Is My Company Tech-Enabled or Tech-Innovative?

Congratulations on launching your new company! You've got the LLC or Corp established, a compelling name, logo, and colors that reflect your brand identity. You're ready to pitch, demo, and share your innovative startup with the world. However, amidst your excitement, you encounter a question from an investor that makes you paus. They ask, “Is this a tech company or a tech-enabled company? You answer: “We’re a tech company” and eyebrows raise.

The answer to this seemingly simple question holds profound implications for how you communicate your vision, secure funding, attract talent, and determine the value of your company.

There is value in being associated with the latest, most cutting-edge trend even if your connection to it is tenuous. - Kerstetter

Understanding the Distinction

In the realm of technology startups, companies are often categorized as either tech-innovative/high-tech or tech-enabled/tech-supported. While neither classification is inherently superior, grasping the nuances between the two can profoundly impact the trajectory of your startup journey (Hughes).

Tech Innovative / High Tech

• Focus primarily on research and development (R&D)
• Funding sources include innovation grants (SBIR), private foundations, and investors interested in long-term solutions
• Often partner with academic institutions and research organizations
• May acquire various patents around the innovation itself
• May spend years developing novel ideas without a clear product application
• Their impact and success may not be an exit but in how many other companies use their solutions or build on their solution
• This can include ventures exploring emerging technologies like Blockchain, VR, and advanced AI.

Corporate examples: DeepMind, SpaceX, Illumina

Tech Enabled

• Focus on solving problems using innovative technology or processes to get to market quickly
• Funding primarily from bootstrapping, commercial funding, or investments
• Emphasize rapid market entry and competition against similar solutions
• May acquire patents around processes supported by other innovations
• Depend on existing technology innovations to deliver solutions to identified problems
• This can include applications leveraging ChatGPT, blockchain-based solutions, and VR-based applications.

Corporate Examples: Uber, Airbnb, Instagram

Keep in mind that there may be a gray area for technology-innovative and tech-enabled companies; being one or the other is not inherently a path to success.

Why Does This Matter?

The distinction between tech and tech-enabled is crucial because when a tech-enabled company decides to build (solutions) from scratch, it often results in a significant waste of resources. - The Catalyst Fund

• Funding: Tech innovative companies need patient capital focused on long-term potential, while tech-enabled companies need investors looking for near-term growth and returns.
• Talent: Tech innovative companies require highly educated or skilled people, PhDs, and research engineers. Tech-enabled companies primarily need product designers, marketers, and business experts.
• Product Strategy: Tech innovators can spend years developing core technology. Tech-enabled companies race to launch an MVP. 
• Marketing: Tech innovators promote their technical capabilities and achievements. Tech-enabled companies pitch the problem they solve.
• KPIs (Key Performance Indicators): Tech innovative companies should show strong growth along a research roadmap that will lead closer to an initial product or solution, MVP, or prototype; they are dependent on their ability to attract highly educated research talent and/or create patented technology. Tech-enabled companies should show strong traction in the form of product development, end-user adoption, revenue growth, market share growth, marketing reach, and patented processes. 

Overall, technology innovative companies may find it easier to build tooling around their technology for wider adoption than actually attempting to deliver a direct-to-customer, or market, solution. However, technology-enabled companies may find it easier, and smarter to build their solution on top of existing technology rather than building it from scratch (The Catalyst Fund)

Founders should understand what their roadmap can look like and thus help them plan their lives around the journey. They should consider:

• Reduce stress and friction by speaking and courting the right partners: investors, researchers, engineers, marketers, and co-founders.
• Communicate effectively to attract better attention. The wrong investor can derail the vision.
• Bring the right team on who are in it for the goals of the company and are as patient, or impatient, but most importantly are skilled and ready for the journey ahead.
• See the way out/exit for you: sale, partnership, licensing, IPO, …etc.

How Does This Help You?

Understanding your company's technology approach improves investor, customer, and employee confidence. Tech-enabled companies prioritize efficiency and quick market entry, often through MVPs built on existing technology. Conversely, tech-innovative companies rushing to market may strain their teams by delivering premature solutions. Classifying and positioning your company wisely can save time, attract suitable funding, and illuminate the best path to market.

Reference:

• The Catalyst Fund. “Fund.” Catalyst Fund, 4 October 2023, https://www.thecatalystfund.com/insights-blog/tech-company-or-tech-enabled-startup-why-it-matters. Accessed 3 February 2024.
• Huberman, Erik. “Are You Running a Tech Company or a Tech-Enabled One?” Entrepreneur, 20 October 2016, https://www.entrepreneur.com/science-technology/are-you-running-a-tech-company-or-a-tech-enabled-one/283345. Accessed 3 February 2024.
• Hughes, Karl. “High Tech vs. Tech-Enabled Startups.” Karl Hughes, https://www.karllhughes.com/posts/high-tech-enabled. Accessed 3 February 2024.
• KERSTETTER, Jim. “Why Some Start-Ups Are Called Technologie Companies and Others Are Not.” New York Times, New York Times, 9 August 2015, https://archive.nytimes.com/bits.blogs.nytimes.com/2015/08/02/in-search-of-the-slippery-definition-of-the-modern-tech-company/?_r=1. Accessed 22 February 2024.
• NSF. “SBIR/STTR Research Grants.” America's Seed Fund – NSF SBIR/STTR | NSF SBIR, https://seedfund.nsf.gov/. Accessed 3 February 2024.
• O’Brien, Paul. “What Does it Mean to be a Tech Company vs. Tech-Enabled? – MediaTech Ventures.” MediaTech Ventures, 13 July 2020, https://mediatech.ventures/what-does-it-mean-to-be-a-tech-company-vs-tech-enabled/. Accessed 3 February 2024.