Innovation in the UK agrifood sector is worth almost £122 billion to the country’s economy, yet there are only around 350 startups in the UK who are tackling agrifood challenges. This is partially because bringing innovations to a commercial setting comes with many risks. Many ideas fail early in the process due to a lack of market validation. While entrepreneurs and startups spend a lot of time, energy and money on their idea or technology, they typically neglect to understand the needs of their customers and therefore, develop and supply a product or service for which there is no market demand. It is this oversight, which explains that 20% of startups do not progress beyond the first year and an astounding 60% collapse within their first three years.
Therefore carrying out market validation early on is vital to success. Here we explain some of the steps required to help you on your way.
What is market validation?
Market validation is the process of identifying whether there is a market for your idea. It involves gaining insights from the key market(s) your technology or product aims to serve including industry or other prospective customers, end-users and other stakeholders. This helps to ensure you develop the right product for the right customer.
As such, market validation helps to establish early in the commercial journey if your business model is viable. Commercial de-risking, through market validation, costs the price of a well-placed phone call and it can uncover a whole plethora of market or commercial barriers. If you discover your idea is in fact not commercially viable, this gives you the option to get out early i.e. “Fail Fast, Fail Forward” or pivot towards something where there is market demand, before too many resources are wasted.
A lot of funding is required to take your technology from concept to commercialisation and therefore it takes time to regain this investment before a new product or service returns revenue from customers. Investors will therefore want to see evidence of market validation in your business plan, because they do not want to invest in a product or service that is not commercially promising.
Therefore, undertaking market validation demonstrates that you are not only reducing your risk of failure, but reducing this for your investors as well.
Moreover, perhaps the most important benefit of the validation process is that you are establishing relationships with future customers. Therefore, you are setting yourself up for success by creating an appetite for a product and tailoring it to its buyer’s needs, before investing valuable time and money.
What steps are involved in market validation?
Market validation requires you to talk to potential customers, end users and domain experts. Validation is about listening, and gaining valuable insights and it enables you to test your assumptions and find out the following:
- What is the problem(s) that the customer needs solving? Ask yourself - does a significant problem exist in the agrifood market that is worth developing a practical commercial solution?
- How big is the problem; where does it occur; and how frequently? This involves a market analysis of the target market to determine the size of market, how it is segmented, and its current key trends and drivers.
- Who is currently looking for a solution to the problem and how much are they willing to pay to solve it? Ask yourself – who is the customer?
- How does your solution address the customer-identified problems?
- Where does the new technology fall short of satisfying customer needs?
- Why hasn’t this problem been solved already?
- What are the current and future barriers that will prohibit the use or implementation of the new technology to solve the problem?
The insights obtained from the answers to these questions will help you to gain a greater understanding of your route to market and enable you to early-on identify and refine your value proposition and unique selling points (USPs). As such, market validation is ultimately a key stepping-stone to commercialisation and the launching of successful ventures or products.
The market validation challenges facing entrepreneurs
Market validation challenges are essentially the same for every entrepreneur, often knowing where to start and how to ask the right questions to the right people. However, entrepreneurs looking to launch a business in the agrifood space also have to deal with additional layers of complexity associated with a multifaceted food system that has many different actors across the supply chain and many different regulations to abide by. Other challenges include:
- Customer identification: Agrifood is a global industry, with many players throughout the supply chain. Therefore knowing where to place a product can be challenging due to the breadth of global potential customers that range from small farmers to large corporates. Trying to identify the real customer who will pay for the product can be difficult.
- Commercialisation: in the agrifood industry the journey towards commercialisation is particularly expensive as regulations can place barriers around certain technologies that require time and cash to uncover.
- Market crowding: Often, innovations are competing with one another for saturation of the market, which makes the barriers to entry high.
- Market domination: The agrifood markets are dominated by many multinational corporations, however while they are operationally excellent, they are steeped in complex infrastructures. In contrast, agrifood startups are nimble and innovative. Therefore, collaboration between startups and multinationals is important to address some the of biggest and most urgent food system challenges.
How to access market validation support [Seedbed Incubator case study]
The Seedbed Incubator helped Crover reach their target customers, of farmers and grain merchants, for their grain storage monitoring solution
The EIT Food Seedbed Incubator programme will help you overcome your market validation challenges, including:
- Defining your market and reaching customers: helps you understand who your potential or future customers might be and how to contact them, formulating the right questions for the right people.
- Understanding food system challenges and regulatory hurdles: draws on experts who are knowledgeable about the complexity of the food system including legal experts who can help with regulations.
- Navigating through a dominated or crowded market: arms you with market analysis tools and opens doors to EIT Food’s rich network, giving you access to industry insights and information to identify competitors and potential collaborators.
Seedbed Incubator is a European-wide programme that’s part of the EIT Food network, enabling you to quickly become part of a wider network of interested people in the agrifood sector across Europe. Once participants have completed the programme, they continue to expand their network by joining our alumni community, which provides further connections to multi-nationals, investors and like-minded entrepreneurs.
This video captures interviews with Seedbed Incubator’s programme leads and participants so you can learn more about the unique market discovery programme
According to Dr Kerri Crossey, Queens University Belfast Hub Lead - EIT Food Seedbed Incubator:
“The EIT Food Seedbed Incubator helps to launch new businesses ideas and is primarily a market discovery programme. We support and coach teams to go out into the market and test their business ideas with potential customers, it helps them define their product-market fit.”
A successfully completed market validation project will greatly improve the probability that your technology gets to market to solve real customers’ problems.
Applications for EIT Food’s Business Creation programmes, including the Seedbed Incubator are open for 2021. Learn more and apply here