Why market research is key to startup success

Apr 1, 2022

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Problem – solution fit – tick. Now let’s find out if you have a viable startup business…

You have a brilliant idea for changing the food system. But how do you go about proving to yourself and others that your idea is worthy of all the blood, sweat and tears that go into it for the months or years to come? 

Is there a market for the product or service you’re offering?

Will your potential customers pay for what you are offering?

What is the size of this market today and in the future? 

How will you deliver the goods and services? 

What kind of technology and/or know-how is needed?

How much funding will be needed to make this work?

Do the economics behind the product or service make sense? 

Are you the right person to make this business idea a success? If the answer is no, are you able to find the right people to join your team? 

Are there any legal challenges that may hinder the development of your idea?

To answer these questions it’s important to do some extensive research first 

Research will help you validate your thinking and general assumptions.

Start with a feasibility study to help with the process of writing a solid business plan. The information you gather at this stage is generally divided into different sections looking at market, technical, commercial/financial and organisational feasibility. 

“I first looked at the macro picture of food security, population growth and realised vertical farming would be an answer to that. If you’re asking me when I actually had the confidence in my plunge… that happened when I’d figured out unit economics, when I got unit economics to work.”

David Rosenberg, CEO & Co-Founder at Aerofarms

Primary and secondary research 

Whether you’re at the idea stage, making changes to an existing product/service or looking at developing a new product, you will always need to conduct market research to make well informed business decisions. And you’ll be much better positioned to do that by understanding the market(s) you’re operating in. Having a clear and strong understanding of your market(s) will also enable you to better focus your product/service, your marketing strategy and to convince others, such as investors and potential customers, to come on board.

We recommend our Seedbed cohort teams speak to at least 100 potential customers before considering launching a business (primary research). This is an essential part of the Seedbed Incubator programme – the chance to speak to all stakeholders directly from our network across Europe. 

Plus we encourage them to carry out research on existing sources like studies, publications and trade reports (secondary research).

Qualitative and Quantitative research

Find out how and why people think and feel about something 

Since the food industry evokes strong emotions in people, it makes sense to use qualitative research to understand what motivates people to make certain decisions around food or how they feel about certain food innovations e.g, would they be happy to eat meat grown in a lab?

You can’t always rely 100% on this data, as people’s actual behaviours differ from their intentions. So, whilst they may say they would choose one brand over another because of ethical considerations, unconsciously it may be price that is the ultimate factor in their decision making.

Get the facts and figures

Data driven research can also be conducted through questionnaires, polls, surveys and studies. This type of quantitative research allows you to understand certain behaviours and particularly the appetite for a product or service.

Review your competitive landscape

As part of your market research, you’ll want to spend a fair bit of your efforts exploring what your competitors are doing. This is essential to gain an understanding of what threats they pose to your business, what you can learn from them and what you can do differently. It’s likely that you’ll do this by finding information that is publicly available, but depending on your business, there may be opportunities to speak to them directly. 

Identify your top 10 competitors and categorise them as direct or indirect competition before gathering different types of information on them. This will vary according to the business or product/service in question.

Product/service

What are their product or service characteristics, how do they differ from yours? What’s their pricing strategy? How much traction has their product or service achieved?

Business model

How does their business model differ from yours? Are there gaps in their business models or areas for improvement?

Marketing

How do they communicate what they’re doing? What does their website say? Do they have reviews/testimonials so you can see what other people say about them? Do they have a lot of media coverage?

Organisation

Who is on their team? Their board? Do you know who their advisors are? Where are they located?Is that a better or worse location for starting a business than yours?

A strong understanding of your competition will help you develop your company’s competitive advantage and set you apart, this is particularly important in a crowded market. Some industries are more competitive than others. If you’re developing a food brand that is targeting large retailers, be prepared to constantly defend why your product is different or better than what’s already out there. If you’re developing an innovative technology like a label that expires at the same speed as your food (check out our RisingFoodStar startup Mimica Touch) you might face less direct competition but there will be other barriers to entry that you may not even be aware of!

Do a SWOT analysis

A SWOT analysis is a strategic analysis looking at Strengths, Weaknesses, Opportunities and Threats. It isn’t, by any means, limited to the startup world and can be used at different times throughout the lifecycle of any business. It’s a useful tool to help you figure out business strategy and competitive advantage, or indeed to inform whether you should take the plunge. Strengths and weaknesses are things you have control over as they’re internal to your company whilst opportunities and threats are external, part of the environment you operate in and are out of your control. It’s usually depicted as a grid but feel free to get creative if you’d like to visualise it differently.

An example of a SWOT analysis:

Strengths
  • Strong team with relevant experience
  • Unique product proposition
  • First mover advantage

Weaknesses

  • Established market with large existing businesses
  • No reputation
  • Lack of funding

Opportunities

  • Growing market
  • Veganism trend

Threat
  • Lack of existing legislation of new technology

Here are some questions and examples to get you started with a SWOT analysis:

Strengths

  • Do you have a strong competitive advantage over others in the industry? E.g: Mimica Touch has created an innovative one of a kind food label that expires at the same rate as the food it’s associated with.
  • Are you the first or amongst the first to bring this type of product or service to the market? E.g.: lab-grown fish is a completely new product. Being the first to market with this type of innovation will be a strength to grab market opportunity, reputation & PR potential. Check out Finless Foods.
  • Is there a clear social or environmental benefit to your product? When considering this question, try to take a Food Systems Approach  – a multidisciplinary conceptual framework which takes into account relationships between different parts of the food system and how changing one thing can have intended consequences on another (by taking a wider perspective, you may also discover some weaknesses you can address!)
  • Can you use your product or service as a platform to talk about an important issue in the world and create positive change in the world? Brands who recognise their responsibility to society and who can make a stand on important issues are the ones that will rise to the top (see the recent Black Lives Matter movement)

Weaknesses

  • Are there obvious gaps in your team? E.g.: if you’re developing a business in food tech, are you missing someone with the relevant technical knowledge?
  • Do you lack funding to bring your product or service to scale? E.g.: companies heavy in R&D (research & development) may need millions to validate their technology before having a product to sell on the market. This was the case for Entocycle, an automated insect farm that produces environmentally friendly insect protein to feed farmed animals.

Opportunities

  • Are there growing market trends you can take advantage of? E.g.: this could be the growth of veganism if you’re making vegan products, or the increase in people reducing their meat intake if you’re developing meat substitutes.
  • Are there changes in legislation which support your product/service? E.g.: this could be a country banning large retailers and establishments from sending any food to landfill opening opportunities for food waste businesses.

Threats

  • Is your business idea replicable from other competitors? E.g.: a brand making flavoured carbonated water has a business model and product that can be imitated easily.
  • Are there environmental threats that can significantly impact your business? E.g.: the cost of your suppliers may fluctuate significantly based on certain events. The price of vanilla recently skyrocketed (2017) to the point where it was found that a huge number of vanilla ice-cream brands did not, in fact, have any vanilla in them (news.sky.com).

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LAUNCH - Seedbed Incubator

ACCELERATE - EIT Food Accelerator Network

SCALE - RisingFoodStars

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