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Hype effect and new technologies: how to avoid becoming victims of the fad of the moment

If exploited strategically, hype around a technology can increase the chance of survival of Deep-Tech projects. But how?

Article by Federico Micol, PhD student at the Politecnico di Torino with a strong passion for Deep-Tech startup development. He has been studying technology transfer processes, entrepreneurial finance and the development of entrepreneurial ecosystems for several years. Since February 2023, he regularly publishes content on his blog Deep-Tech 4 Dummies with the aim of stimulating reflection and raising awareness on topics related to the world of innovation.

"With any potential new innovation, there will always be companies that, knowingly or unknowingly, will gain money, fame and growth simply by getting to market early. Some of these companies will become major industry players, but many others will be pushed too quickly by enthusiastic investors to whom they sold a dream to get their companies off the ground" (Gemma Milne of Smoke & Mirrors)

Startups based on emerging technologies derived from scientific or engineering advances (commonly referred to as Deep-Tech) are currently receiving a lot of attention and a renewed form of enthusiasm for them.

Quantum computing, biotechnology, artificial intelligence, hydrogen, smart materials, gene therapy-we are increasingly hearing about these technologies in the media and political discourse, as many of these technologies have the potential to solve major societal challenges.

Their revolutionary potential generates great hope and expectation in a number of parties:

  • for society at large: solving challenges related to climate change, health care, food supply, and critical resource use will impact the lives of millions if not billions of people.
  • for investors: the introduction of new technologies into profitable industries, or the creation of entirely new markets, usually represents a major financial opportunity for venture capitalists such as venture capitalists
  • for companies: similar to investors, the integration of promising technologies into company offerings or their processes could help companies develop or maintain competitive advantages.
  • for policy makers: the introduction of new technologies into the market can generate positive employment effects (thus wealth creation) in the regions where the technologies are developed (think of all the push for technological innovation coming from any government right now).

These hopes usually generate high expectations for any new invention, as the uncertainty associated with its commercialization prevents almost anyone on earth from truly understanding what technologies will determine our future.

It is precisely this inflated expectation about the potential of new technologies that generates hype. While everyone is rushing to invest in new technologies, realistically only a few projects will be able to generate large impacts for all stakeholders.

If exploited strategically, the hype around a technology, however, can increase the chance of survival of Deep-Tech projects. But how?

With this article I will try to give an answer to this question, starting with the basic concept of what hype is and how it is generated, what problem it causes, and then providing some suggestions on how to exploit it with practical examples of what to do.

But let's start at the beginning.

How do you generate hype about a technology?

The verb "to hype," according to the Oxford Languages dictionary, means to promote or advertise (a product or idea) intensively, often exaggerating its benefits.

The bigger the promise, the bigger the hype that technologies habitually generate.

Almost all startups unfortunately fail in their early years, however (here are some simple statistics), and the survivors are often unable to make a large-scale impact. The benefits that a new technology can bring to society are therefore often exaggerated in the early years of the technology's life.

What generates hype in the world of new technology investment is a mix of two factors: the apparent opportunity that technology can have an impact on a huge problem and thus solve major societal challenges, combined with a generalized lack of awareness of the complexity of bringing technology to market. 

Most people, not being aware of all the uncertainties surrounding technological development, therefore tend to easily overestimate the potential of technologies. This reasoning also applies to people involved in the development of the technology itself.

What are the effects of hype on the development of new technologies?

The strategy consulting firm Gartner has developed an excellent framework to explain the effect of hype on emerging technologies.

The Hype Cycle is divided into five key phases:

  • Trigger: The discovery of a potential technological breakthrough kicks off the cycle. The commercial viability of the technology has yet to be proven, but the stories of proof of concept and prototypes developed by early startups attempting to commercialize these technologies attract the attention of investors, who in turn attract the attention of the media.
  • Peak of inflated expectations: early publicity produces a series of success stories and people begin to use products based on these technologies, but many projects fail because there is still little evidence that the technological innovation can deliver what was touted in the early stages of fundraising, or simply because the technologies were first developed and then tried to adapt to some problem.
  • Trough of disillusionment: the original enthusiasm fades as problems emerge. Delays accumulate, technologies fail to achieve desired levels of performance, or end up being too expensive. Interest then wanes as experiments and implementations fail to yield results. Investment continues only if surviving startups are able to demonstrate the technology's potential for at least some specific and tended to be limited cases.
  • Slope of enlightenment: use cases of that technology begin to crystallize and be understood at the industry level. Widespread knowledge of the real benefits spreads and established players begin to fund pilot projects while early startups begin to consolidate.
  • Plateau of productivity: criteria for evaluating the technology are clearly defined, so its relevance begins to pay off early on. Real benefits are finally clearly visible among a wider audience

