Zero to £22m in Licensing Revenue: Tony Cochrane's Ceres Power Journey

Generating revenue from the licensing of IP sounds great in principle but is notoriously difficult to pull off – especially for start-ups.  On this week’s episode, Chris interviews Tony Cochrane, Chief Commercial Officer of Ceres Power, the UK-based fuel cell company. Tony talks about how he and his team were able to grow from £0 - £22m in licensing and services revenue, building relationships with some of the world’s leading industrial companies along the way.

00:00 Introduction to Value Chain in Technology
00:54 Welcome to Lab to Market Leadership Podcast
01:46 Meet Tony Cochrane: Chief Commercial Officer of Ceres Power
02:19 The Journey of Ceres Power: Challenges and Strategies
05:50 Defining and Implementing a Licensing Business Model
11:55 Securing the First Contract: Challenges and Strategies
29:10 Building a Successful Commercial Organisation
32:07 Securing Strategic Partners and Expanding Globally
55:02 Lessons Learned and Future Outlook
57:52 Conclusion and Final Thoughts

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Transcript

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Tony Cochrane: 0:00

The best approach that I've learned is look at the whole value chain and how much value can be created by your technology. Look at all the players who have to be active and engaged in that value chain and decide how much they're going to need to earn to be motivated and how much risk they're going to have to take and how much investment they're going to have to make. And if you can't see a benefit for everyone in that value chain to participate, then you Then you've got a problem you need to solve. You either need to convince people to give something up to that entity, or you have to create more value as a whole, so that there's more to be shared. So, it's not just about selling to the interface you have. It's actually looking at the entire value chain that you need to enable and make sure it spells success for everyone in some way.

Chris Reichhelm: 0:54

Welcome to the Lab to Market Leadership podcast. Too many advanced science and engineering companies fail to deliver their innovations from the lab to the market. We're on a mission to change that. My name is Chris Reichhelm, and I'm the founder and CEO of Deep Tech Leaders. Each week we speak with some of the world's leading entrepreneurs, investors, corporates, and policy makers about what it takes to succeed on the lab to market journey. Join us. If you're a deep tech entrepreneur wondering how you're going to commercialize your business, you need to listen to today's podcast. If you've got an embedded technology platform and you're wondering how you're going to commercialize that, you need to listen to today's podcast. And if you've got a licensing business model, then you really need to listen to today's podcast. I am so fortunate to be joined by Tony Cochran. Tony is the Chief Commercial Officer of Ceres Power PLC. Ceres Power is a UK headquartered fuel cell technology business. Uh, its business model is licensing and services. And there are fewer businesses out there than fuel cell technology businesses that are more difficult to build, scale, and commercialize. So for those platform technology companies out there, You really need to pay attention. I am, I am so interested to talk to Tony and find out about his lab to market journey, what they had to learn and get their head around, the level of preparation that was required in order for them to win their first slate of customers. So without further ado, let's get into it. Tony Cochrane, so much for joining me.

Tony Cochrane: 2:44

My pleasure.

Chris Reichhelm: 2:47

Let's get right into it. Your, your background is going to be super interesting to so many of our listeners. In particular, those who are interested in taking their company from zero in revenue, and let's be very clear, most of these deep tech, advanced science and engineering companies that are out there have zero revenues. and taking them to where you've taken Ceres which today, uh, is at around the 22 million pound mark. And so that journey of commercialization, where it's not just getting that first industrial partner or the first customer, but getting many, building a business model on the back of it and building sustainable, continuous revenues, uh, is super interesting. So that's what I want to get into with you today. Um, start me off. When you join, where was the company in terms of their development?

Tony Cochrane: 3:52

Yeah, so I joined the company Nine years ago now. And at that time, they had gone through a pretty major misstep in commercialization prior to me joining. And the main reason for that was twofold. The tech wasn't quite ready. which is very dangerous to a company, and the business model was about the hardest business model you could choose to introduce technology into. And what I mean by that is, Ceres, before I joined, was a company that was going to introduce solid oxide fuel cells, in of itself sounds complicated, and they were going to try and sell it as a boiler replacement to individual homes in the UK, Now, if you think about that for a minute, if you're going door to door to people who don't even know what solid oxide means and telling them to invest a premium relative to what they could replace their boiler for, for totally new technology, And trust us, this is going to work, which it didn't, um, that caused a major problem for Ceres, uh, including the need for a rescue financing package, which happened about two years before, or a year and a half before I joined. Um, and so that was my starting point, um, a major reset to the company, new investors. And a realization that, um, the technology, uh, which, which had matured since I joined to a point of readiness, needed a new business model as well in order to be introduced into the market. So that was my starting point at Ceres, and it was a really interesting challenge at that time. Yeah.

Chris Reichhelm: 5:49

I bet. Had that business model been defined at the point you joined?

