“Early-growth startups often have the same four challenges”: Here’s how founders can fix them

Behind Energy Innovation Capital (EIC), there’s a team of investors with experience investing in more than 150 energy and industrial tech companies. With their collective insights into the energy and resource-intensive industries, they are well-positioned to observe patterns in startups operating in this space — and to offer well-tested solutions to common problems.

EIC Partner Joaquin Silva suggests that there are four common challenges that early-growth startups often face, which EIC’s Portfolio Company Scaling Model has been designed to address. Strong execution against these challenges can have profound effects, enabling innovative new technologies to find their way to the right customers, easing the transition towards more sustainable growth.

Problem #1: Chasing too many sales leads across many ill-defined market segments

A company may have an excellent product, backed by a passionate and hard-working team, but that means very little if it doesn’t find its way to the right customers. This is one of the most common problems EIC sees in early-growth startups, where go-to-market is ill-defined beyond initial validation of product-market fit.

If not enough thought goes into which market segment to target, start-up companies often find themselves chasing any lead across any segment in a bid to build revenue.

“The approach is, ‘If I make this change to the product then I can go to this area,’” Joaquin explains. “So, they’re chasing sales deals and leads as opposed to a systematic approach to sales, marketing, product engineering and finance in one well-defined focused market segment.”

This spreads you too thin in terms of resources and time, and trying to cover too many market segments undermines your ability to develop a deep understanding of your customer. Changing the market segment focus like this can also water down an initially focused product offering, and lead to spending extra time on development when you should have shifted to sales and marketing.

Solution: Defining and focusing on your target market segment

Defining a specific market segment and developing a strong understanding of it leaves you better placed to get a foothold building the right initial features and functions of the product, start generating revenue, and eventually expand.

“Create a system around one market segment to make sure you’ve got the value proposition, you’ve got the messaging, you’ve got the references, you’ve got the proof points,” Joaquin suggests. “I’d rather see a company that’s really got depth of revenue and sales pipeline in one segment than one that’s got an incomplete initial segment with an additional 10 segments and 10 geographies still in early development.”

If a company has truly innovative tech and delivers real value, EIC can help with the process of identifying an audience. EIC assists founders through hands-on product management “boot camps” that focus on process development to scale, looking at topics including:

• Differentiated product value proposition
• “Whole product” definition
• Crisp segmentation and focus
• End-user focus and voice of customer input
• Optimal channel and contract structures
• Product roadmap for growth

EIC believes around two-thirds of start-ups could benefit from spending more time on this early on. While some manage to be in the right place at the right time with the right product, that luck isn’t always sustainable.

“I would say the majority of investments could benefit from that commercial go-to-market piece of it,” Joaquin notes, “even when they’re post-revenue. Because as you start to add people, then you have to go through building more of a process around it anyway.”

Problem #2: Disconnect between the founding team, board and investors

With a great product, a solid go-to-market strategy and funding in place, you’re in a good position. But at this stage, another common early-growth startup problem can arise: a disconnect between the founding team, board and investors. Poor communication between these groups can lead to friction, wasted time and missed opportunities.

On the founding team side, communication challenges often arise simply from a lack of experience, with many teams led by first-time CEOs with deep technical backgrounds. They may put in a lot of work to develop an excellent business plan, then poorly communicate some of the plan changes as things evolve or feel unclear about how to track and convey progress.

When it comes to the board and investors’ side, a lack of time and deep knowledge of the intricacies of the cross functional execution plan and how it integrates into the financial plan can cause problems, especially as the board members often have more grounding in finance than technology and entrepreneurship. Joaquin notes that you have very limited time to bridge that gap. “You get three, four hours in a board meeting, maybe a monthly call. That’s just not enough time really to get under the cover.”

Solution: Develop prioritized strategic objectives with clear execution milestones and a consistent reporting framework

Somewhat unusual for VCs investing in early-stage companies, EIC has built processes to help businesses scale. EIC’s model goes beyond the typical VC method of just placing someone on the board to monitor the investment. We introduce a system and playbook to provide more support depending on the needs of the business. A common starting point is to assist in ensuring there is a clear cross functional execution model with milestones to track progress and a board reporting process that is clear and transparent.

“We typically have a board member and a board observer,” Joaquin explains. “But if there’s more in-depth work needed, we’ll bring in an outside subject matter expert, such as somebody who has sales and marketing or industry-specific experience.”

The go-to-market bootcamps can be invaluable for creating alignment, making sure everyone has a shared understanding of objectives, metrics of success and good communications pathways. They can get everyone speaking the same language, which helps less-experienced founders know how best to approach board reporting.

