FAPESP trains startups to develop business models

A training program offered in collaboration with George Washington University aims to promote the commercial development of innovative products, processes and services.

By Elton Alisson  |  Agência FAPESP – A group of 21 technology startups have embarked on a seven-week voyage in pursuit of a robust business model for the technologies they are developing through research projects supported by FAPESP’s Innovative Research in Small Business (PIPE).

These firms are participating in the PIPE High-Tech Entrepreneurial Training Program offered by FAPESP in collaboration with George Washington University (GWU) in the United States. The program’s aim is to “train entrepreneurs already supported by PIPE so that their projects will have a greater chance of success”, according to Fabio Kon, a member of FAPESP’s Research for Innovation Adjunct Panel.

“Startups often don’t really know how to market the technology they develop. The program is designed to train them to build a high-tech business so as to generate economically significant results,” Kon told Agência FAPESP.

The training program is based on the Customer Development Methodology created by Steve Blank, a professor at the University of California Berkeley, Columbia University and California Institute of Technology (Caltech) in the US, and co-founder of several Silicon Valley startups.

The key to Blank’s methodology is the realization that many startups have an idea, propose a solution and define a business model based on their assumptions about the market. These assumptions are not always correct, but the startups only discover their mistake when the technology they have developed is launched onto the market.

“In many countries, including Brazil, startups have very interesting technology projects developed by smart people who are genuinely committed to making them commercially viable, but the entrepreneurs behind these projects aren’t trying to find out what their potential customers think and what their needs are,” said Daniel Kunitz, who heads the training program.

“Entrepreneurs should talk directly to their potential customers to discover business opportunities,” added Kunitz, who is also a director of DC I-Corps, a program designed to foster an innovation ecosystem in Washington DC, the nearby states of Maryland and Virginia, and the mid-Atlantic region of the US.

Also, based on Blank’s methodology, the program is sponsored by the US National Science Foundation (NSF) and jointly run by GWU, the University of Maryland College Park, Virginia Tech, and Johns Hopkins University.

“DC I-Corps and the training program delivered exclusively by George Washington University are somewhat different,” Kunitz explained. “Nevertheless, both set out to change entrepreneurs’ mindsets and cultures so that by understanding the needs, problems and difficulties of their prospective customers, partners and competitors they can identify genuine business opportunities.”

How the course works

The first step was to select 21 out of the 43 startups that responded to FAPESP’s invitation. Selection was based on the quality of the proposals and the potential benefits of participating in the program.

The 21 startups selected are now completing phase one of PIPE, which lasts up to nine months and requires participants to demonstrate the technical feasibility of their research proposals. Next, they will embark on phase two, lasting up to two years and designed to support research leading to the development of an innovative product, process or service.

“Firms were selected in the transition from phase one to phase two of PIPE precisely because they’re optimally positioned to discover their business models,” Kon said. “They can use everything learned during the seven weeks of the training program in phase two of PIPE.”

To participate in the training program, each of the 21 startups put together a three-person team comprising the principal investigator, a representative of the business area, and a mentor chosen by FAPESP from a list of executives with vast experience in large corporations and tech startups in São Paulo State.

“These mentors are working as volunteers to help the 21 startups during the course,” Kon said.

The course has four phases. In phase one, completed at the end of March, the startups prepared a “Business Model Canvas”, a visual device for use as a strategic management and entrepreneurial tool to design business models.

In phase two, which took place on April 4 and 6, the 21 teams worked together at FAPESP in São Paulo, with instructors from GWU helping them learn how to interview customers systematically, and how to build customers’ answers and impressions into the business models they are developing.

In phase three, the teams will conduct at least 100 structured interviews with prospective customers, partners and competitors to understand their needs, expectations and difficulties.

After completing each set of interviews, the teams will evaluate whether their new understanding of customers validates or invalidates their business model. If they decide that a given hypothesis is not valid, they will tweak the model to adjust it to market needs.

“The idea is that every interview will have an impact on the business model initially outlined by the startup,” Kon said. “Each week, the startups report to the instructors from GWU on the progress made thanks to the interviews conducted in the previous week. Each firm can also track the progress made by six other participants in the program by videoconference, so that they learn from the experiences of their peers.”

In phase four of the program, the 21 teams will meet at FAPESP once again to deliver oral presentations on the final business models they will try to implement.

“We want to learn from this experience and in the future be able to develop a version adapted to Brazilian conditions,” Kon said. “A regular offering of such programs would be excellent for the innovation ecosystem in São Paulo State.”