Create new customers by solving “access” to key assets
Original Publish Date: March 23, 2021
“Customers seek solutions to their needs and wants. Access, consumption, and performance are natural checkpoints toward these solutions.” – The Ends Game by Bertini and Koenigsberg
Every market excludes a subset of potential customers for a unique mix of conscious or subconscious reasons. These customers even get labeled as non-customers in due time. It’s no surprise that we see startups that turn non-customers into customers set valuation records.
The cost of assets is one reason potential customers stay away from participating in certain markets. Note that I’m using customers loosely here to include individuals, groups, companies. Any entity that can play the role of a market player and increase the activity in a market or industry.
A simple example to illustrate the role of high-value assets as a competitive advantage comes from the world of regulated utilities. These companies own “difficult to replicate” distribution, transmission, and generation networks. Any new entrant in this space must tackle high capital costs which may not pay off necessarily.
Despite my example, owning high-cost assets is no longer a surefire way to dominate any market in every industry. I want to highlight a few interesting case studies where companies are bringing in a new generation of customers by rethinking asset ownership. By rethinking access to assets to open markets that were closed off to an entire set of customers.
Case Study #1 – Fractional Ownership
“Fractional ownership is a percentage ownership in an asset. Fractional ownership shares in the asset are sold to individual shareholders who share the benefits of the asset.” – Investopedia
Think about the different investment opportunities – specifically in high-value assets – that are completely unavailable for huge sections of our population. Fractional ownership is one way through which many startups (or corporate ventures) are making investments in alternate assets possible for the public. Creating a whole new legion of customers.
Few examples –
Real Estate – ex: Cadre, CrowdStreet – ‘direct access to highly curated commercial real estate investments’
Private Stock Exchange (Pre-IPO stocks) – ex: Carta, JPMorgan – invest in companies in the earlier stages of its lifecycle
Case Study #2 – Creation of Secondary Markets
The emergence of secondary markets may not be entirely new. Many industrial markets always have a dedicated space for market participants to buy used equipment. Even designer brands offer options to purchase pre-owned clothing. An easy win for their sustainability goals. What’s interesting is the intersection of secondary markets, private assets, and passion investing.
The growing trend of passion investing covers so many diverse private assets like art, classic cars, wine, coins, stamps, watches, furniture. The latest splash in this space comes from pop culture, sports fans.
Few examples –
Mythic Markets – buy and sell shares in rare pop culture collectibles
NBA Top Shot – buy and sell officially licensed highlights from NBA games
Alt – a new platform for sports card trading
"As assets like trading cards continue to dominate the conversation, I can envision 'sports' becoming a part of a lot of portfolios as opposed to just being part of an individual's collection or fond memories." – Rob Petrozzo, co-founder of Rally
Case Study #3 – Embracing Decentralization
I want to highlight the option of decentralization to compete, open access to new customers, counter established business models by revisiting the example of regulated utilities at the start. Enter microgrids
“A microgrid is a local energy grid with control capability, which means it can disconnect from the traditional grid and operate autonomously.” – Department of Energy
A microgrid offers flexibility in so many forms compared to a traditional, high capex grid: (i) you can power it with renewable resources, batteries, (ii) it’s a quick way to extend power to remote areas, (iii) it can bring down costs in areas with high electric costs. And that’s just scratching the surface!
On the financing side, there are so many interesting business models available to get these microgrids up and running to break the burden of high expenditures, the involvement of utilities. All the while it brings in new customers, more competition, and offers better value.
Few examples –
AlphaStruxure – designs, builds, owns, and operates next-gen energy systems with no upfront cost to customers (Energy as a Service)
Bloom Energy – on-site power generation systems that can use a wide variety of inputs to generate electricity
BoxPower – designs and manufactures solar energy systems in a 20-foot shipping container
Rethinking asset ownership or access to assets can bring in a whole new set of customers sidelined for a variety of reasons. This journey of figuring out alternate ways to open access to key assets for customers is not done yet. We will see unicorns continue to pop up in the future that turn non-customers into customers.