Yesterday a new university spinout incubator asked me for 3 pieces of advice for their spinouts, ahead of their approaching VC’s:
- Get traction – show that it’s not just you who thinks it’s great science
Get some set of early-adopters (EA) lined up who are verifiably waiting for you create this product and can show some evidence that that they are willing to adopt/pay-for it later on. Ideally have some of them paying something now. These EAs should be representative of a big market. Perhaps use our scorecard.
- Present a credible cash-flow plan
Present a cash flow plan that makes the whole thing seem pretty deterministic:
So, be able to say: “We need £X to get from TRL 5 to TRL9 (or whatever) in order to get these already-somewhat-committed EAs to make a real/bigger financial commitment to us. This will cost us £X. We can get 30% of £X in grants. We need £70% of £X from investors and then we will have no trouble raising further cash because of the level of commitment that the EAs have told us that they will be willing to make at that stage.” Ideally you’re getting 5 or 10% of £X from fees for pilot projects.
- Determine who are the relevant investors
Don’t waste time going too broad and understand the stage-sensitivity of most investors.
So focus on:
– Investors (the very few) with an appetite for the spinout stage and deeptech. Look at the sizes of their recent deals – this will give you the most accurate indication. [Believe it or not you actually need to] Make sure that they actually have a fund are currently investing – ask them. Focus on your local, national or regional investors. Very-early-stage investing is pretty hands-on so far-away investors will rarely engage with you.
– Specialist investors from your sector globally, including corporate VCs from your targeted customers. Most won’t invest super-early but they will at least engage and will tell you if and when they might be interested to invest later. Their expressed interest will be of great benefit to you in speaking to non-specialist early-stage investors.
– Captive investors from your region or university. These usually have a mandate to invest in ventures from a specific university or region and they usually have a lower bar than purely commercial investors. Unfortunately though, most such investors can not lead funding rounds.
Understand the importance of getting a lead investor and don’t waste too much time with followers early on. Once you’ve you a lead investor it is relatively easy to get follower investors. The lead is the one who does most of the due diligence and eventually hopefully expresses themselves willing to jump first.
PS I’m not like the scary VC in the picture – I don’t have any hair😉Get some traction and only then https://deeptechseedfund.com/contact-us/
This post was originally posted on LinkedIn by Pearse Coyle. You can view the original post here and follow Pearse on LinkedIn here