Know your market

Many tech startups believe their innovations will sell themselves, but that’s rarely true. Success comes from understanding the market, analyzing competitors, and refining your Unique Selling Proposition (USP). This article explores why startups should engage with potential customers early, how to assess competition effectively and what truly makes a business stand out to investors.

Why tech alone won't cut it

Technological start-ups often do not pay sufficient attention to the market. "Our technology is so good that it will sell itself", they often tell us, but this is rarely the case. We recommend exploring the market from an early stage. As soon as you have determined a business concept, you can start by testing it on the market, for example by visiting five companies, and presenting your business concept. You can then approach a few "friendly parties", companies you can trust not to copy your concept. If your concept is very easy to copy, you should question the unique and innovating character of your concept. The chance of success increases significantly if you start a company based on a real market demand.

The competition

ln 1597 Sir Francis Bacon wrote "Knowledge is power". In today's information society this adage rings very true. A young company can distinguish itself by knowing the competition.

Analyse the competition. If you do it right, you win twice. You get to know who's fishing in the same pool as you are, but you also gain crucial information about the size of the market and the ruling market demands. Do not outsource all of your market research to a research firm. The knowledge and skill you personally acquire by analysing the market yourself is required for further business.

Never be fooled into thinking that you have no competitors. Every company has competition. Even if your product or service is unique, you will still have competitors. The potential customer can always decide to go about his business as he used to, without your product. Or he could choose a completely different and cheaper solution.

How do you gather reliable information about the market? Analyst reports are (too) expensive for a start-up company. Look for journals that cite from and discuss these studies. You gather the most important information about the market from these articles, such as the size and classification of segments, but also the terminology and buzz words that are used.

Adopt and appropriate this terminology. It can be useful when you are searching for capital. Investors read these same articles and reports. Some of them have their own teams of analysts who regularly send out newsletters. These letters can also be a useful source of information.

Keep in mind that information coming from analyst reports and magazine articles is always "top down". It creates an image of the "available market" and the "addressable market", the market a young company can handle. This market is smaller than the total market but grows at the same pace the company grows.

Lots of young companies argue: "The market is very large and we will manage to get one percent of it." But they do not take into account the many limitations, inside as well as outside the company. There is nothing wrong with a healthy measure of ambition. On the contrary, ambition is like the company's fuel, but it should be combined with a generous helping of realism. Trust your strengths but know your weaknesses.

In addition to the "top down" information of the analyst reports, you also have to conduct a "bottom up" market analysis. This can be done by talking to as many potential customers as possible. Try to find out whether there is an interest in your product or service and what the potential customer is willing to pay for it. It is all about identifying the right niche.

As a start-up company you should look for rich markets: companies that make big profits and have large budgets. Go for the low hanging fruit. Start by attacking your home market. Short distances, conversations with potential buyers in your own language: these are great benefits. At the same time you should try to widen your scope, crossing national borders. The home market is not always accessible.

Your submarket also has to be ready to buy your product or service. Different sectors often are at different stages of readiness to buy. The best way to test this is to talk and try.

The market is not a static monolith. It is constantly changing. Your initial market study is not an end point. Analysing the market and the competition is a continual process. Every market study is by definition is a snapshot. And here the adage also applies that "the customer is always right".

When discussing patents, we recommend drawing up a survey of existing patents in order to occupy a free space. You can map and split up the competition according to technology and existing customers. As a company you have to strike a balance between the market and the size of your company. A start-up will never be able to control the global market. So choose a regional submarket or choose your market as a function of the presence of the competition.

It is also important to be aware of your customer's reactions to competing products. You can also test a competing product at a trade show. You will then quickly be able to see through the marketing message of the competition and identify the weaknesses. You can respond by kitting out your own roadmap with developments that will further underline your competitor's weaknesses.

The competition's website often is an indication of the company's activity rate. If the site has not been updated in the last two years, this raises questions about the company's financial situation and the job vacancies often reflect its growth. If they are looking for sales representatives and aftersales staff for a certain area, you know they have expansion plans. If they are looking for software and hardware developers the company is active in R&D. If there are no vacancies, the company is not growing or is in a restructuring phase.

Unique Selling Proposition

During your first conversation with a potential investor, you will quickly be asked about your so-called "Unique Selling Proposition" (USP). How are you going to solve a real problem in a way that is interesting for the customer and on top of that, not easy to copy? This USP is your business's raison d'etre. Ask yourself what makes your product or service so unique. Why is it competitive and can this competitiveness be maintained? This advantage does not have to be technological (although it often is for a technological company). The advantage can also be the after-sales service or the business model used. Claiming that you are as good as the competition but a lot cheaper is simply not enough.

“An evaluator once told us he was hesitant to endorse our project, not because he doubted the technology, but because our team had limited market experience. He emphasized the importance of having team members who have faced real challenges and navigated uncertainty, proving they can adapt and grow. This insight was eye-opening; it’s not just the innovation that attracts investors, but the people driving it forward.”Tomas Keppens, founder and CTO of Ellio

A USP often starts with an exceptional team. A strong technical/technological team can make the difference, as well as the experience of certain team members. Motivation is the best guarantee for a successful business. You are better off with an A team and a B technology, than with a B team and an A technology. The A team will transform the B technology into an A technology.

Investors also attach importance to the team. If the team is not experienced, it will be hard to find large amounts of capital on the market.

Other USPs could be a watertight quality control system, a supplier who exclusively works for you, a patent, the unique location of your business, a new lifesaving treatment etc. In this framework uniqueness and exclusivity often go hand in hand.

The ultimate validation of your USP is not achieved by your investor but by the market. Whether your investor believes in your product or not, it is the customer who decides to place the order. It therefore is very important to be in touch with the market, in the first place through multiple industrial contacts.

---

Enjoyed this post? We’d love to hear your thoughts! Drop a comment below to share your insights or join the conversation.