Startups developing so-called deep tech often find it challenging to raise capital for various reasons. At TechCrunch Early Stage: Marketing and Fundraising, two experienced investors spoke on the subject and advised startups facing a challenging fundraising path.
Pae Wu and Garrett Winther are both partners at SOSV and run the fund’s programs around biotech and hardware. SOSV doesn’t shy away from startups building complex technology, and because of this, Wu and Winther are well placed to advise on fundraising. They presented three key points targeting startups fundraising for deep tech applications, but the points are applicable to startups of any variety.
Before giving advice, the two acknowledged the nuances across the deep tech ecosystem and each industry. Their presentation is focused on general guidance applicable to nearly every startup.
Finding the right investor
The first point on Wu and Winther’s presentation sounds a bit self-serving but is based on solid advice. When building a deep tech startup, find the right investor, they said. This is general advice for startups, but according to these two, it’s even more important when building a company that might take longer for the investor to see a return.
In deep tech, it’s essential to think about founder-investor fit. And what we mean by this is understanding why an investor is even in VC in the first place. And what it is that’s driving you, the founder, to do what you do.
And so we look at this fit as a Venn diagram between founders who have a near maniacal devotion to wanting to solve a core systemic problem and investors that thrive on the unique risk profile that comes in deep tech. Because with deep tech, we’re talking about both technical risk, where maybe that insight that is core to the company merely proves that we’re no longer having to break any laws of physics to do whatever it is you’re trying to do. So there’s a big technical risk. (Timestamp: 6:09)
Set obtainable goals
Breakthrough technology hardly came from sudden breakthroughs. As explained in this presentation, it’s critical to set obtainable goals that lead to the desired outcome.
You need to build viable stepping stones toward the big vision. I think the traditional mentality is, “We’re going to build this amazing new technology, we’re going to bring it out in the world, it’s going to change everything, but we’re going to do it in 12 months.” Or, “I don’t know how we’re going to do this as it’s going to take $100 million in funding to reinvent this entire industry, or at least start billions of dollars reinvent this industry, how do I even get there.” And there’s this tension of taking those first steps but also being able to achieve that big vision.
We, as investors, love to see methodical founders who can see the first step that will converge at the right moment of technical and business milestones. Maybe it’s a smaller product; perhaps it’s a beachhead product; maybe it’s just getting a purchase order commitment with your first customer. But coming together to show at the very critical point of fundraising, “Hey, there’s something here. This works, and we can build a business around this.” And then doing that repeatedly for your business rather than just building it from day one or expecting everybody to see the vision on day one, but methodically working away to scale. (Timestamp: 11:29)
Communities have network effects
Wu and Winther are directors at two of SOSV’s startup accelerators, programs that lean heavily into communities. From their vantage point, it’s clear they see advantages in building companies alongside peers.
It’s hard enough trying to build a company that’s in a brand new technology on your own. It can help to be surrounded by like-minded individuals. There’s the benefit of having a community where everyone’s working at a similar cadence. And there’s also just understanding what each other are going through,
Surrounding yourself with people not just that understand the technology but also push you. I think that’s what we’ve seen most, with our communities and other ones that are thriving, that founders get put in a spot where they’re demanded to move forward, demanded to get to market, and demanded to take the next step. And I think the network effects of these communities are more powerful than any capital you can see out of them. So find your way and get the exponential impact that comes with being in those communities. (Timestamp: 16:38)
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