As a former rocket scientist I have a lot of friends doing HardTech/DeepTech startups. Fundraising process, traction metrics and VC’s logic are a bit different for them compared to classical IT.
I typically advise my friends a short video “Advice for HardTech and Biotech Founders” by Jared Friedman. You will also find many inspiring MVP's of Y Combinator HardTech startups.
Video: https://youtu.be/C1DlZWfI6rk
Short summary
- HardTech startups are different because it takes a lot of time, efforts, and money to build an MVP. Sometimes it is not possible to build a product (or it is unreasonably pricey, my note). - HardTech typically build a product that potential clients need. The main problem is to deliver it. - The hardest part is to build a product, while it’s easier to hire employees when you have a bold and inspiring idea. - To raise money you need to build a «heavy MVP» (for example, you can build a solid advisory board with tech advisors and industry experts, a computer simulation, a plastic model, etc.) - You need to test the demand: the best case scenario is to get pre-paid orders (for example, launch a campaign on KickStarter), alternatively you can sign a letter of intent with a potential clients (Jared claims that despite the document is non-binding potential clients are very serious about it, but according to my personal experience it varies from a country to country) - It is impossible to raise 10s of million dollars to deliver a commercial version. You need to raise money in several steps. To raise the next round you will need to reach a technology mile stone like building laboratory sample, PoC for a potential client, etc.
I would also add that
- A charismatic leader and professional team is even more important for HardTech startups than for IT since it takes significantly more time to deliver commercial version.
- Even if you are as brilliant as Elon Musk you will need a mix of VC and government funding to build your startup.
- No all HardTech ideas could become startups. It should be a disruptive innovation because market leaders implement supportive innovations better than a startup.
By the way here is a book Innovator’s Dilemma describing history of disruptive innovations, basic concepts and logic around it: https://www.amazon.com/Innovators-Dilemma-Revolutionary-Change-Business/dp/0062060244
I hope it will help those of you developing HardTech startups. Remember, HardTech is hard, but not impossible :)
Original article was published in 2020 at my LinkedIn here.
Comments