SaaS founders looking to navigate the complexities of raising their next round can turn to Point Nine’s renowned annual SaaS Funding Napkin, inspired by the concept of “back of the napkin” plans or calculations.
Now, European hardware deep tech teams have a similar resource from First Momentum, a pre-seed fund that focuses on investing in technical B2B and deep tech startups.
With its Deep Tech Hardware Napkin, this German VC firm aims to democratize knowledge and benchmarks on funding, team, product, and commercialization, categorized by different stages. The spotlight is on Europe’s blossoming deep tech sector, offering insights distinct from the global SaaS landscape.
Benchmarks are particularly valuable for first-time founders or individuals lacking a robust network in the startup and VC realm. In the realm of deep tech, where many entrepreneurs stem from research backgrounds, having data-backed insights is crucial. General partner David Meiborg expressed, “They don’t know what’s a wrong decision or a good one, because they don’t have data on it; they are not in entrepreneurial circles, they don’t have 10 to 15 friends who have started companies before.”
First Momentum conducted a survey involving 30 deep tech VCs from eight countries to address this knowledge gap and opacity. The results, compiled in both a “napkin” and a comprehensive report, offer valuable insights into the landscape.
Additionally, the report sheds light on an intriguing finding: “At Seed and Series A, teams led by very technical CEOs (with no business background) secure significantly more funding than teams led by CEOs with a business-related background.”
First Momentum’s aim is not only to provide founders with this report but also to establish a community called Clueless No More, enabling aspiring “European scientist entrepreneurs” to learn from each other and tackle challenges collaboratively.
How deep tech differs: Bigger rounds, longer road to success
The report highlights that pre-seed and Series A deep tech hardware rounds in 2023 were larger compared to 2022, indicating a rising investor interest in the sector. Globally, deep tech now captures a 20% share of venture capital funding, reflecting a significant growth from a decade ago.
Meiborg emphasized the distinction in investing in deep tech, where the focus lies more on technical risk than market or commercialization risk. The elongated pathway to revenue for deep tech startups is evident, with only 29% reaching a repeatable sales motion and meaningful revenue at the Series A stage.
The approach of “derisking” is crucial, where founders must identify key milestones to secure future funding rounds. Understanding costs, achievable gross margins, and strategic planning are vital components outlined by First Momentum to guide founders effectively.
Accessing global investor syndication early on is recommended to secure the necessary funding for deep tech startups, as highlighted by Julien Macquet and Clement Van Driessen from Elaia, emphasizing the need for substantial capital and strategic partnerships for success.
