Over the years, I’ve worked with many early-stage instrument companies – ranging from engineering spinouts with little market knowledge to seasoned entrepreneurs who’ve done it all before. Some founders know the science but not the business; others are navigating both for the first time.
No matter your starting point, launching an instrument company is tough. Expect sleepless nights, a slow path to revenue, and the need for patience, focus, and resilience.
Think about who you are and what you can solve
Perhaps most importantly, you’ve got to start by thinking about the application for your technology. Do your due diligence and figure out where you fit into the existing landscape. In other words, what is your value proposition? What are you offering that’s different or better than what’s already out there?
Here, you’ll need people to talk to potential customers, and bring that insight back to the team. That kind of input is essential for figuring out where to focus. If you're purely focused on the technology, you're unlikely to land on the right application.
I often refer to a 1995 paper that looked at the marketing-to-engineering ratio in startup companies and how it correlates with ultimate success (1). It was a thorough study that profiled a lot of companies, and the takeaway was pretty clear: you need a marketing-to-engineering ratio of one or greater to succeed. If you’ve got many more engineers than marketeers, your chances of failure go up significantly.
You also have to appreciate that each potential market has its own language, its own culture, and its own sales dynamics. Just to give you a couple of extreme examples: handheld X-ray fluorescence instruments are sold into the scrap metal business – that’s actually the largest single market for them. And in that space, you’re often dealing with owners of scrap metal yards who view a $30,000–$40,000 scientific instrument as simply a “gun” that gives them answers. In some cases, it’s practically a cash business.
On the other end of the spectrum, if you’re selling into the pharmaceutical sector, it’s a very different story. Pharma is a highly regulated space and you need to understand all the requirements that go along with it. You’ll be dealing with a whole raft of acronyms and standards.
Then if you're looking at selling into government applications, the procurement and approval cycles are completely different again. You need people on your team who can go to those companies, attend the relevant meetings and trade shows, and really understand that environment – how the instruments will be physically used, what regulatory regime they fall under, and who the operators are.
Flexibility is also important. Your first idea, or even your first couple of ideas, may not turn out to be fruitful. You have to be prepared to pivot if necessary – which can be tough, especially if you’ve developed a technology and are convinced it’s going to solve a particular problem. If it turns out it doesn’t, you must be willing to change direction. This takes a certain amount of courage, because it often means letting go of something you’ve invested time and energy into.
You may have to pivot more than once. Sometimes you go quite a long way down a road with one application, but it just doesn’t work out. And there’s always that temptation to think, “Well, if I just put in a bit more effort, maybe it’ll come together.” But if the signs aren’t good, you’ve got to be honest with yourself, be disciplined, and move on.
If I had to put a number on it – unless you’re one of those serial entrepreneurs who really understands how things work and where the strongest opportunity lies – one to three potential major applications would be ideal. More than that, and you’re going to spread yourself too thin. It becomes very easy to get distracted. At the same time, if you just focus on one, there's always the risk that it might not work out and then you’ve put all your eggs in that basket. Ideally, you want a balance; a small number of focused areas you can genuinely evaluate and pursue properly.
In addition to finding the right application of your technology, you also need to think about the level of product you’re aiming to produce. Are you planning to make a sensor? A module or engine that’s sold to another company? Or are you aiming to build and sell a complete product yourself? This is one of the fundamental “what do I want to be when I grow up?” questions – which startups really need to be clear about early on. And there are pros and cons to each approach.
If you’re selling a spectroscopic sensor, for example, the potential volume is very high, but the price per unit is low, and there’s typically heavy price pressure. If you’re selling a module or engine, the volumes might still be decent and the pricing somewhere in the middle, but again, the companies you’re supplying to will likely push hard on price.
On the other hand, if you're aiming to build and sell a complete product yourself, the revenue per unit can be much higher – but you’ll need a lot of infrastructure to support that. You’ll need a worldwide sales force with deep domain expertise, product managers, product specialists, field service teams, and so on.
There’s also a huge difference between software-based companies and hardware-based companies, which affects everything – from how you grow to how much capital you need. If you're building a software-based company, the capital investment is relatively low. You don’t need much physical space, and rapid growth is possible because your cost of goods and inventory are basically zero. You deliver the product electronically, and if there are any issues, you can push fixes electronically too.
A hardware business is much tougher. You need significant investment in engineering and manufacturing, you need physical space, and you have to manage inventory. That means you need more capital up front, and growth tends to be slower. You also have to physically deliver your product, provide support and training, and if there’s a problem in the field, it’s a lot more expensive and complex to fix. Product updates can be slower and less frequent.
Learn to “speak VC” – but avoid the “rabbit hole”
With regard to funding, typically, companies will bootstrap themselves in the beginning. There’s the self-funded stage, where founders have saved up and are working out of their garage or basement. Then comes the friends and family round, followed by angel investors, who might contribute tens of thousands to maybe a few hundred thousand dollars. After that, you’ve got the venture capital (VC) stage, where you're looking to raise millions. So, there’s a ladder in place.
Once you're at the point of pitching to VCs, the key thing to bear in mind is that just having a new technology isn’t necessarily enough to interest a VC – or even a large analytical instrument company. What really matters is the market: the potential size of the market, the opportunity for revenue growth, early sales, customer engagement – that’s what investors want to see.
You need to show more than just a product development roadmap. You have to be able to map out a clear path to meaningful revenues. That means understanding the applications for your technology, the specific markets you’re selling into, and the dynamics and timescales of those markets. You’ve got to be realistic about what’s achievable.