Tony Cochrane: 5:56

It had. So, so the concept of it had been defined. Um, so the decision prior to me joining was that to introduce a, a capital intensive product line for a technology that had multiple uses rather than a single product use, warranted a licensing business model, which I agreed with. And that's part of the reason I joined Ceres is because I agreed with the business model. I understood what licensing meant. And I had very good insight into assessing the technology itself at that time, given I was, you know, in that industry for 17 years prior to joining the company.

Chris Reichhelm: 6:42

Yeah, that's right. And you had come from Ballard, haven't you?

Tony Cochrane: 6:46

Yes, correct. So it was also a fuel cell company, also very similar sort of chemical reactions and approaches. And so I, I had unique insight into What I thought of the technology, how ready I thought it was, obviously I was privy to some confidential disclosures at that time about what the technology really was. And I was very confident that given what I saw and the business model that was chosen, I could add value in my commercial role.

Chris Reichhelm: 7:16

Yeah. In, in terms of technology readiness, where was it at the point when you joined?

Tony Cochrane: 7:24

So,

Chris Reichhelm: 7:25

um, if you had a, you know, in terms of a rating, for example,

Tony Cochrane: 7:29

yeah, so, so the technology was probably at, if people are used to TRL levels and so on, it had reached probably a TRL six to seven. But the good news for Ceres is when I joined is the manufacturing readiness was about equivalent. And that's really important, is that CERES had coupled the manufacturing and the design together very early on, and in fact, all of the samples that were being tested early on, and all of the R& D samples that have been tested since, have all been produced on the manufacturing equipment that's intended for commercialization. And what that does is it gives you both of the maturity indicators at the same time, which is very, very powerful for a technology company.

Chris Reichhelm: 8:19

Yeah.

Tony Cochrane: 8:20

Yeah,

Chris Reichhelm: 8:20

that is. And I don't know about you, but in my experience, there are a few companies that manage to scale both the technology and the manufacturing readiness levels concurrently.

Tony Cochrane: 8:38

Yeah. Yes. It's, it is rare. In the industry I'm in, it's a necessity because the process technology contains a lot of the trade secrets related to the technology. So how you make it is fundamental to the performance of the technology, but also it's fundamental to the confidentiality, which under a license is an imperative. So when you think about a licensing model, a license to only patents, Patents are already in the public domain, so people can read those. They don't need to talk to you about what your patents say, but if you have trade secrets and know how that you can layer onto your patents, that significantly increases the value of your license, which was fundamentally important to our business model at that time.

Chris Reichhelm: 9:27

But then is that know how delivered via a services component to the offering?

Tony Cochrane: 9:34

Yeah, so let me tell you a little bit about how the business model was commercialized. So when I joined, as I said, the concept of a licensing business model was agreed. The board believed that was the right approach. I was brought in because I had some experience in licensing business models, and I, I knew what that meant. And what I decided to do with my team at the time was to set a mold. And it's really important for technology companies when they start to not think about the contract they have ahead of them as their first adopter, right? But think about how it scales before you sign your first agreement. And what I mean by that is that companies that are, are, are too accommodating of their first and very important partner, sometimes make mistakes that interfere with future contracts with partner two, three, and four. So I was quite deliberate at the time to make sure that whatever we put in place commercially was future proof to the second, third, fourth, and fifth Licensee, so that the first contract wouldn't interfere with scaling. And the kinds of things that interfere with scaling are exclusivity rights, preferred terms, most favored nation, all the things that your first partner will try and demand of you can sometimes erode your ability to scale and to be commercially successful with your second, third, and fourth partner. And anyone who's starting any journey on a business model. He needs to really think about how robust it is to that scaling of the commercial terms themselves. And so I institutionalized a licensing model that included upfront technology transfer fees, which are meaningful to the company that pays the bills today. I introduced engineering services, which delivered the technology through essentially consulting expertise that our employees have, then obviously the long term prize, the one that really adds value to the company, are the royalties themselves. And all three of those elements were built on the first contract we ever signed. So we could continue to use that mold and that approach with subsequent licensees and partners.

Chris Reichhelm: 11:55

How easy was it to get that first contract away?

Tony Cochrane: 11:59

It was hard. Um, and, and the reason it was hard is because you have to fight for the things that you absolutely need long term with a partner who knows they have a lot of clout over you at a time when the company desperately needs revenues. And it's difficult. So the, the, the support you need, and obviously I had that support from the board and CEO, you need to be able to walk away. And we did walk away from some of our first deals. But if you believe in the strength of your technology and your value proposition. Those partners will come back and they usually do, uh, because they really value what you have to offer. And that's, that's really important to know that you're valued enough that people will test your willingness to walk away. And if you do, they'll come back to you and find a suitable compromise, which, which we were able to do.