Problem #3: Lack of critical skill sets as a company grows

Founding teams who are passionate and highly knowledgeable about their areas of expertise are great assets when seeking investment. But the technical skills which underlie their innovative products aren’t enough to run a business alone.

This is a pattern that appears in a wide range of industries. As a technology-focused company scales up, they will start to feel the lack of people management, project management, financial forecasting and analysis skills, among other skillsets. Or, even worse, they won’t be able to identify the gaps they need to fill, so they are unsure of how to upskill the existing team or who to recruit.

Solution: Access networks and recruiters to get the right people

Joaquin explains that EIC has observed “repeat patterns of where there might be team gaps” in early growth-stage energy tech startups. Building on that observation, EIC is well-placed to analyze the specifics of a company, and then offer tailored team development options.

EIC provides CEO coaching, performance management advice and templates, access to recruitment services, and/or cultural analysis tools to focus recruiting and improve the culture, depending on specific company needs. All of these options draw on EIC’s strong networks and depth of experience in the sector.

As Joaquin sees it, EIC’s key strengths when helping businesses bridge skills gaps are their “depth of network, specialized recruiters, [and] our outside network. We have more than 30 former industry executives in this area as investors and LPs that often are a good resource.”

Problem #4: Plenty of tech knowledge, not enough industry knowledge

Founding teams may lack not only a diversity of skillsets, but also a depth of knowledge. How their new tech fits into the industry is one thing, but the specific commercial nuances of getting it where it needs to go is another.

This is especially important to note when we are looking at the energy transition macro theme. “You’re changing existing systems and processes that work,” as Joaquin notes, so you need to be able to give compelling reasons for that change, such as providing a significant cost advantage.”

Without an experienced industry insider, you might also miss commercial or security requirements. Without that knowledge, you cannot fully understand how the industry buys and assess market fit.

It’s also crucial to understand what systems your new tech would need to fit into, and how systems or the tech itself might need to change. Early-growth startups can overlook how that change will be led and managed, and how many extra resources it needs to dedicate Chargers for EVs are a great example of this — no matter how great they are, they still need to be deployed and integrated:

“Somebody’s still got to do the project management and if the customer doesn’t have that skill set, you’ve either got to rent it or you’ve got to build it yourself. Why don’t they buy more? Well, they just don’t have the internal capability. So, you’ve got to build more software, more integration, more capability around the solution for deployment velocity to accelerate that will lead to more sales”, Joaquin explains.

Solution: Access networks and connect with industry experts

There’s no shortcut to industry knowledge — you need to connect with industry insiders.

This is one of the core reasons why EIC may nominate subject matter experts from their network to become a board member or observer, or take on a full time or advisory role within a company: to directly apply their industry knowledge.

“The other thing that sets us apart is our Fusion Customer Network,” says Joaquin. “We can bring in our six energy corporate partners to assist in the commercialization process and help provide feedback to the portfolio. We’ve got over a dozen commercial agreements (and counting) from our corporate partner network with our portfolio companies, so we can be a catalyst to customer adoption through this network.”

The potential benefits of connecting these companies with shared goals can be far-reaching, and include:

• Deal screening
• Deployment and pilot network
• Voice of the customer
• Sourcing collaboration
• Potential co-investments

EIC’s Portfolio Scaling Model is based on wide-ranging insights into the venture backed company scaling process within energy and resource-intensive industries, and it tackles these four common issues head-on. So long as the company’s tech is innovative, useful and relevant to specific market segments, EIC can help companies develop and implement a polished go-to-market strategy, diversify team skills, strengthen communication and integrate industry knowledge.

As Joaquin puts it, “I really believe [our Portfolio Scaling Model] can make a big impact helping a company get on the right track and we have seen it happen time and time again. It could take a company that doesn’t have the right focus and commercial strategy and assist in getting the company on model, with a clear path to value creation for all stakeholders.

Joaquin Silva is a Partner at EIC. Joaquin oversees EIC’s portfolio scaling model, co-manages firm capital raising efforts, and supports overall fund management. Joaquin currently serves as a director at Kairos Aerospace, FreeWire, Kelvin inc., and CNIGuard. Joaquin’s 25-year career spans technology, entrepreneurship, and investment management. Joaquin is a serial CEO, co-founding and leading Emerging Infrastructure Capital Partners, a clean tech holding company that developed three companies across energy, water, and the circular economy, including Continuus Materials, which was recently acquire by Waste Management. Joaquin also co-founded On-Ramp Wireless, a pioneering IoT systems company selling communications systems to major energy companies such as SDG&E and Shell, where he was the CEO. Earlier in his career Joaquin worked as an investment banker at Montgomery & Co focused on M&A and growth financings for tech companies. Joaquin holds an MBA from UCLA and a B.S. in management from the United States Air Force Academy.