Monday, October 28, 2013

Barriers to Entry

In last week's TI:GER class we were treated to a panel discussion from four local entrepreneurs. They shared their start-up experiences with the class and then took questions for an hour on a variety of topics from funding to the importance of patent protection. The aspect of the discussion that stood out the most to me was their approach to barriers to entry.

As the TI:GER program is based PhD's technologies, our projects are focused on products that are very novel and difficult to replicate. These high barriers to entry give our projects the ability to have intellectual property protection and create temporary monopolies around our technology.

The entrepreneurs offered a different perspective and suggested that founding a successful business was predicated more by finding a large market than finding a unique technology. They believed that our strategy was forcing our businesses into smaller market niches that were not always as profitable as larger markets, even adjusting for competition.

It reminded me of discussions our TI:GER team had last year when we were attempting to find a product to build using our technology. We were searching frantically for competitors and if we found that another group was first to market, we would either cross the idea off the list or, at the very least, strongly discourage the use of that product. We were intensely focused on finding a novel application to fit our new technology.

The panel was very informative and provided an interesting perspective. It is important to remember that there are two components to total potential customers for a start-up company: market share and market size. While it's easy to get focused on owning market share with a new technology, it needs to be balanced with understanding the potential size of the market. Barriers to entry, while important, is not the most important aspect to consider when launching a start-up.

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