Chris Reichhelm: 12:55

Now, they often come back provided the problem for them is real enough. And there's a recognition. That you've got a solution to that problem, a workable solution to that problem that can be implemented, that's going to work. They've got a lot of confidence there. At the time of you joining and, and running through this first contract with your first customer, was that recognized by them? that they had this kind of problem for which this solution was going to work? Or was it still, were they still unsure?

Tony Cochrane: 13:35

Yeah, so the good news for us is that, um, and I'd recommend testing how interested people are very early in any relationship that involves a partnership. But our early partners had already tried to do what we do, which was very powerful. So if someone has tried to do what you do and realized it's hard, and can't do it themselves, But believe in the value in the business case, you're in a very strong position because they, they know they need you to succeed and they really want to succeed. But that has to be tested quite early. So the strength of the business case needs to be strong enough and the appreciation for the technology ingredients that you enable in that business case needs to be understood and valued. Otherwise, it's very difficult to introduce new technology through, through a partnership. The other thing that is quite important is, it's not only about selling the business case to your partner, but it depends a little bit on how deep the value chain is. Because that partner needs to be able to either sell direct to a consumer, which is, or end user, which is good. Um, then you only have one sales process. But if your partner is embedded deep in the value chain, there's actually a cascading selling process where the value of the technology needs to flow through the entire channel. And that's a much more difficult, uh, sales process because sometimes you have to convince their customers that your technology is truly differentiated and adds value to that entity's business case as well. And you have to work on the principle of what I call net value add to everyone in the value chain. And everyone has to play a role. Everyone's going to take some risk. Everyone needs to extract their portion of value to reward them for that risk. And so it can, it can increase the complexity of the sale quite a bit, depending on how deep. in the value chain your technology is embedded into.

Chris Reichhelm: 15:49

How, how long did it take you to win that first contract?

Tony Cochrane: 15:55

So it was a, uh, about an eight month process with a, with about a, as I said, about a one month pause for people to rethink their interests. Um, and, uh, and obviously that was a nervous month, as you can imagine, but, uh, it was the right thing to do. And we ended up with a very, very strong relationship. We believed very much that the partnership was important as well. So we wanted to make sure that all the pieces were future proofed, not only for the partnership that we're staring at, but as I said, future proof for the business model itself. And, uh, it's again, when you're too impatient about getting it done right, you can sometimes sign up to terms that you shouldn't reasonably have agreed to. And, uh, that obviously is. Is a challenge for a startup company. It's a challenge because you need the revenue, you need the commercial traction. Everyone who's invested is usually very impatient about the result, but, um, you need to hold your nerve and get the right contract in place and set the company on the right trajectory.

Chris Reichhelm: 17:10

Yeah, I think, I think that's a, I think that's an excellent point you make where a lot of, we've seen this a lot, uh, especially, I think this is true. Especially of inexperienced founders who may be doing this for the first time, building their first company in one of these advanced science or engineering disciplines and trying to commercialize it for the first time where they just don't have that, they don't have that experience. And the, what's possible commercially isn't, isn't fully known yet, uh, by the board or, or the leadership team. And so invariably someone blinks. And I think when, when you've got that, then, as you say, then you can run into those problems and you can wind up making compromises, which are ultimately going to come back and, and, uh, you know, and could challenge you later on.

Tony Cochrane: 18:09

Yeah. And, and I, what I would also say is that every tech company I know of thinks that technology is best in class. and tell their investors there's some sort of hockey stick curve of growth. Now, you've seen millions of them, um, because that's what people want to hear. You got best technology and there's explosive growth. Now, that doesn't mean that's not true, but I think that the most responsible thing for a commercial representative to do is to be quite strong in the test of whether both those assumptions are true and Because, ultimately, the commercial people in the company have to represent the technology to the customers, and the customers are going to ask the difficult questions. And I think it's the responsibility of the commercial organization to ask those difficult questions. of the internal teams stating them. So that if they're not quite true, we need to test that and make it better in some way. And if it are, it is true, then you have to really be able to package that well and understand it well, so it can be properly represented through the customer and value chain. And similarly on the growth assumptions, it's very easy for a technology lens to assume commercialization challenges. as easily overcome. And, and they're not, right? If a company's filled with, you know, engineering and science lenses, they think once you solve the technology, you're done. And, and commercializing technology takes a lot of persuasion. It takes, you know, channel management. It takes partnership acquisition. You know, you've got to think if you're a product company, you got to think about service model, the warranty model. You've got to think about the assurances you have to give contractually to the early adopters and ultimately the broad adoption cycle. And all of those have a huge interaction with the rate of growth that you can enable. It's not just about solving the technology problem. It's about solving the whole problem for the market.

Chris Reichhelm: 20:30

It's about building a solution because all of those other things you've just mentioned there are all elements of a solution, all features of a solution ultimately. When you, when you joined was, was there a solution already or was it still just a, a TRL six or seven technology that was becoming more stable with a business model that was workable?

