Four Crucial Reframes for Fundraising in Deep Tech
The pathway for deep-tech founders is different. Here’s what they should consider when raising capital—straight from experts in VC and climate tech.
Experts in venture capital and climate tech, Albert Dong and Daniel Beer of Godling Studio, recently shared their insights on fundraising with Activate Fellows. Based on their experience helping hundreds of founders tell their stories to investors, here’s what they want early-stage deep-tech founders to know.
First things first: hard-tech startups are different than software startups. The pathway for software companies is “well-trodden,” said Beer. “From seed to Series A, all the way to an exit event, that pathway is clear.”
Albert Dong and Daniel Beer, partners at Godling Studio, shared fundraising insights with Activate Fellows.
In contrast, science entrepreneurs like Activate Fellows are blazing their own trails—with highly specialized technology in nascent markets—often with longer R&D timelines and higher capital needs. Their milestones and go-to-market (GTM) strategies are fundamentally different and may be foreign to VCs who have historically invested in software startups.
“A lot of folks who were formerly software investors are now moving into hard tech,” explained Beer. “They expect and are trained on a certain type of growth trajectory… and there's a confusion and a lack of understanding as to how hard-tech companies grow.”
It’s on science entrepreneurs to bridge this gap and clarify their journeys to investors. So, how can founders reframe these conversations?
1. Focus on your 12-month plan and 12-year vision.
According to Dong, the two most important things to communicate to investors are 1) what the world will look like once you are successful and 2) what the next 12-18 months will look like to get you to the next round of capital. Investors understand ambiguity is part of the game—they don’t expect you to have a finalized 10-year plan.
“You don’t have to sell a pathway to commercialization all at once,” Dong explained in a LinkedIn post about the advice he and Beer shared with Activate Fellows. “Get granular on what has been de-risked to date and what you’re hoping to prove with the next round of funding.”
“It is important for early-stage CEOs to understand what they are and what they're not, and build a plan to address weaknesses into their next set of milestones,” Beer added. He also likes to remind hard-tech founders that milestones don’t have to be revenue-related. “Oftentimes, it's de-risking product development, or your ability to hire a really good team,” he said.
2. “Get creative with your comps.”
How can you come up with strong comparables when you’re building something completely new?
“Instead of by sector, consider making comps to similar business models or similar GTM strategies from companies in other industries instead,” Dong wrote on LinkedIn. “Don’t feel stuck referencing only those in your (budding) industry.”
Additionally, comps don’t have to summarize your business as a whole. “They are useful simplifications to help investors quickly understand a facet of your business,” Dong said.
3. “Sell your vision, support with your technology.”
“Your technology explains the utility, differentiation, and defensibility. Your vision is what gets you the term sheet,” Dong wrote on LinkedIn. “Inspire your investors with how incredible the world will be and how large the company can be if you are successful. Don’t let yourself get bogged down by the technical details early on in the process. Technical diligence will come later.”
4. Remember that it’s still mostly about the team.
“First-time founders often get lost in the rabbit hole of the technical implementation, business model, GTM, and all of the rich company details that belong later in the fundraising process,” Dong said. “The number one most impactful factor is the team.”
When approaching conversations with investors, Dong recommends emphasizing why you’re the perfect team to tackle the problem you’re solving (if your background supports it). “Connect the dots between all of your past experiences and showcase how they give you deep advantages (technical, industry, sales, etc.) in building the company that you are building,” he said. “Business models can be iterated on; founders cannot.”
Dong further explained, “Most investors won’t publicly admit this, but rapport is one of the strongest reasons why people invest. It’s human psychology. If they like you, they will look for reasons to justify why you are a good investment.”
“You have two goals for any fundraising meeting: 1) Maximize excitement and rapport, and 2) Control the narrative of the diligence that will be done after the call.”
Overall, Dong wants you to remember: “You have two goals for any fundraising meeting: 1) Maximize excitement and rapport, and 2) Control the narrative of the diligence that will be done after the call.”
Dong and Beer’s fundraising advice is even more important during this moment when liquidity is tight. Founders have to be extra smart with their strategies because, unlike a few years ago, they’re not convincing a VC to choose their company to be the one they invest in—they’re convincing a VC to invest, period. “Today, the goal of the founder and fundraising is to give the investor the courage to invest—and to invest now,” said Dong. “When the markets were hot, many investors were looking for reasons to invest. Now, most are looking for reasons not to.”
“Today, the goal of the founder and fundraising is to give the investor the courage to invest—and to invest now.”
Despite the unique fundraising hurdles that hard-tech founders face, investment in innovative climate tech is more important than ever. And investors’ curiosity about this sector could seriously pay off, for them and for humanity. As Beer summarized, “We need many of these technologies, and innovation is full-steam-ahead. These are unique investment opportunities that will return for fund managers and society. Feel confident in those meetings knowing you have something important to offer.”
Need help telling your story to investors? Godling Studio works closely with founders to tell stories that inspire investment and ultimately help them raise in less time with better terms.