Most technologies that enter the Hype Cycle however never reach the last stage, dying along the way for two main reasons:

  1. Many technologies die in the transition from one phase to the next because of lack of real-world applications (at that specific time), because they are not "economically viable," or because they are unable to generate competitive advantages for the companies using these technologies.
  2. Many other projects die because other technologies not available just a few years earlier outperform current technology performance (and promise), killing potential funding opportunities (thus making some technologies technically and economically no longer attractive).

Hype may in fact help you raise your first round of funding or get some grants, but it will not help you make your technology more attractive to markets if it does not outperform other technologies for long enough to establish itself as the "Dominant Design" of the niche in which you will hopefully operate for a long time.

Because you are always competing with something, and that something is usually not only the company using an emerging competing technology, but it can also be established technologies that solve a similar problem or inertia, laws or regulations.

In addition, hype about specific technologies usually spreads to the ecosystem as well. During the initial hype phases, the number of "ecosystem support" organizations grows very rapidly, and more and more investors seek to invest in such technologies as soon as possible. On paper, this is good for Deep-Tech startups. In reality, having many players usually adds noise to the complicated processes of technology transfer, resulting in an "innovation theater“.

Theater of innovation because startups in the early stages usually lack experience in recognizing their own limitations and shortcomings, so they do not have the prerequisites to assess what might be the best service/best investor for them (because yes, it is usually possible to select with whom to interact).

But so does hype generate only negative effects?

While hype can affect the rational thinking of actors along the entire innovation value chain, it can also offer enormous opportunities. Excessive exposure and big promises usually make technology more visible to the public and politicians, who start pushing to see these technologies in the marketplace.

The hype then increases the availability of capital for emerging technologies, and working on such technologies becomes more attractive to both talent and companies. All of this translates into the fact that in hype cycles it is relatively easier for founders to connect with potential stakeholders, a fact that theoretically can help founders access potentially useful information and resources needed to reduce information asymmetries.

Being the coolest startups in the world, however, is not enough to learn faster than others.

If you are not developing the right mindset and approach to problem solving (covered extensively in these articles What Entrepreneurship is about and Escaping the Death Maze), chances are you will fall victim to the hype sooner or later.

What can you do to harness the hype and reduce information asymmetries?

To reduce your exposure to the negative aspects of hype and take advantage of its benefits, here are some suggestions:

  1. Set up a techno-economic and value chain analysis of the industry in which your technology may fit: try to understand what other technologies are needed to make your technology viable, whether other resources needed for commercialization are already available, how your technology fits into possible value chains, and where value is generated and for whom. Understanding an industry sector is the key to moving beyond the hype. This exercise will help you understand what activities and potential obstacles you will face in bringing technology to market.
  2. Don't take the first "opportunity": capital is usually the least scarce resource in hype cycles. What you need (especially in the early stages) are skills and knowledge. Take your time to try to understand how actors in your ecosystem might help you overcome some of the challenges identified in Step 1.
  3. Use exposure to learn: press coverage could be helpful in attracting potential investors and business contacts. The customer discovery process is (and always will be) your number one priority. Be strategic with exposure, too. Don't enter all available contests. Time spent preparing for contests is time wasted if you already have media visibility and the contest is not used to build meaningful relationships that could help you along the way.
  4. Be clear in your communication: don't make over-promises about the possibilities of your technology, be specific about where your technology could be useful, how useful it will be, and (especially important) when it will be available. Don't lie about the potential by generalizing and making it bigger than it currently is, especially when talking to potential investors/users. 

Hype is a double-edged sword that must be handled with care.

Taking these steps into consideration when developing your Deep-Tech startup will help you overcome the fog generated by hype, allowing you to develop critical thinking and learn more quickly in which direction to move, thereby increasing your chances of developing commercially viable technology that can help solve important societal challenges.

Because "Critical thinking is not something smart people are born with. It is a skill they have exercised by asking questions, both of others and of themselves, while sitting comfortably in a state of ignorance" (Gemma Milne of Smoke & Mirrors)

And who else but scientists are in the best position to harness critical thinking to develop extraordinary technologies and help us overcome the fog generated by hype?

Author

Federico Micol
PhD student at the Politecnico di Torino & Blogger

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