Tony Cochrane: 20:57

Yeah, so the, the, the solution was not yet fully defined and The reason I joined and believed that technology was commercially ready was because in Ceres particular case, the The product development cycle that embeds the technology was also quite long, which means there was time to solve some of the final technical challenges and there was time to build the solution through the value chain while our partners were developing the product around the technology, which was years, not, not months. So it depends a little bit on product and the business model. In a licensing business model, um, we would obviously ask the partner to build the factory. The partner would build the product. And our role was to enable the license to be practiced so that the partner can succeed with not only the product, but also the manufacturing of the product. That was, that was our role, which means you could embark on that journey quite early. And it was a true collaboration over years. to get to that end result. If you're a software company, I imagine those cycles are much, much shorter. Um, the good news though, is that you can, with software updates, the, the ability to remedy any shortfall is better. Whereas in a, in a brick and mortar product business, you've got to get it right the first time. The product has to work.

Speaker 3: 22:34

Yeah.

Tony Cochrane: 22:34

The factory has to be built. There's not a lot of room for mistakes. Yeah. Um, and, and so it really does depend on what, what your product is and what market you're going after in terms of how conservative it is and how risk averse it is.

Chris Reichhelm: 22:50

Yeah. How many meetings did you have before you signed that first contract? Not just with that client, but you join, you agree with the business model, you start going out. Obviously, they're looking for revenue from you. How many meetings do you have to have out there roughly before you're able to sign that first contract.

Tony Cochrane: 23:16

Yeah, look, over, over the course of eight months of negotiation, um, you know, I, I joke that some of my partners spend more time with me than I do with my family. Um, because, you know, you have to, the selling of technology into a new product in a new business, which is what, what we do involves, uh, assessing the technology. No one, no one just believes PowerPoint. You have to sometimes do some testing, send some samples. Confirm that they're testing it in the right way. And that's seen as a bit of a waste of time, but unfortunately, it's a necessary ingredient to the belief system that you have to enable. Um, then there's the testing of the business model. So it's all about risk mitigation. So the first is how do you minimize the technology risk in the eyes of the customer? Then there's the market risk question. Is there a market risk that you reasonably need to digest? And working on the business case itself can sometimes be part of that collaboration. And then there's the execution plan, the implementation risk. So how do you convince everyone that they can execute against the market risk? the embedding of the technology into the product, and then they're ready to sign the contract, and then you're negotiating the contractual terms. And so if you can imagine all of those ingredients have to be part of a collaboration prior to signing, um, you're, you get quite intimate with your partner before they actually sign on the, on the dotted line. And in large contract selling, which At least in our business model, that's what you do. It's, it's, it's, it's quite a heavy business development investment of time. I wouldn't quantify the hours, Chris. I would, I would, I would say it's, uh, at least, you know, weekly meetings of twice a week, two hours, uh, yeah. You have to expect that's quite a regular practice with each partner that you're courting.

Chris Reichhelm: 25:26

And you, I'm assuming we're taking this up and down the value chain as well.

Tony Cochrane: 25:32

Yeah. In some cases, you know, you've got to bring, as I said, their customers, if it's a deep value change, uh, you've got to bring some of their stakeholders along as part of the journey. Now, some of the relationships are confidential until they're signed. So there are some disclosure barriers that prevent too much of that happening. There's, you know, when people are building a product, they need to know that the supply chain can support their growth. So there's sometimes suppliers that you have to bring into the foray to help, uh, everyone understand what the supply chain risk is involved with scaling. And so you're, you're building a business together. And my, my approach is always that the best thing to do is to eliminate your, your company boundaries and look at the business that surrounds both companies. And if you can create good margins and good values for both entities, then all you have to do is figure out how to share that value in an equitable manner. Eliminating the company boundaries doesn't provide enough value, then there's not a deal to be done because there's not enough to share.

Chris Reichhelm: 26:42

So it's about looking beyond just this one contract with one partner. You've got to see the entire impact across the value chain and understand the distribution of value along that chain. And so in a way, if I'm understanding you correctly, and, and then you've got to make sure there's enough value to be distributed equitably along that chain. And if there isn't, then maybe you've got the wrong solution or you need to go back and you need to refine whatever it is you're working on.

Tony Cochrane: 27:14

Yeah. Look, everyone in the value chain will only do it if they make money. And understanding who is essential to get to, to that value chain for your technology to reach the market. It's really important because if there's any piece of that value chain where there's no money to be made, it's going to be a missing link in the chain. And so how do you then motivate that link in the chain to be active and interested in the business? And the only way you do that is you have to share some of that value with that link. And so the best approach that I've learned is. Look at the whole value chain and how much value can be created by your technology. Look at all the players who have to be active and engaged in that value chain and decide how much they're going to need to earn to be motivated and how much risk they're going to have to take and how much investment they're going to have to make. And if you can't see a benefit for everyone in that value chain to participate, then you've got a problem you need to solve. You either need to convince people to give something up to that entity, Or you have to create more value as a whole, right, so that there's more to be shared. So it's not just about selling to the interface you have, it's actually looking at the entire value chain that you need to enable and make sure it spells success for everyone in some way.

