"Deep Tech Funding Guide: First Momentum's Insights"

Deep Tech Founders: Navigating the Funding Landscape with First Momentum’s Deep Tech Hardware Napkin

In the ever-evolving world of deep tech, European hardware startups now have a critical resource at their disposal. Much like SaaS founders reference the renowned yearly SaaS Funding Napkin for guidance, hardware deep tech teams can turn to First Momentum’s Deep Tech Hardware Napkin. This initiative by the German venture capital firm aims to democratize knowledge and provide essential benchmarks on funding, team composition, product development, and commercialization, all tailored to different stages of growth.

The Importance of Benchmarks

Benchmarks serve as invaluable tools, particularly for first-time founders or those lacking a robust network within the startup and venture capital (VC) ecosystem. This is especially true in deep tech, an area where many entrepreneurs have a research background rather than a business one. As general partner David Meiborg aptly noted, these founders often lack the data and insights necessary to make informed decisions. First Momentum seeks to bridge this knowledge gap through a comprehensive survey involving deep tech VCs from eight countries. The findings are presented not only in a concise “napkin” format but also in a detailed report.

Key Findings: The Role of Technical CEOs

One of the most intriguing insights from the report is the funding success of teams led by highly technical CEOs, even those without business backgrounds. At the Seed and Series A stages, these teams tend to raise more funds compared to their counterparts with business-oriented leaders. While there’s a degree of sample bias—successful startups are more likely to be surveyed—this trend indicates that technical founders can thrive if they bolster their business acumen. This is particularly relevant for Europe, which has a strong pipeline of university spinouts poised for success if guided correctly.

Addressing the Challenges

To further support these technical founders, First Momentum has launched a community called Clueless No More. This initiative allows aspiring European scientist-entrepreneurs to learn from each other and tackle common challenges. For instance, Runa Capital associate Francesco Ricciuti emphasizes the importance of cap table management, warning that poor technology transfer can significantly hinder a startup’s success.

Investor Appetite and Market Realities

The report also highlights a growing investor appetite for deep tech hardware, with pre-seed and Series A rounds being larger in recent years. This trend aligns with the global increase in venture capital funding for deep tech, which now commands a 25% share, up from 15% a decade ago. The nature of deep tech—requiring substantial upfront investment but offering lower market or commercialization risk—explains this investor interest. As Meiborg puts it, finding a cure for cancer is immensely challenging, but selling it is not.

The Path to Revenue

Despite the promising funding landscape, reaching meaningful revenue remains a significant hurdle. The report notes that even at the Series A stage, only 8% of startups have achieved a repeatable sales motion. This underscores the need for founders to strategically identify milestones that will attract further investment. Julien Macquet and Clement Van Driessen from Elaia, another VC firm participating in the survey, stress the importance of engaging global investors early on. This approach not only ensures the necessary funding but also provides critical support for achieving key business milestones.

A Brighter Future for Deep Tech

First Momentum’s Deep Tech Hardware Napkin and accompanying report offer European hardware startups a roadmap to navigate the complex funding landscape. By providing clear benchmarks and fostering a community of like-minded entrepreneurs, First Momentum aims to empower technical founders to achieve their full potential. With the right guidance and strategic planning, Europe’s deep tech sector is poised for remarkable growth.