Editor’s Note: Spencer Powers, Co-Founder and President of Lightelligence, offers GSA Forum readers a primer for assessing what it takes to start an entrepreneurial tech venture. With a degree in economics from Boston College, an MBA from MIT and a business background, Spencer seems like an unlikely tech entrepreneur. Yet, he knew that’s what he wanted to do, especially after he met one of his co-founders, Dr. Yichen Shen, at MIT who was moving toward starting a semiconductor company utilizing photonics technology. The two of them and fellow co-founders, Professor Marin Soljacic and Dr. Huaiyu Meng, founded Lightelligence in 2017.
A Critical Perspective
Technologists often fall in love with their technology and dream how it will rock the world. Maybe so, but they need to evaluate their technology in terms of business viability. A new technology can be exciting within academia, but that doesn’t always mean it will result in commercial success. It’s at this point when technologists need to switch gears from glorifying the technology to researching customers, understanding the ecosystem, and doing some basic financial calculations.
The first bit of research is to determine the perceived need of the new technology. One framework to assess the viability of a business idea is to consider if it is a “Tech Push” or a “Problem Pull” startup. An example of Tech Push is to imagine an inventor saying “Eureka! This is a cool invention. Now I have to convince customers that they need it.” On the other hand, Problem Pull startups are based on known pains in the market that inspire the creation of a solution.
The reality is technology startups tend to be somewhere along a spectrum between Tech Push and Problem Pull as even the most idiosyncratic inventors are inspired by real-world needs despite otherwise living in a lab. Regardless of the genesis, technologists considering entrepreneurship must move toward that Problem Pull end of the spectrum to understand customer needs, ecosystem realities, and market sizes. They need to discern whether the problem and solution are real or imagined and whether the value created is incremental or measured by orders of magnitude. With this understanding, the next important consideration is the level of capital investment required to build the product at volume. If the comparison of value creation to required capital is favorable, then good, convince venture investors of the development plan, raise money, and start building.
Technologists determine quickly if an end product is technically possible, but identifying the hurdles to scale the technology from lab to production is equally important. Not everyone is an Elon Musk who creates vertical supply chains from scratch. Most technologists will need to rely on an existing supply chain and distribution channels that can be leveraged to manufacture and sell products at scale. It’s useful to evaluate early if ecosystem players are going to help or hinder a startup from succeeding.
The Mentality Balance
Before launching into entrepreneurship, technologists should also evaluate whether or not they have the right skills and mentality. Doing a startup requires one to be both i) a disciplined, logical reasoner who can assess when one must pivot and ii) an optimist who can maintain positivity in the face of doubt.
Further, entrepreneurs must accept delayed gratification. Building any company, and especially a hardware company, will take up a significant portion of the entrepreneur’s life. Entrepreneurs need to look realistically at taking a reduced salary while their peers at corporate jobs earn more money than them. Monk-like frugality and a strong support network help.
An entrepreneur needs to have the resilience to keep on going. Some let the pressure get to them which degrades their performance and leads to burnout. Quitting means failure, so highly rational people can learn to manage this burn-out risk. Entrepreneurs must understand what causes their stress or unhappiness, accept that burnout is a business risk, and then manage their happiness just like any other business risk.
Convincing the Best
Another part of personal sustainability is self-awareness. Entrepreneurs need to be willing to fire themselves as the company grows. Instead of maintaining overly wide and deep responsibilities, entrepreneurs should have the humility to hire people who are specialists and entrust them to take over substantial parts of the company.
That’s not to say recruiting is easy, especially in the semiconductor industry where roles require highly specialized skills and decades of experience.
At the beginning of a chip company, founders’ main job is to convince top-tier semiconductor engineers who are at established companies to join, persuading them that while there is risk, the opportunity could be a once in a lifetime. Challenging this effort is that most industry vets have either participated in or watched startups flame out over their careers. For each success story, there are nine failures. Selling the business plan and opportunity doesn’t stop with the venture capitalists. The same pitch must be convincing to recruit the first team members.
As a company grows and welcomes newcomers, culture is another important consideration. It was challenging to maintain a corporate culture when everyone was working from home. In hindsight, the loss of culture during COVID was a slow deterioration, like a boiling frog. Cutting-edge chip systems already have massive risks; introducing the remote work model before a tape out is a risk not worth taking.
Entrepreneurs often ponder, “what would I do differently if I could do it again?” Unfortunately, daydreams aren’t actionable. What is actionable is finding a more experienced advisor who can share these insights before the entrepreneur encounters the challenges.
Finding the right advisor is challenging. Be aware of advisors who played the game decades ago as they may have outdated analogies given industry norms, financing terms, technologies, and labor markets evolve over time. Additionally, it is easy to find someone who will agree to be called an advisor and get paid; it is a lot harder to find someone who will spend the considerable time to get to know the technology, market, and personalities and offer actionable advice. If the advisor isn’t immersed with the company, there will be a frustrating amount of overhead to get the advisor up to speed.
Self-reflection is necessary throughout the entrepreneurship journey, but it can be difficult to be self-critical. Entrepreneurs must fight cognitive biases to be hyper-rational about their own capabilities and critically assess the value of their technology. Before launching a startup, a technologists must drop the unconditional love they’ve developed for their inventions and rationally estimate the commercial relevance and viability. Post launch, entrepreneurs must maintain introspection to constantly re-evaluate their execution. Hope is not a strategy, so with a critical view, an entrepreneur can develop a realistic path forward.
About Spencer Powers
Spencer Powers is Co-Founder and President of Lightelligence. Spencer received an MBA from MIT Sloan School of Management and a BA in Economics from Boston College. Prior to Lightelligence, Spencer co-founded Lux Labs, another MIT spinout, and ArtLifting, a nationally recognized Benefit Corporation.