Fundraising is a complex set of activities and a time-consuming process aiming to find the funds to implement an idea. A fundraiser is a link between those who have resources and those who need them. Can a deep tech startup survive without a fundraiser? – Yes, it can. But the question is how satisfying it will be. For most deep tech startups funding is one of the top challenges, since their core idea might need years of development. Hence, due to specifics in business models, deep tech startups require extensive support and domain expertise to make that Next Step effectively, especially at the early stages. Fundraising is not just about money, that is in fact the last step in the process. Fundraising is about formalizing your ambition into the full story for your startup and build the underlying foundation for that story: the USP, the target entry market segment, the business model, the financials and the exit scenarios. Only when the story is complete and consistent, can you start thinking about the amount you want to raise. Only then can you demonstrate to potential investors that not only do you have a unique selling proposition, you can also convert into a product, a product roadmap and enter the market with it. This is the very first concern of potential investors: buying into the story [and the team]. Once they’re past this step, the investment itself is going to be on the table: how much [for how long – typically 18 months]. This is where the discussion starts moving towards the first parts of a term sheet.
All this takes a lot of time and effort. Where 30 years ago a team, a pitch deck and a business plan was the foundation, today a lot more effort and work is needed. The founding team has to take this into account when planning their fundraising schedule: at least 9 months if this is the first time you are raising a round. It is here where our fundraising team will make its impact: we know the process, we know how to work with the founding team to build the full story and package including pitch to prepare them to engage with the right investors. We consider ourselves a service organization – we work with the founding team as one team to prepare for that Next Step: it is a personalized process as each startup has its own fingerprint, its own value proposition, its own team, its own strengths and weaknesses.
One of the challenges that comes with design services is the cyclical nature of the services business. When the economy tightens and corporates are watching their operational expenses, the first step will be to halt any external contracts/contractors which are not deemed absolutely essential.
Whereas the earlier (staircase) model is a good approach in scaling up revenue and creating new revenue streams, the foundation of the company is still based on the service model: headcount continues to be the main driver (typically up to 60-70% of revenue). In terms of (enterprise) valuation the additional revenue streams, however, will already make a significant difference.
Design services companies typically start small (some exceptions when it concerns management buy-outs) and natural growth is a slow process as it requires hiring and training of engineers based on/driven by the revenue stream of the company. Growth of business is tied to growing the team and it is not always easy to find the engineers.