Send Samples To Your Customers
And how to get them to agree to take them. Sooner is better than later.
A key phase of any chemicals business, start-up or established, is sending samples to your customers to try in the lab. No one will place an order for a million pounds of your product without having data that shows that your product can:
Perform as advertised (your responsibility)
There are no problems downstream (your customer’s responsibility)
Points 1 and 2 are ultimately about establishing trust through the supply chain and having data to be willing to spend the time and money to verify that a potential new product or raw material will help improve a product. That improvement is then verified by your customer and then they (in theory) will verify that their customers also see value and benefit. Once the trust is established the money will start to flow, but getting your samples (e.g., your chemicals) into the door the first challenge.
“In God we trust; all others bring data.”
―W. Edwards Deming
Step 1: Develop a product that has value.
I’ve written about value and what it means for product development. Big picture, it’s all about cost, but tactically it’s also about ensuring you are meeting some sort of baseline performance. In order to show baseline performance, you need to bring data. This could be as simple as H NMR spectra, melting point, and melt viscosity or it could be actual performance data in a known formulation benchmarked against a standard and run on an industry accepted method (e.g., ISO, ASTM, DIN). Without data you are asking people to have faith in you and even God(s) have trouble with people keep their faith.
Step 2: Call and talk to your customers about your product.
This step is kind of like a technical sales pitch. You need to convince your potential customer that your product has some sort of value to them. Your product is going to solve their problems. Your product is going to remove 10% of their cost and increase profitability and if they can make it work then the person on the other end of the phone is going to be a hero and will get promoted all because you sent them that thing you made in the lab.
Usually, if you are going to send chemicals to someone, even if they are made through fermentation or are really cool, the recipient usually appreciates foreknowledge that something is coming and what they should do once they get it.
When I was still working in the lab and getting samples on a semi regular basis, they would all go to a central room. I might get an email that I had something, but usually I just checked it every day. If I knew something I wanted was coming I would check with anticipation and grab it right as it came in the door. Usually, this room was a disaster and there were just boxes of stuff everywhere including bad product from the field that we had to test, new raw materials for someone else’s project, or even just lab supplies like gloves and tape. Once, we lost a $10,000 piece of equipment because no one knew it was coming and that it had been delivered.
Pro Tip #1—Send an email to your customer once you’ve shipped your thing with a tracking number. They will appreciate it.
Pro Tip #2— You will be asked how much this stuff costs. Tell them the truth, you don’t actually know, but you do not anticipate it to cost more than whatever it is they are already paying. Then, ask how much they are currently paying for whatever you are trying to replace.
Step 3: Get your paperwork in order.
You could be a synthetic biology company that makes stuff in space. You could be growing algae in your parent’s basement. You could be an undergraduate who just discovered a metal free Suzuki organocatalyst. If you want someone to use the stuff you have made you’ll eventually have to put it in a box, print out a label, and ship it to the final destination. This means you need paperwork like a Safety Data Sheet and a shipping label—only terrorists, drug cartels, and painfully unaware academics send unmarked and unlabeled chemicals in the mail. This way, if the truck carrying your stuff gets wrecked and your samples spill out on the road, because some guy named Donny was watching TikTok and not paying attention to where he was going, the authorities will know that your samples are not Anthrax. I mean, just go watch some dashcam footage—people are crazy.
Ideally, you would also have some data with your sample. I always appreciated a physical copy of both the data (sometimes referred to as a technical data sheet) as well as the Safety Data Sheet and electronic versions in my email. That way, when I start using this stuff in the lab, I just have a copy right there—or if I’m lucky my technician has a copy right there.
Pro Tip #3—Usually, you want some sort of confidential disclosure agreement in place prior to sending a sample. The easier you can make it to sign (e.g., make it 1 page instead of 10 pages so the lawyers don’t need to get really involved) the sooner you can ship stuff. Ideally, you should have your patents filed already, but a CDA helps ensure that your invention is not out in the “public.” Imagine doing all the work to get someone to agree to take a sample, but it takes 3-6 months to get a CDA in place. No one has time for that.
Step 4: Try and send two samples.
If a potential customer has agreed to take a sample from you ideally you should try and get them to agree to take two. I like to think of this as the “double barrel,” method. Yes, I’m referring to a double barrel shotgun because you might only get this attempt to get a slight hit on your customer’s target and it’s better to try two shots instead of one. Ideally, you want to be like James Bond in Skyfall and both shots hit.
