Home Business & Finance Industry 4.0-oriented Startup: Things to Consider Before You Begin

Industry 4.0-oriented Startup: Things to Consider Before You Begin

It’s fair to say that the adoption of innovations within the domain of modern manufacturing takes considerable time as the production cycle is longer than in companies developing, say, new fitness trackers. Let’s take a look at an average factory: its equipment and technologies acquired over the last 10-20 years must be depreciated and its technological workflow has a lot of dependencies on other factors, including suppliers and distribution partners.

However, this does not necessarily mean that industrial enterprises are afraid of innovations. Within the framework of the current production or technological processes, it is quite possible to find windows of opportunity for introducing innovative technologies, materials or processes. And that’s where industrial-oriented startups step in.

In order to determine innovations within an operating plant, startups should not only find problems that need to be solved, but also understand the risks faced by implementation at industrial enterprises. Often, a single change in one of the elements of production entails major changes in other parts of the production cycle, affecting the ability to implement a technology or a process.

Peculiarities of industrial startups

The tracking of an industrial-oriented startup has a number of specific characteristics:

  1.    a long product development before the market fit and entry;
  2.    the inability to quickly test the product;
  3.    extremely long sales cycles;

Things to Consider Before You Begin

Considering these peculiarities, the tracking of an industrial startup is an extremely specific process. No matter how great your industrial solution is, it’s impossible to make a modern plant to promptly change the entire production process within short time cycles.

The reason is simple: industrial software development is impossible without a deep understanding of the industry. Therefore, at the very first stage, it is necessary to maximally decompose all business processes into a network of microprocesses and find out what can be done at every step. One must realize where it is possible to test new solutions and improve microprocesses, so that these changes have a positive impact on the global operation of the company. One way or another, you can start thinking about sales only following a detailed analysis of the industry.  

The sales formula can be divided into three stages:

  • the creation of potential customers base;
  • the management of existing leads (or so-called warm clients);
  • the search for new channels to promote your product;

These stages are usually longer than in other startup domains. Therefore, there is considerably less margin for error, because any wrong decision can cost a company much more than in case of B2C model.

Funding strategies

According to Paul Graham, one of the founders of Y Combinator, three essentials things define a good startup:

The last point is painful for every startup I know. Money is the vital question and a lot of things depend on this factor. So what the strategies for funding might be there? Basically, two options exist.

The strategy number 1

You may raise a lot of funds without much traction. This model provides startups with the necessary time to develop the product, make friends with some customers and get to early product-market-fit (or simply PMF).

The strategy number 2

Instead, you may raise a relatively small amount and focus on finding a few clients . If you feel professional in your chosen field – manufacturing – you can start by providing consulting, in order for your venture to survive the initial stage. This means you may have to reach profitability at some point to bootstrap for a while until you can hit the growth pedal.

Sales Process

Before starting to even approach sales channels, industrial startups need to be aware of the value of their product. It’s all about understanding how they can convey this value to potential customers. Thus, it is necessary to test the hypotheses associated with the product using your own understanding of the case. Only following this first stage, which can last up to a couple of months, you can start thinking about sales and fill the pipeline.

Be at the center of action. Close cooperation with manufacturers is important not only to understand the problems they face, but also to determine the testing schedule and the implementation of these innovations in production. As mentioned above, depending on the stages of the production cycle and the introduction of new equipment can have a significant impact on the ability to test or purchase new technologies.

Things to Consider Before You Begin

Final Words

Sure enough, everybody knows that mantra – 90% of all startups die. However, if you check the chart above, you’ll notice that things do not look that bad for manufacturing startups if to take in consideration the complexity of Industry 4.0 domain.

Like it or not, technical innovations define the century we live in. No wonder that most of the existing startups are built around modern technology. The domain of Industry 4.0 may not be the most popular destination, but that’s understandable due to its nature. Some sources claim that there are 26.792 IoT-oriented startups globally. It’s easy to understand that some of these IoT applications may turn into IIoT ones one day. One way or another, Industry 4.0 solutions have potential to deeply transform many business ventures, including manufacturing.

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