Market validation in new-technology development – an exploratory study of New Zealand start-up companies

Abstract

Entrepreneurship is the driving force for many modern economies, increasing the competitive capacity of developed countries through company creation or an increase in the corporate activities of existing firms. The characteristic expression of entrepreneurship is seen in the creation of a start-up company which goes on to develop into a high-growth company. New Zealand is a country with a relatively high rate of start-up companies, and is one of the easiest countries in the world to start a business. However, despite a high business population per capita, growing a new-technology based company into a high-value firm in New Zealand is challenging. An invaluable skill for a start-up entrepreneur is the ability to quickly and accurately assess whether serious potential exists in a new opportunity. Subsequently this informs decisions on how much time, effort and money to invest. Market validation (MV) is a process to probe, test and validate a market opportunity prior to investing a large amount of money into technology development. However there is very little research to suggest that New Zealand start-up companies routinely use this process during new-technology development. This research investigates the use of MV in New Zealand technology start-up companies. An exploratory qualitative study was conducted. Data was collected through semi-structured interviews on seven New Zealand technology start-up founders. This research identifies three key implications for the use of MV in New Zealand start-up companies. Firstly, there is a need to increase the awareness and accessibility of MV information in the New Zealand start-up community. Secondly, entrepreneurs need to understand the value that MV practices can add to their business before deciding to implement MV into their new-technology development process. Thirdly, there are perceived barriers to MV in New Zealand start-up environment that need to be addressed. It is proposed that future research in this area could focus on two areas. Firstly, how tertiary business education can effectively communicate the value of MV to New Zealand technology start-up founders. Secondly, how to address the New Zealand specific barriers to MV that prevent technology start-up companies implementing this process in their business.