Chris Reichhelm: 28:43

Yeah, I think that's a golden piece of insight, Tony, that I think a lot miss. Maybe it's just me, but I think that most people, when they're thinking of value propositions, are thinking about. A value proposition that extends between one and one, you know, between two people or between two parties. They're not considering the broader impact across an entire value chain. Um, when you, when you think about the time you joined, you were commercial person number one at Ceres, was that right?

Tony Cochrane: 29:20

Uh, yeah, there was a, uh, regional representative doing some work, but in terms of, you know, the, the true build of the commercial organization, I was. I was really the first of a new, new era of commercialization at that time.

Chris Reichhelm: 29:36

Yes. Can you walk us through a little bit the development and evolution of the commercial group and, you know, and also expand on, you know, your views on how you, how and when you build teams and the kinds of skills and experience and talents you're going to need in a business like this? Sure. Thank you.

Tony Cochrane: 29:59

Yeah, so the, the trick is to make sure that, um, you, you manage. the near term expectations well of what do you want to achieve near term? What does the business need near term? And again, how, how do you scale so that the longer term growth aspirations can also be fulfilled through some investment today? And so I, I knew already that the sales process for large contracts involving licensing are not, you know, short term transactions that you just hire 20 or 50 salespeople and put them to, to work on. It doesn't, it doesn't work that way in the kind of business that, that I was entering. And, and I knew that it was a partnership relationship type sale that required some intimate knowledge of the technology and how it, it could be used as well as some of the commercial acumen. that it takes to sign the contract that, that, that packages that result. And so what we did is we, we were very targeted about which partners met the kind of criteria of a first licensee, because that couldn't go wrong. If you're a technology company and your first customer fails, it doesn't matter if it's their fault, the whole technology gets tarnished. With a brand of failure and you can't sell another contract thereafter. So we were quite deliberate about not trying to go with a broad business development approach, but instead we targeted two regions, which were, we felt were strategic, which were, had the right ingredients for early adoption and had the kind of partners that we thought would be the best custodians of our brand in terms of how they would use the technology. and how they would be successful. So we went to Japan and Europe and one of our first partners was Bosch. That's no secret, that's public domain. Why do you pick Bosch? Well, Bosch has got the balance sheet, they've got the manufacturing pedigree, they've got channels to multiple markets, they've got material scientists who needed to be conversant in our ceramics based technology. So they, they had Such strategic ingredients as the right partner for that first commercialization license that we felt we would focus on that first. And what that, what that did was it sold the next wave of licensees. So, you know, once, once you've sold the technology to someone who's highly credible in the industry, then the fact that they bought it is already part of your sales process. It's part of how you, you reach what I call external endorsement of your technology. And so then we expanded into Korea, which was also a, a strategic market for us, signed a relationship with Doosan, signed a relationship with Weichai in China, who actually came to us with a strategic interest, and then we've built the business since. And what we try to do is focus on a region that was strategic, Build a representation in that region to look at the primary candidates in that market, and then, um, qualify a few candidates and ultimately work through the new licensee in each region. And our goal, and it's still our goal, to put a strategic partner in each and every region, and in each and every market, that deserves to grow. and access for our technology. We're not done yet. There's still work to do, but, but it's a very much a win and build approach rather than hire 50 salespeople and, and, and throw them out into the world and hope you, you know, you, you reel in some, some, some partners. I think you could do that if you had a huge amount of sales budget. Yeah. Most startup companies don't, we didn't. So we had to adopt a, you build it, you grow, you build it further, you grow further. And now we have, you know, 25, 30 people in the commercial organization. We have regional representation, uh, you know, across the globe. Um, and we've also, what we've done is we haven't only hired our own employees. We've also used agencies in some areas to minimize the employee burden on the company. And it can be quite effective depending on the type of business you're in. You don't necessarily have to hire everyone. You can do some business development through agencies and other representation, if it makes sense to your business model.

Chris Reichhelm: 35:22

In Asia, that's quite popular.

Tony Cochrane: 35:24

Yes, exactly.

Chris Reichhelm: 35:26

Okay.

Tony Cochrane: 35:26

There's also some, some taxation. Reasons to do that. Um, you consider things like permanent establishments and you, you sometimes want to avoid those in certain countries. The best thing to do is actually to use agencies to avoid some of those problems. Yes.

