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Home > Nanotechnology Columns > Alan Shalleck-NanoClarity > Finding the First Paying Customer for Your Nanotech Product

Alan Shalleck
President
NanoClarity LLC

Abstract:
The Nanotechnology world in 2007 has "ready for prime time" nanotechnology products. From cell phones to coatings to structural elements to electronic displays to cosmetics to sensors to bioarray materials … and on. More than 400 nanotechnology based (or enhanced) products are for sale here in the US and more abroad. New nanotech products are being introduced monthly. Is this the long predicted turning point for nanotech? Have we reached a threshold where nanotech becomes a choice investment industry and begins to be courted by IPO and funding mavens up and down Wall Street? It should be … but the Street still sees nanotech as "not yet there" and its reasoning is probably misunderstood by the scientists/entrepreneurs currently managing the most promising nanotech ventures. That reasoning revolves around "paying customers."

January 10th, 2007

Finding the First Paying Customer for Your Nanotech Product

Finding the First Paying Customer for Your Nanotech Product
By
Alan B. Shalleck
NanoClarity
January 2007


The Nanotechnology world in 2007 has "ready for prime time" nanotechnology products. From cell phones to coatings to structural elements to electronic displays to cosmetics to sensors to bioarray materials … and on. More than 400 nanotechnology based (or enhanced) products are for sale here in the US and more abroad. New nanotech products are being introduced monthly. Is this the long predicted turning point for nanotech? Have we reached a threshold where nanotech becomes a choice investment industry and begins to be courted by IPO and funding mavens up and down Wall Street? It should be … but the Street still sees nanotech as "not yet there" and its reasoning is probably misunderstood by the scientists/entrepreneurs currently managing the most promising nanotech ventures. That reasoning revolves around "paying customers."

Based on their behavior, most nanotech management misunderstands what converts a venture into a real business. Ventures tolerate negative cash flows and talk of "burn rates" and "negative cash flow reductions." Real business's talk about "projected profits," "returns on investment" and "positive cash flow allocations." Notice the difference. The bottom line sign simply turns from minus to plus … and the world beats its way to your door. Minus to plus is the financial wisdom that came out of the dot.com era a decade ago (seems almost like yesterday, doesn't it?) and correctly or incorrectly it is being applied to the nanotech industry today. Almost all nanotech companies are still losing money.

Having "paying customers" also can sum up that difference. I repeat… "paying customers". There are today insufficient "paying customers" for most of the new nanotech products. In fact, many companies have "no" paying customers. Finding that first paying customer has been a major problem in nanospace. The key word, obviously, is "paying." Any company in the world will be a "customer" for an "Alpha" or "Beta" version of a product. These versions are free and every loves "free." However, getting those same "testers" to pay for your product is an entirely different decision that is fraught with differential ROI criteria, timing questions and budget issues. It's a different and more difficult task to sell for cash than to place free. Very few managers in the nanotech industry seem to understand that to be successful in getting "paying customers" different skills … the marketing and sales skills so looked down on by engineering and or scientific managements … are required. Only when these skills enter management ranks with equal management power will the industry move to the next step, and I don't see that change happening in many nanotech companies so far.


Moreover, I don't hear the urgency voiced by nanotech management to find sufficient paying customers to convert their venture into a true business. When asked, current nanotech management will point to one or two customers as indicative of success and product acceptance. They won't acknowledge that "a few" is not sufficient in the eyes of the world or of investors. Today's scientifically oriented nanotech company will be fairly pleased that someone (or a few) are positively using the company's creations, and then will talk about reduced burn rate and the reduced need for future financing, etc. From a business viewpoint, it's a wrong view of what is really going on. And the time frames quoted for improvement usually are not indicative of a sense of urgency.

Attracting sufficient paying customers is hard to achieve, especially for scientists trying to act as businessmen. Most of us who have built successful businesses learned that early on. It is probably as difficult as the original problem of developing a saleable product. It begins with the first paying customer. Then the second and so on. There is an old business saw that "if you can identify the source of your next sale or cash flow by name and location you don't have "enough" in the sales pipeline." The nanoworld has to learn how to build sales pipelines that keep expanding, and that building that pipeline costs and requires salespeople who can close a sale and move on the next. You will know that time has come when the want ads for nanotech hiring switch to sales and marketing professionals. Not there yet. Wall Street has a point.

Last, a word on how many customers for a nanospace company are "sufficient." Because most nanotechnology is at the lowest levels of the product value chain, margin percentages are going to be lower, sales amounts per unit will be low and margin dollars per unit will be low. That argues for high unit volume or product integration up the value chain. It means that "sufficient paying customers" for nanotech "businesses" are higher than most young industries. Sufficient starts with finding that first "paying" customer. Hire a better marketing person today to jump-start your effort.


Alan B. Shalleck
NanoClarity LLC
www.nanoclarity.com


© NanoClarity LLC 2007

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