Why sales is important for R&D startups you may wonder. I was reading a white paper by Douglas Barber (Distinguished Professor in Residence at McMaster University) and Jeffrey Crelinsten (CEO of the Impact Group) titled “Understanding the Disappearance of Early-stage and Start-up R&D Performing Firms”. This was the fourth white paper in a series that is researching Canada’s innovation performance and culture. This particular white paper investigated the connection between R&D investment and ultimate, commercialized business success.
 
The results are very interesting to the say the least and definitely reinforce why we set up VA Partners and why any entrepreneurs reading this need to begin looking at their potential customer base way before their R&D has been completed.

 
The study looked at the commercial success or lack thereof of 18 Canadian R&D performing companies. The results were:
 

• 10 firms insolvent
• 3 firms were part of a merger or sale with no profit
• 5 firms were part of a merger or sale with some level of profitability

 
Interviews with the former CEO’s of these firms found that:
 

• The firms did not have any tangible sales strategy in place or a way to drive sales interactions with prospects. One third of the firms had no customers or sales as their main focus was on R&D and markets.
• Massive focus on R&D and the technology behind the product led to a large R&D team and a corresponding high burn rate.
• Governance model did not support success. There was a lack of common goals between management and the Board, Board did not have suitable experience to draw from and investors did not have expertise required.

 
The results are definitely disappointing no matter how you slice it. As a taxpayer, you ideally would like to see better results if the R&D was government funded. As an individual investor or VC you are feeling this directly in the wallet as it translates monies lost.
 
All three bullets speak pretty clearly about what needs to change and what a start-up company should consider when building a business. The first bullet though really speaks to me in particular as it directly relates with what VA Partners does.
 
For any firm in a start-up situation, whether R&D intensive or not, your sales strategy needs to be in place early and you should consider introducing yourself to potential prospects even before your product is “officially” ready for market. I would liken it to tilling the field before planting the seeds. You still have a long way to go before you see the crop but you need to start getting the fields ready to plant.
 
These early introductions ideally will lead to sales when you are ready to “go to market” and if not, that is OK too. By doing these meetings you will get a feel early on if your solution is addressing a “business pain” and if people are willing to pay for it.
 
A full version of the white paper by Doug Barber and Jeff Crelinsten of the Impact Group is available at www.impactg.com.
 
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