Chris Reichhelm: 35:43

Yes. Securing Bosch as a first customer is the dream for so many, uh, similar types of businesses. If you were to put yourself in their shoes, evaluating you, Tony. And, uh, and Ceres generally. What was it about you guys that ultimately made them sign? What was, what did they see from Ceres? What did they get that made them say, okay, we're going to do this deal with these guys?

Tony Cochrane: 36:14

Yeah, look, without revealing some of the commercial circumstances of those decisions, they, as I said earlier, they already had a practice in the same technology domain as us, so Solid Oxide. They had a team that was doing some of their own work. They knew how hard it was. They already have products. that use similar manufacturing processes to us. Um, and so they understood not only what we're doing, but why we're doing it well. Um, even compared to some of their own practices, which have hundreds of millions of euros of revenue attached to them. I think they saw an organization that, um, adopted good practices in technology development, but also retained its nimbleness. So in other words. You can't be just a lab company and be seen as a bit of a bunch of cowboys. You have to actually be able to show that you have a mature approach to maturing the technology, that there's business processes behind that, which aren't very expensive to invest in, but they need to be credible in the eyes of the big companies. Like what kinds of

Chris Reichhelm: 37:31

things?

Tony Cochrane: 37:32

Well, just, you know, the way you release your drawings. So, you know, they took a lot of drawing packages and how we release drawings. They took a look at our testing protocols. Do, did we have, you know, a statistical approach to our testing or was it just we built a sample, we didn't really know what it was and, and we got a good result but we can't explain it. I mean, sometimes companies, they, they get lucky but they can't explain why they got lucky and that's, that's too much risk for, for an adopter. I think if a company can show. They knew why the technology works, or why the technology works now, and that they considered some of the failures that, that resulted in that success, and learned from them, and institutionalized the practices of, you know, proper failure analysis, proper, you know, qualification and verification of your results. proper documentation of some of the results, then you, you minimize the risk, right? And it's all about minimizing technology risk so that people believe that they can count on your technology for a business case. And if you can institutionalize those practices and make them visible, then you, you can give confidence. And I think Bosch saw that in us that we had put in good practices. Good test infrastructure, good validation practices, good engineering documentation, and they could read all that and see all that and go, okay, this is real. And that's really important. That built trust. Absolutely. Yeah. And sometimes sharing what you learned in your failures is actually quite important as well. It's not just about sharing success. About being able to share that we tried some of these paths and they don't work and here's why and this is why our technology is unique because we've solved some of these problems.

Chris Reichhelm: 39:32

So there's a, you know, there's a, there is a level of professionalism that is required operationally and technologically in terms of the way things are developed and the way the technology, you know, the way data is captured, the way testing is handled, uh, and, uh, and ultimately. I'm guessing too, in the way that the whole engagement is approached, which is led by commercial. The, and in making that, in making that journey, one thing we see companies struggle with is understanding when to wrap in or fold in some of those practices that will take you down a more rigorous line. And some may argue, may, may stifle a little bit, but are so important in order to build that level of credibility. Okay. Do you have a view on when you introduce those?

Tony Cochrane: 40:29

I think it costs you very little to introduce those quite early. Um, a lot of people think that's documentation burden. I, I don't believe that's the case. I think that you can implement these, those practices and that culture very early in, in a company and it, it doesn't slow you down. It, some of those practices are actually enabling of better development, more credible development, because the worst thing you can do is, is achieve a successful result and not understand why, or achieve a successful result and not be able to replicate it. And not only replicated within your company, but when someone says, I don't believe your PowerPoint, I would like to replicate this within my company. If you can't share all the documentation on how you achieve that result, including the testing you did, and they fail to reproduce that result, they're not going to believe your technology. And so many big companies demand it. That they should be able to replicate your result, uh, if you know what you're doing. And so I would recommend that those, those practices be institutionalized very early in a way that doesn't slow the company down. And that's, that's the magic to it is don't, don't go so big on process that it slows the innovation, but make sure that the underpinning of good practices is built into the organization very early on.

Chris Reichhelm: 42:05

Yeah, it's going to help business development enormously, amongst other things. Um, the commercial role itself, what are the skills and experience you think are needed in order to be able to handle the job that you've performed?