I recommend trying something related to varying the chemical composition. If you are concerned purity is going to be an issue try and send one with 99.99% purity and send another with 95% purity. You might be almost certain the 99.99% pure sample will work and the 95% pure will not and then your customer tells you that both are just fine. The cost difference between the two samples might be significant enough to allow you to cut out a whole purification process that will give you a price advantage when it comes time to negotiate.
You might be thinking, “well, if you are going to send two why not send 10?”
No one really wants to get 10 samples in the mail. That’s a shitload of work and just keeping it all straight can be challenging. I think a maximum of 3 samples per round of sampling is appropriate, but if your customer wants 10 then by all means send 10, but it might take longer than you want to get feedback.
Step 5: Get feedback from your customers.
After a month I think it’s appropriate to reach out to your customer and see what they have done. Chances are they haven’t gotten to it yet, but it’s a friendly reminder that you spent some time sending them this thing that you probably made in the lab. The least they can do is try it out.
This is usually where having a confidential disclosure agreement in place is helpful (see Pro Tip #3 above). It allows your customer to open up to you and tell you about how great your samples were or how they didn’t even come close to doing what you said they were going to do.
This whole process of sampling is essentially courtship. Your first set of samples is the first date. Blowing off feedback from a customer is like taking a vegan to a steakhouse and ignoring their complaints that the mashed potatoes are made with butter. If your first two shots missed wide you need to really figure out why. Admit that it’s your fault (even if you don’t think that’s true) and try and learn as much as you can about your customer. Ideally, they need to agree to take your next round of samples if you can decipher what to do next.
The more you can get a customer to disclose the better it’s going to be for you in the next step.
Step 6: Adjust and take another shot.
With your customer feedback in hand get back in the lab and try again. If both samples were a big miss initially you might need to take a more radical approach from a different direction.
If only one sample was a partial hit, then hopefully you know why or you have a hypothesis as to why and your next two samples (maybe 3 if you are lucky) will deliver what your customer wants or help prove out your hypothesis. You might need to adjust your paperwork too (step 3).
Pro Tip #4—Think about profitability and manufacturing every time you make something new and send it out. It might work technically for a customer, but that’s just the first step in the path to commercialization.
Pro Tip #5—If you invented the product you’re probably going to be the one who scales it up too.
Step 7: Rinse and repeat until you get something sellable.
Going back and forth with a customer with samples is normal. Your customer is investing their time in trying to get your stuff to work and this is why there is an expectation that your samples are free. It might take 3-9 months for you to arrive at something that works and the cost of figuring it out is way more than whatever profit you might gain from selling a sample to a prospective customer.
Also, if you are early on in your product development process, you might need to actually file with the EPA because you trigger a different part of the law with a sale of a chemical as opposed to sending a free sample for research purposes only.
Ideally, during the whole sampling process you know how to manufacture and you know how it’s going to scale.
Step 8: Scale-up and verify.
Next, your customer is going to want to ensure that what you make in the lab will translate to scale-up. It’s not uncommon at this point to go from sending 1-2 kilograms of material you made in the lab to being asked to send 100 kilograms from a pilot plant trial and then a truckload or two.
Your customers will have an expectation that you can scale-up at the beginning of the process or it’s going to be implicit in their agreement to take your stuff. Ideally, you want to have contract manufacturing figured out or ideally be building a demonstration plant somewhere as you sample.
Step 9: Get the sale.
It might be small, but every sale is a win.
Step 10: Relax for a bit. Then, do it all again, but 10x in parallel.
It may have taken 2 years to get that first sale. Now, you need 10x more volume to get that demonstration plant to be break even and 15x to make it slightly profitable. Then, you’ll have what you need to raise the money to build your commercial scale plant.
Step 11: Go public or sell to your competitor or supplier.
You’ve got EBITDA hopefully by this point. Maybe it’s year 6 or year 10. Maybe you have hair. Maybe the hair you have is gray now. Either way, it’s time to think about an exit. Either go public and be judged like every other chemical company out there (just because you use biology or enzymes to make something doesn’t mean you aren’t a chemical company) or sell to the big chemical company you’ve been competing against for 10-15x EBITDA. Maybe you can sell to your raw material supplier that will allow them to diversify away from a “commodity” and into something more specialized.
This is the way