Six take-aways on Digitally Transforming European Industry from the forefront of this rapidly growing community
Co-authored by Robin Dechant (@robindchnt) at Point Nine Capital
In November, Atomico and Point Nine Capital joined forces to host 100 entrepreneurs, operators and investors at the Design Office Towers in Munich for four-and-a-half hours of discussion on “Manufacturing the Future — Digitally Transforming European Industry”.
The overriding feelings were of optimism about the opportunity Europe has to defend its position as a global leader and innovator in the next wave of Industry, and of growing excitement at how the community can realise this chance. Everyone agreed that this won’t be plain sailing though, with the US and China both fighting to make their own impact and as many large corporates remain conservative.
Here are each of our top three insights from the event.
Ben’s insights on the macro opportunity and pace of adoption
- A lot to win, a lot to lose: Industry accounts for 19% of European GDP meaning we have a significant opportunity to take advantage of the improvements that Industry 4.0 provides, but also a lot to lose if we fall behind and production moves to our international competitors. Today US corporates are perceived as more willing to take bets on innovative technologies and early stage companies, and so the US is seen an easier market for the best entrepreneurs to start their businesses. And China is no longer a market of copycats, but producing home grown and globally leading innovation with more resources and urgency than the West. We have great momentum in Europe and a strong history of manufacturing innovation, but we need to play offence and not defence in order to ensure we maintain our place at the global table. By the time we are forced to take make bold and risky bets to catch up, it may be too late.
- In reality we are still at the very early days of automation: While there are some high profile examples of manufacturers using highly advanced automated processes, in reality across the industry we are still at the very early stages of automation. Even for manufacturers who have a public profile of being highly advanced, the truth is that in many cases this is in one or two lighthouse factories, with many others far less automated sitting behind them. In reality, the cost of building a future factory is often far more significant than can be afforded across a business, and even from a technology perspective these are often only suitable for certain processes. With this in mind, many business will find their successes in working with customers on incremental evolution rather than wholesale replacement, but this still creates potential for highly disruptive and scale businesses.
- Sell to the top and filter hard: For those on the factory floor, a new technology that makes their daily work easier is normally a no-brainer. However in most cases these individuals are not the ultimate decision maker when procuring new technology, and at best have clear limits on what they are able to spend. They also move move around jobs and organisations, meaning that if you sell to them and they take another role, you lose your internal champion and then most often your contract. Instead, startups need to focus on selling to the organisation’s leadership, and quickly moving on if they aren’t on board. This will almost always be a different kind of sell, and is often most effectively focussed on selling their problem rather than your solution. For an early stage company time is one of the biggest constraints and so filtering hard is crucial to ensure time is spent on the highest potential opportunities. Learn from your customers the triggers that indicate someone is unlikely to move forward, for example if they tell you in the first meeting they don’t use cloud software, or they have very specific security constraints, and park these to come back to when you have more resources to deal with them.
Robin’s insights on how to win as a Industry 4.0 startup
- Your biggest competitor isn’t another company — it’s the status quo: Selling cloud-based software to factories which are often still running on outdated software or using pen and paper is something not many have done before. You are pioneers in this industry. Many industrial companies might not even know what they are looking for and lack problem awareness in today’s prospering economy. Educating them takes a lot of time and resources you probably cannot afford in your early days. So your biggest competitor is the status quo and how to overcome this friction. Therefore, it is better to find a niche you can sell to right now even if it means changing your plans. References are one of the strongest selling points in this industry. If you have a customer in the plastics industry for example, chances are high that you will have an easier time selling to other plastics manufacturers than to other industries. You have to relentlessly focus to get these early adopters no matter what it takes to cross the chasm.
- Focusing on inbound can help you to find the early adopters: Using traditional SaaS techniques such as content marketing or SEO can help you to increase the number of leads. In particular, product marketing is a good method to sell your product in different ways and with more targeted messages, without changing the product itself. Companies that are approaching you are probably actively looking for a solution and are aware of the problem. There is less need to educate the customers and they will probably move faster, especially if they have tried other solutions already. The best customers are those who have a vision for where they want to be in the future and understand the journey of how to get there. That said, you cannot avoid doing traditional enterprise sales and it’s this can be hard learning, especially if you are an engineer or designer and haven’t done it before.
- Expansion potential is enormous: You often start selling to one production line or to one factory of your customer. If you can prove the capabilities of your solution and later on the ROI, the expansion to other production lines and factories within the same customer is huge. Customers can even take you to a new market if they roll out your solution across geographies and products. You may even be able to expand the number of use cases given the sheer amount of inefficiencies in a factory. In addition, software in factories is very sticky which is also a reason why you often find so many legacy systems in place that are painful to integrate. But before that happens you need to get a foot in the door whatever it takes, even if you have to do some consulting or build the first integrations yourself.
Thanks again to everyone who joined us in Munich, and we would love to continue the debate in the comments and at future events. And if you are an entrepreneur building your company in this area please do reach out! Point Nine Capital would love to talk about your Seed funding, and Atomico can pick up the conversation for your Series A and beyond.