Tony Cochrane: 42:27

Yeah, look, I think, um, because the subject matter here is deep tech, right? It's technology companies. I think the commercial role in In the companies that I know of that are involved in Embedding deep technology into the value chain. First of all, the commercial really needs to understand the benefit of the technology in the eyes of the market, not, not in the eyes of the company that's trying to sell it. But how does the end user interact with the technology in a way that matters to them. And so, I mean, I have an engineering background. I ruined my engineering by taking an MBA. Um, and, uh, I'm now spending, you know, part of my time pretending to be a lawyer with, with contracting. Um, so, you know, those are the ingredients I bring to the table. But I rely very heavily on my What I call technical commercial interface that I, I use my technical background to understand the, the technology, but with the market lens that I feel is going to matter to the end user. And so what features are going to be experienced? So, so, you know, there's many products where the technology doesn't actually, isn't actually known by the end user. So, you know, you buy a new phone and, you know, Apple might market a chip with a code name to you. And that means absolutely nothing. And in reality, um, what matters more is probably the quality of the camera or something like that. Um, so the people who are developing the chips think that it's really, really important that people know how many, I don't know, graphics processors are on and all that. It's really important to the technology people within the company. But it's not experienced by, by the end user. And so I think the commercial role in a technology company really needs to help the organization understand what really matters in the eyes of the end user and how that translates back through the value chain to the commercial interface that, that you're trying to broker. And, and that skillset of, of filtering out the noise. And some of it is noise. To distill it to the sort of essence of value, it's probably the most important skill any commercial person can bring to a, to a technology company.

Chris Reichhelm: 45:09

How, what is your audience? If you look at the evolution of the contracts you've put together, the development of them, your audience as you're developing this, you know, tell me a little bit about their backgrounds in these organizations. Is it starting with R& D and then moving through different layers of the organization, different areas?

Tony Cochrane: 45:32

Yet it changes over the course of the selling process. Um, look, the, the early audience is someone who believes there's a business and a technology advisor who believes that the technology is enabling in some way. You normally start in a, in a, an embedded technology sales process. You have to, you have to make sure there's money behind the, the, the question. So, There's the business owner who thinks they're going to build a business or a better business because of your technology. And there's usually someone in a technology advisory role, um, who needs to validate that what your technology does is indeed true and differentiated. And so the relationships start there and then unfortunately they do go into a prove your technology works phase. So the, the. If the business case is sound, and the assumptions about the technology result in a positive business case outcome, the next question is, can we believe you? And so you end up in a technology interface for a period until the technology advisor says yes, the technology is better than our own or someone else's, and it's differentiated in the way that's proclaimed. Once you get through that gate. Then you'll get into, back into the business and commercial forum, which says, how are we going to share the value that each party deserves because we can enable this business outcome for you. But then it goes very much back to a commercial terms relationship. Usually people like to use heads of terms or some summary of the commercial terms. And then once that's agreed. The last step is obviously the legal work, and then you're into teams of lawyers digesting fairly nuanced contractual language, and it's really important that before you start that process, That the commercial terms are clear, understood, and agreed, because otherwise you can waste a lot of time decoding that through legal language, which takes a lot more time and energy if you haven't done it right at the commercial level.

Chris Reichhelm: 47:57

How much time does that legal process add on to the entire thing?

Tony Cochrane: 48:02

Well, in our business model, because it's a licensing contract that's quite complex, um, months. But I'm not suggesting that every tech company would need to digest that kind of contractual complexity. It really depends on what you're trying to put into that contract. We have licensing terms, long term royalties, uh, you know, performance obligations in the implementation phase. So our, our contracts tend to be very complex and require that kind of effort. But I imagine that there's many businesses that could do it in a lot less time.

Chris Reichhelm: 48:35

But you've, you know, you've got this engineering background and appreciation, which you can bring to discussions, which are important in the early stage. I suppose in order to set out the case, and I'm guessing that during that phase, it's really important that you're not, you really want to be careful with the claims you're making around the technology, because in all of this, you're trying to establish credibility. Yeah. So you have to really have a sense of what, is possible with the platform you've got at that moment in time. So that as much as possible, again, the results they create with your sample, you know, in their sampling process of your technology are going to broadly replicate what you've created before, hopefully. So again, that that trust is there. It's hard to do that, I would think, without being able to communicate well enough. with that audience. And so some engineering or a technology affiliation or background, some comfort level with that is going to be important as part of the mix.

Tony Cochrane: 49:50

Yeah, absolutely. I mean, look, our, at least our transactions are not just a commercial supply transaction. They are 25 year partnership, not, not only for the generation of technology that's. available today, but also to build the belief system that our technology in future iterations will continue to be competitive long term. So we're not just selling a trust in what we say today, we're selling a trust in the capability of the company itself to iterate on the technology and advance the technology long term so that the partnership remains healthy long term. So it's, again, it depends on your business model. It depends on the commercial transactions. That you're trying to broker. But, you know, in our case, in the licensing business model, we not only have to sell the technology, but as I said, it's a new market, so we've got to understand the market risk that we're asking our partners to digest and help them mitigate some of that through, you know, agreements, for example, to Learn from the market and embed those requirements in our next generation designs. So we have to make some commitments around if we learn something together about what makes you even more successful, we will take that on and we'll build it into R& D processes so that you get a better version of the design in three years. We also build detailed implementation plans to help people build factories. So again, the knowledge of what does it take to build a factory, what capabilities does our partner have, how do we complement those, without a good understanding of Each party's strengths and how they can be combined. You don't end up building that confidence and trust and mitigating the risks. And again, it's all about getting people comfortable to take the step to adopt the technology and invest in its commercialization. And risk is a big, big portion. Mitigating risk is a big portion of the sales process.

