How to spot non-obvious verticals for your core tech

Founders can sometimes become fixated on their technology's initial application. It's natural for a startup to concentrate on one market, but substantial growth often emerges when entrepreneurs broaden their horizons. Technology originally designed for a specific sector can uncover its true potential by addressing problems in various industries with shared business issues.

To uncover these non-standard markets, entrepreneurs must adopt a different perspective. Rather than viewing their product through the lens of their current customers, they should evaluate the technology based on its broad functionalities. By breaking the solution into its fundamental technical aspects and separating it from its current industry application, founders can uncover new opportunities for expansion.

Start by identifying the technology's basic capabilities. Strip away industry-specific branding and the problem it was designed to solve. What is the core functionality? For instance, consider a software that monitors keyboard and mouse activity to detect signs of professional fatigue. While its current use case is employee wellness for desk-bound employees, the underlying technology is broader.

It can identify and verify behavioral patterns through input from keyboards and mice. This realization opens the door to new applications. The technology could be utilized for online security, fraud prevention in fintech, or even cheating detection in video games. The key is not to force the product into unrelated markets but to distinguish what the product does from the specific problem it addresses.

Once the core capabilities are understood, map them to other sectors experiencing comparable operational challenges. Sometimes, unrelated industries face similar issues. A dashboard designed to solve a logistics bottleneck in distribution could also address workflow problems in healthcare. Similarly, anti-fraud solutions used in online gambling could prove beneficial in combating compliance risks in retail banking.

The underlying pattern is that the same technical capability can solve diverse problems. It's crucial to understand that a technology's initial success does not restrict its potential. Startups that look beyond their product's original application and recognize these commonalities can identify entirely new markets where their existing technology can provide greater value.

To transition to new sectors efficiently, startups should avoid overhauling their core product or altering its functionality. Instead, they should test the new vertical through small, low-risk pilots. This can be achieved by creating minimalistic integrations using existing systems. By partnering with at least one business or team in the target sector and offering a short sandbox trial, startups can gather valuable insights.

Conducting research and creating a case study is essential not only to prove the vertical's compatibility with the product but also to demonstrate to potential investors the viability of this new direction. Assessing commercial viability before making significant changes is crucial. While a technology may be technically feasible, the business aspect must be thoroughly examined.

Even if a sector appears large, factors such as lengthy sales cycles, demanding compliance requirements, or intense competition could render the opportunity impractical for an early-stage company. Therefore, evaluate the target market's commercial realities carefully. Consider contract speeds, sales cycles, and the general willingness of potential customers to adopt new solutions.

Compare the potential value of customers and acquisition costs in the new sector against the startup's current baseline. The ideal new market is one where the problem is urgent, there is a positive attitude towards experimenting with innovative solutions, and regulatory requirements align with the startup's current framework.