We recently hosted a webcast conversation between Hisham, Aidan, and Carsten about how Lean Startup is applied in the hard sciences. This is part one of a new mini-series we’re doing with Rhapsody Venture Partners. Our first conversation focuses on the startup, Hazel Technologies.
Don’t have time for the full webcast now? Catch the webcast highlights and tips from their conversation in our companion blog below.
If you’d like to read the full transcript of Hisham Ibrahim’s conversation with Aidan Mouat and Carsten Boers, you may download it.
Lean Startup In The Hard Sciences: Hazel Technologies
Carsten Boers is Managing Partner of Rhapsody Venture Partners, and Aidan Mouat is Co-Founder and CEO of Hazel Technologies. Their two companies meet at the intersection between science and entrepreneurship. Rhapsody is a venture capital firm that specializes in startups in the hard sciences, and Hazel Technologies makes products that improve the shelf life and quality of produce when stored.
They spoke with Lean Startup Co. faculty member, Hisham Ibrahim about how they work together as “a well-oiled machine,” as Carsten puts it, and the lessons that have emerged from the process.
Have a Solid Support Network
The early stages of any hard science company are “perhaps the most mysterious” Aidan says, because many business lessons just aren’t taught in scientific programs, such as intellectual property, legal and regulatory requirements, and “the elephant in the room”—fundraising.
Thanks to an entrepreneurial accelerator program during his fellowship at the Institute for Sustainability and Energy at Northwestern University, Aidan became versed in this formerly unfamiliar language. He also found his calling to try and solve a really big problem—billions of dollars in wasted produce every year.
Hazel’s success at its precarious early stage depended upon having a solid support network within the university’s ecosystem, Aidan says, where he was given access to mentors, investors and early stakeholders, and eventually connected with Carsten’s Rhapsody Venture Partners.“I think the early stages of any hard science company are perhaps the most mysterious.” Click To Tweet
The Importance of Seed Funding
Money talks in a startup of any kind, and Aidan credits a variety of early grants, ranging from university system grants, to USDA grants, to competition grants, for enabling them to to work in affordable micro labs without having to build a facility themselves. Lab space is one of the most expensive aspects of funding for hard tech startups to secure, running as much as $500,000, at minimum.
Even better, they were able to do all their product development and early MVP generation outside of the university so they could maintain their own intellectual property.
They parlayed this into early customer traction. When Rhapsody Venture Partners came in, bringing seed financing and accelerating the business, “Then we had the resources to go out and service that early list of customers and pilot partners,” Aidan says.
Create a Tangible Product as Quickly as Possible
Even though Aidan spent a lot of time immersed in scientific theory, he quickly realized that a scientific technology is only successful when it’s tangible to the customer. He knew he had to demonstrate value by getting it into customer’s hands. That’s what drove Aidan to “attack the market with the lowest tech solution we could possibly come up with.”
He sought to develop the cheapest, most effective and sustainable version of the technology, with the least engineering and least complexity, to get that product into customer’s hands because, Aidan says, “agriculture revolves around a largely untrained workforce.”
They deliberately looked for a solution that could bridge the gap from idea to customer application as quickly as possible, which they could then scale in production numbers as quickly as possible.“We deliberately looked for a solution that we could bridge the gap from idea to customer application as quickly as possible.” Click To Tweet
Create Investor Confidence Through Satisfied Customers
Even with a MVP, it was extremely difficult to gain investment traction, Aidan says.
VCs early on in the process gave them points for their solid team, product and unit economics, but they were losing them when it came to the business model, because investors weren’t familiar enough with the agricultural space Hazel works in.
They realized the way to build investor confidence as quickly as possible was to create satisfied customers, and develop testimonials they could show the investors. “The imperative, and everything we did, was focused on getting [the tech] into the customers’ hands,” Aidan says.
Of course, this left them with the daunting task of going out to talk to customers with a product that wasn’t fully developed yet.
Engage the Customer Over Failures
The Lean Startup method relies upon customer feedback, and Aidan says Hazel came up with “an aggressive policy” of getting immediate feedback when they didn’t get any traction with a customer. They’d ask questions like “What could we do better? What turned you off?” and learned that customers were very willing to talk about their concerns. But it was also important to phrase questions in a way that helped the customer understand the “nitty gritty” of a new technology. This helped them refine their customer vision and improve the product.
They also had to be comfortable not receiving an economic return on their initial pilots. “We didn’t want to go out of our way to force our customers to pay us as the first step in the process,” Aidan says.
Those pilots paid off, quite literally. Once the customers saw how the product worked, they had great success in selling it. They let the customer drive the conversation and say when they were ready to purchase. “We put a lot of effort and focus into ensuring the customer sees the results they want to see under their commercially relevant conditions,” Aidan says.
They couldn’t have gotten there without generating lots of hypotheses and testing them, over and over again.
Know When to Pivot
Not all hypotheses proved out for the better. As they began to scale, they identified a customer segment they were optimistic about: retailers and distributors. They presumed that these folks had higher margins and more money to spend.
However, it turned out that shelf-life extension of produce was antithetical to business for this customer segment, which had a 24-48 hour policy to get produce off the shelves. “They don’t want things to stay on site long enough to have shelf-life extensions,” Aidan says.
He said that could have been “disastrous” if they had continued to pursue that market, but after three months, they had to reject the hypothesis and pivot into a new market space. “Had we not done that, we would not have gotten our seed funding,” Aidan says. Without that seed funding, he admits they probably wouldn’t have survived.
Everyone Pitches In
There are numerous elements to Hazel Technologies’ success, but from Carsten’s perspective, much of it hinges upon the fact that everyone on the team does what’s necessary to make the business run. “Everybody is willing to do essentially every role,” Carsten says. There’s nothing delegated to third parties and founders are as intimately involved in every day work as any other person in the business.
Aidan adds that founders have to take personal responsibility for every task, from top to bottom. “Particularly in the early stages, if you don’t do it, it doesn’t get done, period.”
Thanks to Jordan Rosenfeld for contributing this piece. If you seek to bring the entrepreneurial spirit to your organization, Lean Startup Co. can help.