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Lip-Bu Tan's investment formula for semiconductor startups requires targeting a hyperscaler as the first customer. Their scale validates the product and provides millions in revenue, de-risking the venture. He even advises giving up warrants to secure such a crucial design win early on.
When pre-selling your product, avoid the trap of building a custom solution for just one customer. Secure commitments from at least five to ten different companies. This ensures you're building a repeatable, scalable product that addresses a broad market need, not a one-off science project for a single client.
Unlike software, hard tech involves long scale-up timelines and high capital costs. Founders must specifically seek the small subset of investors and partners who understand the market context and have the risk appetite for massive, world-changing opportunities, rather than trying to appeal to all VCs.
Pursuing large "whale" customers for early validation is risky because they often come with heavy demands that can derail the product vision. Instead, seek out innovative, mid-level companies who are early adopters. They provide better feedback, and building traction with them opens doors to larger clients later.
It's common to vet investors, but founders should apply the same rigor to their first customers, especially in enterprise. Early customers are not just revenue sources; they are innovation partners who shape your product. Choosing partners who share your vision and will collaborate deeply is crucial for success.
For large-scale B2B products, validate demand by signing customers who not only commit to buying but also pre-fund development. This model secures capital, guarantees early adopters, and ensures the product is built with direct, committed customer input from the very beginning.
Sirian validated its market by securing five paid pilot agreements from large manufacturers based on its vision and understanding of customer pain points. This approach proved market demand and de-risked the venture before significant engineering investment, a powerful strategy for enterprise-focused founders.
The go-to-market for AI hardware is unlike traditional enterprise sales. Founders should focus on a small number of massive customers: the hyperscalers and emerging "sovereign clouds" in various countries. The total addressable market is maybe 50 customers, not thousands, making it a telecom-like industry.
Validate market demand by securing payment from customers before investing significant resources in building anything. This applies to software, hardware, and services, completely eliminating the risk of creating something nobody wants to buy.
Startups building custom silicon for physical autonomy face immense capital costs. A staged approach can de-risk this by first developing and selling a hardware-agnostic software layer for model optimization. This generates early revenue, proves the market, and funds the gradual progression towards a full custom ASIC tape-out.
Contrary to common advice, the biggest companies (Walmart, Tesla) are often the best first customers. They must innovate to maintain their #1 position and are willing to take chances on new tech that gives them a competitive edge or "alpha."