeys to be able to lead the company. They typically depart from mastering different knowledge domains (technology vs. business) but both have to reach a common ground of minimum competencies, coupled with a set of personal traits.

Profiling the CEO of early-stage deeply technically digital ventures (illustrative)

Our thoughts that follow relate to the first-time, deeply technical CEO prototype and her journey — in particular, they relate to those with a research background contemplating becoming the CEO of a DeepTech startup.

From researcher to CEO

Here’s a suggested simplified framework as you contemplate whether you are the right team member to take on the role of CEO:

As you go through this very individual reflection and decision-making process, strive to consider what’s best for the company. And remember that a deeply technical founder can create significant value while not necessarily assuming the role of CEO.

What several founders told us is that if you have a deeply technical background — including having taken part in the scientific or technological breakthrough that originated the company — , and if you want to be the CEO, you must absolutely relinquish and delegate the technology roadmap and product development ownership and focus on the bigger picture: and this can be very uncomfortable to some. Having a deeply technical CEO can be a huge advantage to the startup; having a CEO overriding her technical team or neglecting the company’s leadership can be disastrous.

Having said this, some teams do not have to go through this process, as one of the founders clearly has the CEO role assigned to her. This can happen for multiple reasons, including the founders getting together precisely because they have complementary skills or because one of them has the will to be the CEO and all are confident that she’s the right person for the job.

III. Building the leadership team

Having dealt with the CEO’s choice, DeepTech teams need to define and fill the remaining leadership positions, taking into account two DeepTech-specific challenges: (i) selling products with a strong technological differentiation, (ii) balancing science, technology and product development. The way you approach these two challenges will, obviously, depend on the skill set and personalities of the founding team: and no two teams are alike.

Think about this as setting up the team to monetize your “secret sauce” (i.e., your underlying competitive advantage). Take this simplified (quite literal) analogy and framework:

Assembling the leadership team of early-stage deeply technically digital ventures
  • Science is the sauce’s recipe, the underlying fundamentals
    — for example, Codavel improves user experience in mobile applications by implementing a novel wireless communication protocol based on a recent subset of network information theory named network coding
    — you need someone to go deep on the subject and provide credibility
  • Technology is the set of ingredients, kitchen appliances, quality control, logistics, etc., needed to convert the conceptual recipe into a consumable matter, i.e., the actual sauce
    — for example, Vawlt delivers a multi-cloud storage solution by applying advanced cryptography techniques in a non-obvious way
    — you need someone to bridge the gap between science and product
  • Product is the 300mL bottled sauce people pick at the supermarket’s shelf (or the 5L jerrycan that restaurants order, if you are B2B)
    — for example, Feedzai’s RiskOps platform is used to analyze millions of transactions to prevent online payment fraud
    — you need someone who cares about usage and whose focus is on delivering the technology’s value in a way that is seamless and adapted to your user’s environment
  • Sales and marketing is how you reach your audience and communicate the sauce’s taste (or its value for money, if you are B2B) and make sure they keep buying from you rather than switching to a competitor sauce vendor or to an entirely different category of products
    — for example, Feedzai’s sales tactic of quickly (and unequivocally) demonstrating its product performance by using prospective clients’ historical data to identify known (by the prospective client) fraudulent transactions
    — you need someone who understands what users want, how to reach and communicate with them and how to deliver the product

(i) Selling business credibility to deliver technology-enabled value

One of the key decisions we see DeepTech founders debate over is whether:

  • (a) the CEO leads the initial sales alone, or if
  • (b) a VP of Sales & Marketing (S&M), or equivalent role, is hired to support the CEO.

While this may sound like a detail, it’s not. To close those critical initial sales (in many cases, even just closing a pilot or a PoC) will require the startup to garner and present as much credibility as possible. You’ll need to bring everything that (non-Deep)Tech startups bring to the sales process… and more.

As you’ll likely communicate your value proposition (at least partially) on your product’s performance, which is based on a non-obvious underlying technological breakthrough, you’ll possibly be framed by your prospective customers as a young and very techy (read: very risky) startup and supplier, in particular if you are B2B (as most DeepTech companies are).

In that case, you’ll have to go the extra mile to create as much comfort as possible throughout the customer buying process, which may typically include both commercial and technical personas. Credibility is the keyword for you to design your sales strategy. The people you choose to lead and participate in the sales process will very strongly influence your startup’s perceived credibility.

Illustrative credibility assessments based on hypothetical commercial interactions with prospective clients

As you go through these “fictionalized” perceived credibility assessments, we would bet that your concern is not at all on the “perceived technical credibility”… your deep technical knowledge would likely create comfort with a technical persona. Therefore, you should definitely focus on your prospective customer’s “perceived commercial credibility”.