I’d also caution against taking a scattershot approach. It’s not very impressive to have one sale here, and one sale there in different geographies and unrelated markets. What really builds confidence is showing a focused go-to-market strategy – where you’ve identified two or three markets that you understand deeply, and are seeing consistent sales, customer engagement, and growth in those areas. That kind of focus is far more compelling to a potential investor than a broad but shallow footprint.
For scientists and engineers, peer review might be the closest equivalent to pitching to a VC, but it’s a completely different ball game. Scientists are often used to solving problems for the sake of solving them, but in the startup world, that mindset can lead you down the wrong path. One thing I caution people against is what I call "going down the rabbit hole."
If you have a new technology and you’re pitching it to potential end users, you’ve got to be careful that they don’t pull an impossible problem off the shelf and say, “Well, if your tech is so good, solve this for us – and we’ll buy hundreds.” It might be a completely impossible problem, no matter the technology.
You need to conduct a proper opportunity assessment. You have to triage the ideas that come in and not just jump at something because it sounds like an interesting scientific challenge. You need to be disciplined and have a structured process for evaluating these opportunities. Otherwise, you may find yourself going down that rabbit hole, sinking a lot of time and resources into it, and getting absolutely nowhere.
Culture Shock
You may be wondering whether you’d be the right fit for a startup. One thing you should know is that the culture and goal of a start up is really quite different to an established company.
In an established company, you’ve got an existing product line that you’re focused on growing within existing and adjacent markets. You also have to defend your market share against competitors, so most of the product development ends up being incremental enhancements.
You really have to stick to your budget in those environments. Typically, only a small percentage of revenue – perhaps 6 to 9 percent – goes toward R&D and product development. The engineering teams in that setting tend to focus on complete product documentation, transferring products to manufacturing, and driving cost reduction. Marketing and product management also stay closely connected with the customer base.
By contrast, in a VC-funded company, the mindset is completely different. You're trying to create a new market or disrupt an existing one. The guidance is essentially to "swing for the fences" – the VC investors want a big hit.
You're working on bringing a completely new technology to market, and you’re actually encouraged to spend quickly. A large portion of funding – sometimes over 50 percent – goes into R&D and development. Engineering is focused on innovation, while marketing is more about business development than traditional sales. In some cases, you’re going after design wins, especially if you're selling an engine or a module to a bigger company. You’re not just trying to close individual sales – you’re trying to get a larger company to adopt your technology, which locks in future sales.
The engineering culture is also different. In VC companies, engineers tend to be “inventors.” They're really focused on creating something new, but not necessarily on finishing it. They often have a limited understanding of how the technology will actually be used, or what customers expect from it. Once they've invented something, they can get bored and want to move on to the next idea.
In contrast, engineers in established companies are more like “finishers.” They focus on delivering a complete, robust product – thinking about everything from fixtures and procedures to vendor relationships and compliance with global standards like UL or CE. They’re thinking about how to manufacture and support the product in the real world.
And to be honest, those two types of engineers don’t always understand each other! So it’s worth contemplating what sort of culture, mindset, and priorities resonate most with you.
Know your target buyer
Later down the road, you might start thinking about finding a buyer for your company. However, if you’re still an early-stage company, and heavily R&D-focused, pitching your technology to the big players is often a waste of time.
In my experience, large analytical instrument companies don’t tend to make what I’d call pure technology acquisitions. Usually, acquisitions are initiated and driven by a specific business unit within the larger company. That unit spots a smaller company operating in an adjacent space – somewhere with clear growth potential – where the product would integrate well with their existing distribution systems. For example, there might be obvious synergies: they could use the same salesforce, the same marketing teams, maybe even attend the same conferences and trade shows. If there’s strong revenue growth and a clear strategic fit, the acquiring company is often willing to pay a significant premium – typically a high multiple of revenue or profit, usually measured in terms of EBITDA (earnings before interest, taxes, depreciation, and amortisation).
These companies have sophisticated acquisition models. They use spreadsheets to calculate the valuation of a target company. If you're a technology-driven startup with a prototype and maybe a few units out on evaluation, however, those models don’t work and the acquiring company often cannot justify it on paper. In those cases, they’ll usually just wait. They’ll keep an eye on you, and if you gain traction and start generating meaningful revenue, then they might come back – and they’ll be willing to pay a lot more.
They want to see more than just a promising prototype – they want a real business with customers and growth. And realistically, it will probably take the typical analytical instrument business around five years to get to that point.
Even then, big, established companies tend to focus on large acquisitions – the billion-dollar deals, rather than the $10–50 million ones. And that’s because the amount of time and effort they spend – on due diligence, legal review, patent checks, and so on – is pretty much the same regardless of the deal size.
In over your head?
You might be thinking, “Okay, I’d be way over my head if I tried this.” If so, the best first step is often to talk to other entrepreneurs. Listen to what they say and take their advice seriously.
In many cases, a university or research institute might also have an incubator or tech transfer office with a lot of experience in supporting startups.
But above all, you need to keep your antenna up and talk to lots of people. It’s really about gathering information, building perspective, and learning from those who’ve done it before.
Newsletters
Receive the latest analytical science news, personalities, education, and career development – weekly to your inbox.
References
- R. E. Grabowski, "Who is going to buy the darn thing? [marketing]," Proceedings of Electro/International 1995, Boston, MA, USA, 69-96 (1995). DOI: 10.1109/ELECTR.1995.471046.