Deep Tech CEOs with Technical Backgrounds Raise More Funding: What European VCs Are Saying
Techcrunch1 week ago
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Deep Tech CEOs with Technical Backgrounds Raise More Funding: What European VCs Are Saying

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Summary:

  • Deep tech startups with technical CEOs raise significantly more funding at seed and Series A stages than those led by CEOs with business backgrounds.

  • The report highlights the unique characteristics of deep tech, including longer paths to revenue, larger funding rounds, and a focus on technical risk over market risk.

  • Deep tech founders need to understand their costs, gross margins, and the financial implications of their long-term goals to successfully navigate the fundraising process.

  • First Momentum's Clueless No More community provides a platform for aspiring deep tech entrepreneurs to connect and learn from each other.

Deep Tech Startups: Technical CEOs Dominate Funding Rounds

First Momentum, a pre-seed fund investing in European deep tech startups, has released its Deep Tech Hardware Napkin, a resource providing benchmarks and insights on funding, team, product, and commercialization in the deep tech space. This report sheds light on the funding dynamics within this unique sector, revealing interesting trends and offering valuable guidance to aspiring entrepreneurs.

One key finding: Startups led by CEOs with a purely technical background (lacking business experience) tend to raise significantly more funding at seed and Series A stages than those led by CEOs with business backgrounds. This finding, although influenced by the success of surveyed startups, highlights the potential for technical founders to thrive by acquiring essential business skills.

Deep Tech: A Different Playbook

The report underscores the unique characteristics of deep tech, emphasizing a longer path to revenue and larger funding rounds compared to traditional SaaS startups. Here's why:

  • High upfront investment: Deep tech requires substantial capital for research, development, and prototyping. This translates to larger funding rounds, typically exceeding those seen in other sectors.
  • Technical risk, low market risk: The focus in deep tech is on tackling complex technical challenges, which often translates to a more assured market demand. For example, a cure for cancer would be easy to sell, despite the technical difficulty in achieving it.
  • Slower path to revenue: Due to the intricate nature of the technology, deep tech startups take longer to reach profitability and achieve a repeatable sales motion. This requires a strategic approach to derisking and identifying key milestones that will attract further investment.

Building a Strong Deep Tech Foundation

The report emphasizes the importance of building a strong team with a blend of technical expertise and business acumen. It also highlights the need for founders to understand their costs, gross margins, and the financial implications of their long-term goals. First Momentum's Clueless No More community provides a platform for aspiring deep tech entrepreneurs to connect, learn from each other, and navigate the unique challenges of this sector.

Key Takeaways:

  • Technical founders can gain a significant advantage by developing business skills and knowledge.
  • Deep tech startups require a different funding strategy and a longer time horizon to achieve profitability.
  • Building a strong team, understanding financial realities, and engaging with the right investors are crucial for success in the deep tech space.

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