And that’s where the decision to onboard a VP S&M right from the start comes into play. To support your decision, consider answering the following questions about the CEO:

  • Does she have industry-relevant experience? Does she understand the client’s pain points? Does she understand the market dynamics in which the client operates?
    — If not, could she compensate for that with the support of advisors and mentors?
  • Does she have sales experience? Is she able to convey the economic impact of the startup solution? Is she able to navigate the client’s decision process?
    — If not, could she quickly learn on the job?
  • Does she want to lead the initial sales process (which could last several years)?

Very few “inception”-stage startup CEOs would pass this test with flying colors (in particular, first-time deeply technical ones) and yet we believe that the majority would still be able to do a good job in leading initial sales without the need for a VP S&M… but if you do end up answering “no” to “too many” of these questions, then you should seriously contemplate creating the VP S&M role right off the bat.

On the other hand, if you simply do not have the resources to recruit a talented VP S&M with the right fit for your company… just do what you can with your team and, when you do have the resources, don’t waste time and hire the right VP S&M.

One word of caution. What several founders have taught us throughout the years is that having the CEO actively participate (ideally, lead) the sales processes (in B2B sales, of course) is critical for two reasons. First, the level of perceived commercial credibility in the sales process is significantly enhanced if the CEO shows her face to the customer; the thought being “if the company’s top boss is leading sales, then they are really focused on delivering the goods”. Second, those early sales will provide invaluable insights into the customer’s needs that must be swiftly incorporated into the company’s strategy and product development (with the goal of finding the right product-market fit), which are ultimately a CEO’s decision. The choice of who else is involved in the sales process will depend on the CEO’s profile and skills and could certainly include a VP S&M as well as the CTO or the HoP (in particular if the CEO does not have deeply technical background).

At the end of the day, it’s about showing that you have a solid business that happens to be technically strong, and not a somewhat business-like technical “organization”.

(ii) Science provides, technology enables, but it’s the product that sells

The other DeepTech-specific challenge we typically see founders face when building their initial teams is regarding the balance between science, technology and product.

Again, the setup depends on the team members’ backgrounds, expertise and individual preferences. Notwithstanding, here are some basic thoughts for you to consider:

  • First, prioritize product development and user experience. Yes, your value proposition is anchored on the underlying technology and how it outperforms alternative “legacy” solutions. But that will mean nothing if you can’t materialize your technology into a product that “people” want to use and are willing to pay for;
  • Second, make sure you have a technology roadmap that consistently maintains and, if possible, improves on the baseline that got you to start the business. We have not yet seen a digital technology that has not required consistent improvement to maintain the product’s competitiveness;
  • Third, to the extent that it makes sense for your business, contemplate maintaining some links to academia. This may sound fuzzy, but essentially means keeping tabs on leading-edge science so that you can onboard and test new concepts into your technology roadmap. In addition, these relationships may be extremely valuable for tech talent recruitment.

Translating these thoughts into actual roles:

  • Head of Product: owns the product development roadmap, user experience and product-related customer support, and doesn’t necessarily require a technical background on the subject matter.
  • Chief Technology Officer: owns the technology roadmap and typically has a very strong technical background on the subject matter.
  • Chief Science Officer: provides strong scientific credibility and, usually, is the link between the company and academia. We see startups taking very different approaches, from 100% dedication to “hands-off” advisory roles. This function is not a requirement, but may be extremely valuable under certain circumstances (e.g., in sectors where scientific credibility is critical or in companies heavily invested in R&D).

Fundamentally, do not confuse the role of the CTO and the HoP and, to the extent that it’s feasible, do not merge these roles into the same person. In DeepTech companies the CTO and the HoP have substantially different functions and very rarely should the same person assume both roles (obviously, this may not apply to companies still developing the core of the technology).

Conceptual framework and scenarios

For illustrative purposes only, we present a few conceptual scenarios applying our framework and thoughts on fictional characteristics of founders. Do take it with a grain of salt…

Food for thought: a few conceptual scenarios for team creation

IV. Summary

Building an early-stage DeepTech team is anything but easy. We are well aware that there are no blanket rules or templates and that sector idiosyncrasies, individual personalities and team dynamics override many of our considerations. Still, if you find some of our notes useful to establish your own frameworks, then we will have succeeded in this little exercise of ours.

If we had to summarize our thoughts in three simple points, these would be:

  • If you are assuming the role of CEO, delegate product and technology leadership.
  • Build the sales team to convey commercial (more than technical) credibility.
  • Assign different people to manage the product development and the technology roadmap.

In our next article on this series, we will discuss product development.

Authored by João Dias & Rodolfo Condessa, Armilar Venture Partners

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Armilar VP

Armilar VP

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Armilar is Portugal’s leading venture capital funds manager, an independent VC with a 20-year-old high-performance track record and an international footprint.