Companies must distinguish themselves to advance to the next round in a VC’s pipeline, much like in hiring procedures. What can you do as a Deep Tech business to increase your prospects of raising money? Let’s start by taking a closer look at some of the important qualities Speedinvest looks for in early-stage Deep Tech firms.
In the end, a startup’s ability to develop, learn, and carry out a clearly expressed goal is what matters most.
We won’t go over how VCs evaluate startups again; instead, we’ll concentrate on how we view Deep Tech startups differently than other non-Deep Tech businesses.
Let’s start now!
Technology should address problems rather than create new ones.
Yes, there are blog posts about how picking an initial target market is crucial as well as the normal information from Forbes on “how VCs judge market size.” The founders of Deep Tech, however, should remember that their technology must address a problem that is terrible enough to call for it. Alternatively stated, “We make every effort to avoid investing in [technical breakthroughs] in search of a problem.” The trick is to comprehend who needs your goods and why.
Credentials Alone Don’t Take Priority Over Expertise And Practical Knowledge
Ideality is balance. Researchers from Berkeley and Stanford found that teams with at least one technical and one business-focused founder raised 30% more money than those that are either exclusively technical or business-focused. Additionally, while degrees like PhDs and/or years of operating experience are occasional signs of profound technical or business expertise, respectively, they are not always “must-haves.” We place greater emphasis on a person’s level of expertise in an area than just their credentials.
It is crucial to have a distinct vision and the capacity to articulate it.
Along with experience, it’s critical to be able to explain in detail what your product accomplishes and the benefits it offers buyers. These characteristics are a sign that you will be able to:
Talk to clients on their level so they don’t have to go on a “technical deep dive.”
easily overcome the initial obstacles while pursuing future funding rounds.
In the end, a startup’s ability to develop, learn, and carry out a clearly expressed goal is what matters most.
The solution must provide a special benefit.
Fundamentally, we must comprehend the benefits a Deep Tech startup’s product can provide, the suffering it can ease, the issues it can resolve, and the defensibility it offers.
We work to gain an understanding of the fundamental studies or insider information that power the technology in the product. These trade secrets may consist of inventive fixes for complex technical issues, fresh inventions, fresh procedures, restricted access to data, or patents. We would be really delighted if a business could provide the key to monetizing basic research on a broad scale (read: faster and cheaper).
Traction Evaluation Is Based On The Business Model
It is significant to remember that the business model of a startup affects how we estimate traction.
Larger deals and extended sales cycles are usual for startups that use an enterprise license model. As a result, we do not just base our assessment of traction on cold, hard cash flow; rather, we consider additional indications such as letters of intent (LOIs) or pilots that are likely to convert, show a market demand, and have the potential for further future monetization. Additionally, it helps to have a solid grasp of the factors that affect conversion rates.
On the other side, for firms using an open-source software strategy, we typically downplay pilots and revenue. In these situations, community traction, corporate user count, developer activity, or even proxies like GitHub stars, are the main measures we assess. A few letters of intent at this point would be a plus. Nevertheless, we continue to seek to comprehend how a firm may develop into one that is profitable and commercially successful.
How We View Deals in Deep Tech
When opposed to reviewing non-Deep Tech startups, the procedures for evaluating Deep Tech startups are distinct. The following considerations are crucial for us to bear in mind:
Does the startup address recognizable problems that obviously require a fix?
Does the team have more than just credentials—does it also have competence and balance?
What level of uniqueness and viability does a company exhibit in terms of technology?
How does the business model of a company impact the way we gauge traction?
Gratitude for reading! Please be aware that many early-stage startups only have some of the qualities we are looking for. Do you think I overlooked anything? Have more questions if you’re starting a deep technology business? Follow our blog for more.
