Deeptech Seed Fundraising
or: how I learned to stop worrying and love the raise
There are lots of great resources out there on round structure, pitch deck formatting, and team building. But the deeptech pre-seed / seed round presents an interesting conundrum: most likely your startup only has an idea, maybe with a little bit of rudimentary data or a patent. So the evidence you have on-hand for your pitch is quite limited and you have little in the way of customer traction.
As follows are a set of parameters that can augment and accelerate your raise when you’re in this position - they likely apply to any company that is pre-product but I’ll use some deeptech / synbio examples.
Your investor hit list
The most important thing to do is to build up your rolodex of potential funders well in advance of needing money. At a minimum this is a list of names at specific firms with direct connections to you or warm intros lined up. This should probably include a number of months of regular updates on your progress before actually entering into a “pitching” phase.
It’s worth noting that if you are ruthless in paring this list down, you’ll find it will be pretty short, especially in deeptech - something like 25-30 names. There are very few investors that are actually writing checks into companies like yours and it will take some digging to find them. Make sure you choose the specific partner at your firm of interest and try to get inside their head before your first conversation.
Having your hit list prepped and ready will allow you to consolidate fundraising into a short period of time, which is key to driving a deal. As an aside, this is the key value add for an accelerator like YC - they consolidate pitching around demo day to drive urgency for investors to write a check, and have a ready-made network to hand to you.
Investor trust vs. plan robustness
Your startup plan has to be insanely robust if you are not personally known by the investor. If the VC has had some prior interaction with you, or has been tracking your progress for a series of months, you can build trust with them, giving them more comfort with your startup’s risk profile. Show them focus, progress, learning, and adaptability. It is nearly impossible to build this trust in a 30 minute cold pitch, so start a dialogue months before you plan to raise.
Dumb money
Screen for investors that are broadly bought into your thesis around how the world is changing and your company’s possible impact. It is very unlikely that you will be able to convince an investor that is totally new to the space or hasn’t already done some deep thinking about your sector.
Don’t waste your time on investors that haven’t thought about the broader trends that make it the right time for your startup. For example, if you are a synbio startup and the VC isn’t already bought in on biomanufactured products being a massive market in the future, or worse, doesn’t know what synbio is, it’s not worth your time to pursue them.
“Too smart for their own good” money
A corollary to the above is that you want to focus on investors that don’t know too much about your industry, or at least are able to come at the problem with a “beginner’s mind”. If they are already too deep in your industry, it is likely that they will have extreme skepticism about new solutions - they’re crusty. Their GPs may have launched companies in the space a decade ago, or they have ex-industry advisors all over their website.
They may eventually get over the line with you but will require a huge amount of diligence - assuming you took the above advice and are driving to a deal in a short period of time, then you have other options and shouldn’t spend weeks generating materials for them to review.
There are probably some examples of veterans who would truly add value, but more than likely they will just get in the way of your company doing something truly novel in an industry that they know too well.
Hope you enjoyed some of these tips and tricks - I’d love to hear from any of you about other strategies you’ve employed to get seed funding for your deeptech startup.