How we pivoted our deep tech startup to become a SaaS company
Brian Casey — January 2023 (TechCrunch Article Link)
For the foreseeable future, global markets will require billions of highly specialized electric machines that perform much better than the inefficient relics of the past.
Initially, we approached this as a hardware challenge until we determined that the key to meeting next-generation electric motor demand actually lies in software. That’s why we’ve pivoted to a SaaS model.
Like any major startup redirect, there were several “a-ha!” realizations, accompanied by trials to make it all work. Fortunately, the SaaS direction has delivered upsides: We’ve achieved relatively strong product-market fit and cash flow-positive status without big VC raises or burn rates.
The process wasn’t precisely linear, but (looking back) we did four core things to conclude SaaS was our model:
- Assessed what was truly disruptive, scalable, and profitable about our technology.
- Engaged our board and investors candidly.
- Studied global markets and tech trends.
- Took our MVP to market quickly, opting to polish in public rather than perfect in private.
ECM PCB Stator Technology was founded on the innovation of MIT-trained electrical and software engineer Dr. Steven Shaw, our chief scientist. After launch, we began developing proprietary printed circuit board stators that replace bulky copper windings — the central component in electric motors — and using in-house software to make them lighter, faster and more efficient machines.
Two years later, I joined as a growth-stage CEO after leading two energy technology companies to scale and acquisition. At that point, we were still at a relatively early stage in funding and product-market fit. The startup had raised a venture round and was flirting with becoming an axial flux electric motor manufacturing company. The initial impetus for a SaaS shift came when I began to assess the company with fresh eyes and engage Steve and the board on our inherent advantages and path to profitability.
At that point, we also pulled in some new investors.
On a macro level, we conferred to determine our competitive advantages and addressable market. An early observation was that there were already several large, established players making off-the-shelf electric motors. An assessment of global trends (e.g., mass electrification, automation, reducing carbon emissions) also revealed that the need and requirements for next-generation electric machines were rapidly shifting.
After plenty of analysis and a number of board meetings, this appraisal emerged: The global marketplace will require more efficient, better performing and custom-designed electric motors that can be produced in the hundreds of millions in a more sustainable way.
With that in mind, I turned to Steve and our board to evaluate the best business model. We concluded that the most competitive aspect was the ability to leverage printed circuit boards via “motor CAD” software to create bespoke electric motor designs that require less raw material and outperform legacy offerings.
Then we addressed a critical question: How can we take this technology to market rapidly with a favorable capex profile?
From a company standpoint, we’d assessed that the most disruptive facet of our technology was using software to create custom PCB Stator electric motor designs that could plug into multiple applications.
We’d completed an assessment of technology trends that indicated there was a multibillion-dollar market emerging around the need for more efficient, next-generation electric motors customized to exact performance and dimensions.
Becoming a full OEM motor manufacturer would have been incredibly expensive, required multiple VC raises, alienated a large and viable market vertical of motor OEMs and actually delayed bringing our technology to market — while also delaying scalability and profitability.
An extra nudge in the SaaS direction came through an unsolicited partnership request. A large military defense company reached out to see if we could devise an electric motor designed to precise specifications and form-factor requirements. Our engineers were able to create exactly what they needed.
It was at this point that all these individual “a-ha” moments in our startup discovery added up to a “eureka!” moment for me and the board. We realized manufacturing hardware wasn’t truly disruptive: The best path forward was a SaaS model that could scale the most innovative aspects of our electric motor design and PCB Stator technology to multiple players, inclusive of motor OEMs.
Next, we had to determine how best to deliver that to market, which entailed making our in-house process scalable and repeatable through a platform we could extend to legions of innovators. To do that, Steve continued to develop, advance and refine code to create a product version of our electric motor design software.
In developing our MVP and getting to market, we opted to polish in public instead of perfecting in private. We completed certain key steps to hedge risk, but to define the addressable market, I believed we needed to start solving customer problems immediately.
So we assembled a solution-based sales team, one that started turning over client opportunities across a wide range of partners and sectors, to determine what kinds of problems we could solve with this technology. Paired with that, ECM shifted to operate just short of the full SaaS launch before testing PrintStator in beta in 2022.
For the last few years, our business development team has taken customer specs for a wide variety of electric motor applications so our in-house engineers and beta partners could use our software to model, prototype and produce design solutions. We’ve also partnered with production houses for clients who don’t have their own manufacturing capability.
Making this pivot to SaaS has not been without friction: A big challenge was transitioning culturally and organizationally to identify and operate less like a motor company and more like a software company.
As part of that evolution, we updated our platform and system security and obtained the right patents to license our software externally. We also needed to finalize the programming to offer our design and prototyping services on a larger scale. Most importantly, though, I had to fully convince employees and investors that the SaaS move could be a winner.
That entailed holding board and employee meetings — and numerous one-on-one conversations — to lay out the value proposition for software. We also brought in several new investors who were sold on the SaaS strategy from the start.
To fully shift the company culture to SaaS, we had to prove there was a large enough customer base for our electric motor software design platform to take off, which was something our solutions-based sales exercise would affirm.
Fortunately, we’ve found substantial demand for electric motor design solutions and have grown customer acquisition significantly enough to plan a full SaaS launch in early 2023.
Pivoting from hardware to SaaS was the right move for our startup. Still, I’d remind founders that the process we followed holds inherent value, whatever business path you choose. Remaining agile, adaptable and open to new possibilities is key to any successful startup journey. The market forces, customer needs and opportunities that existed for your venture at first raise and launch will almost certainly change down the road.