# Institute Channel and Subsidy Dependence ## The company reaches customers through institutes and trade associations, and a subsidy pays for the projects of some customers In the home market of the company, the company reaches member manufacturers through institutes and trade associations. The manufacturers trust them. A partnership with them gives domain expertise, credibility and introductions at low cost. Foreman uses this channel. The company has long-term revenue-share contracts and co-development contracts with them. > [!tip] The most important asset > The institute-led channel gives the company an advantage to get customers. The advantage is not a claim only. Competitors from other countries and horizontal competitors cannot easily make the same channel. In the rating, the channel is the most important part of the moat, **if the channel is exclusive**. Nobody proved the exclusivity. ## Two exposures 1. **Concentration**: the value of the signed contracts is in one sector. The value is also in government-linked institutes or in projects that a subsidy pays for. The headline logos in the pitch are at the non-disclosure step or at the memorandum step. 2. **Subsidy dependence**: a large share of customers pay for projects through national AI-adoption schemes or succession schemes. For some payments, the customer pays only if the subsidy is paid out. Management thinks that most customers with a subsidy will pay the full price if there is no subsidy. **Nobody made sure that this belief is correct**, and management did not answer the questions on subsidy risk. > [!warning] What the test is > For each customer with a subsidy, the test has three questions. Without the subsidy, does the customer buy the project? At what price? What share of the contract value is payable only if the subsidy is paid out? ## Why it matters Revenue from a subsidy can be revenue that the company gets. But this revenue does not show product-market fit. It shows that the company can get a subsidy in a grant system. The institute channel is very good to get new customers. It does not show that the customers will buy again at the full price. [[Land-and-Expand in Enterprise AI]] and [[Quality of Revenue]] give more information. ## Related - [[Foreman MOC]] - [[Domain Packs and the Vertical Playbook]] - [[Borrowed Data Is Not a Moat]] - [[Emerging Market SaaS DD]]