Chris Reichhelm: 51:59

Yeah. It's a big thing that keeps coming up on this podcast and people we talk to, especially those from corporates. But these skills, that technical appreciation, obviously the commercial piece. The, the strategic relationship development, uh, moving that process along and the legal piece together, particularly in this model, licensing. Yes, you absolutely have to have an appreciation for the legals as well. It, at, at some point, and in the early days when you're establishing those early beachhead customers and partners, I can understand how you need that and how you need that blend that we've just discussed. At some point, at what point do you think you're able to relax that, if at any point, and maybe start to look towards more sales oriented? People that may not have those full backgrounds, but because you've got such a track record, you may have standard terms, you've got the confidence to wheel out standard terms, you've got precedent, etc.

Tony Cochrane: 53:03

Yeah, look, I think, um, every technology company should look at their commercial trajectory and about, you know, who are the early adopters. And how do you motivate them to take the appropriate risk? Because there are still some unknowns. And how do you make sure they're successful? Because your early adopters have to be successful. Can't, I can't emphasize that enough. You can't afford to let an early adopter down in any scalable business model, because you, you, you totally lose confidence in the market when you do. So you have to pick your early adopters carefully. You have to invest heavily in their success, and there are still, in that relationship, some unknowns that require that confidence building, that more nuanced approach. But you're right, Chris. I think once you've done it a few times, and the market validation, not the technology validation, but the market validation proof points are all there, then the technology starts speaking for itself. in some respects. And then you get the later adopters who aren't really taking as much risk. They don't need as much persuasion about the risk mitigation, and you get into more standardized, repeatable sales era. Now, Ceres isn't there yet, we're still, you know, in the adoption phase and primarily early adopters. But I imagine that some years from now, once those factories, some of the first factories are all producing volume successfully, rewarding those early adopters, there's a wave of follow on customers who don't have anywhere near the same barrier to entry. that you have to digest early on. And then you, you probably don't need the sales sophistication that we're applying today.

Chris Reichhelm: 55:02

Ceres was your first startup, I think.

Tony Cochrane: 55:07

Uh, yeah, certainly in the capacity I'm in now. Yes.

Chris Reichhelm: 55:11

Yeah. What are, if you look back, what have been the biggest lessons for you?

Tony Cochrane: 55:18

Yeah, look, I, I think the, the biggest lesson, uh, I've learned is to really focus on the entire business risk reward equation that you're asking your customers to believe you about. And, you know, that sounds obvious. I think that when you start in a commercial role, and I was somewhat guilty of that, is you look at the commercial interface you have in front of you And you go, all right, if I can sell this contract, I'm done. And, you know, it's, it's in the public domain that some of the things that we hoped about the speed at which, you know, the factories would come online and the trajectory of the relationship have been longer than we thought. And I take huge responsibility for that, right? I, I really want the business to succeed, not just the product. the commercial contract terms be upheld. And so there's been quite openly quite a lot of adjustments to the contract that was signed originally were reasonable for us to make, given what we learned along the way. And so, and, and probably could have been avoided or better managed had there been a stronger emphasis on what does this entire business look like? And, Um, and how do we make sure that we think about all the elements, not only the, the, the commercial interface between our two companies, but, you know, what is the supply chain elements going to do to, to add or mitigate risk? What are some of the channel partnerships that need to exist? How might the market evolve? Um, you know, these, these are time horizons that could result in the market shifting on you, and is everything robust to some of those shifts? And, and it's a bit of a crystal ball, and I'm not saying there's a science to it, but you have to try. I think you really do have to try early on to think about all the things that could go wrong and make sure that what you put in place is robust.

Chris Reichhelm: 57:39

And you've got to get alignment.

Tony Cochrane: 57:41

Absolutely.

Chris Reichhelm: 57:42

So whatever you come up with, also, you know, that view needs to be shared. Yeah. By your customer, your partners, and your other value chain participants as well.

Tony Cochrane: 57:52

Yeah.

Chris Reichhelm: 57:52

Tony, um, this has been a wonderful, wonderful conversation. dive into, uh, into commercialization. Uh, I can't thank you enough for joining me.

Tony Cochrane: 58:03

No, thank you. It's fun to talk about these things and not everything I say, uh, is, uh, is right, but, uh, hopefully I've learned a few things along the way.

Chris Reichhelm: 58:12

That's great. Thank you so much. You've been listening to the Lab to Market Leadership podcast brought to you by Deep Tech Leaders. This podcast has been produced by Beauxhaus. You can find out more about us on LinkedIn, Spotify, Apple, or wherever you get your podcasts.