First Momentum Survey on Navigating Deep Tech Hardware Funding: A New Resource for European Founders

European hardware deep tech teams now have a valuable resource akin to Point Nine’s renowned SaaS Funding Napkin. This innovative tool, the Deep Tech Hardware Napkin, has been introduced by First Momentum, a pre-seed fund specializing in technical B2B and deep tech startups. The German VC firm aims to democratize essential knowledge and benchmarks related to funding, team composition, product development, and commercialization, all broken down by stage.

The Deep Tech Hardware Napkin addresses the unique needs of Europe’s burgeoning deep tech sector, which often yields different results compared to the global SaaS industry. This resource is particularly beneficial for first-time founders and those without extensive networks in startups and venture capital. Many deep tech entrepreneurs come from research backgrounds and lack the business acumen that seasoned entrepreneurs possess. Consequently, they often struggle with making informed decisions due to the absence of relevant data and guidance.

To bridge this knowledge gap, First Momentum surveyed 30 deep tech VCs from eight countries. The findings were compiled into both a concise “napkin” and a comprehensive report designed to provide objective insights. One notable discovery was that teams led by highly technical CEOs, even those without a business background, tend to secure significantly more funding at Seed and Series A stages compared to those led by business-oriented CEOs. This suggests that technical founders can greatly enhance their prospects by acquiring business skills and knowledge.

The survey results indicated a positive trend: pre-seed and Series A deep tech hardware funding rounds were larger in 2023 than in 2022, reflecting increased investor interest in the sector. Globally, deep tech now accounts for 20% of venture capital funding, double the share from a decade ago. This growth is partly due to the nature of deep tech, which requires substantial upfront investment, leading to larger funding rounds on average.

First Momentum’s report also revealed that at the Series A stage, only 29% of startups had achieved repeatable sales and significant revenue. This underscores the long timeline required for deep tech startups to reach revenue milestones. Founders are advised to reverse-engineer their funding strategy, identifying key milestones to attract future investment. This process, referred to as “derisking,” involves understanding costs, achievable gross margins, and the financial requirements to reach their ultimate goals.

Additionally, First Momentum supports technical founders through a community initiative called Clueless No More, where aspiring European scientist-entrepreneurs can share experiences and learn from each other. The community addresses challenges such as those highlighted by Runa Capital associate Francesco Ricciuti, who cautioned about the impact of poor technology transfer on success prospects.

In conclusion, the Deep Tech Hardware Napkin and accompanying report from First Momentum offer invaluable insights and benchmarks for deep tech entrepreneurs. By leveraging these resources and fostering a collaborative community, European deep-tech founders can navigate the complex landscape of startup funding and development, ultimately driving innovation and growth in the sector.

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