Bold ideas that promise to reshape our world are all about venturing into uncharted territories, giving us new super capabilities and creating new markets. The stakes are high, the rewards high, and in most cases, they are deeply technical. When it comes to raising funding, it is as crucial to mobilize generalist venture capitalists as it is sector-specific investors for each round.
Yes, having investors from specific sectors is very valuable. But we should not underestimate the power of the generalist perspective. They provide something different: a broader, more expansive point of view. However, convincing generalist venture capitalists to bet on these ambitious ideas is complex.
The task is doubly daunting in a tense economic environment. Just look at biopharma. The industry is expected to have increased its lowest figure in four years. When the funds are adjusted, the venture capitalists (particularly those without deep knowledge of the specific technical domain) often revert to a more conservative investment approach. This conservatism can inadvertently sideline the most transformative ideas that promise financial returns and significant social impact.
So how do founders of highly ambitious and deeply technical startups navigate these turbulent waters? How do you convince generalist venture capitalists to invest in ideas that require a leap of faith and, perhaps, an act of understanding?
Tell a great story about how the world will be better if the goals are achieved
First of all, the key is effective communication. Translate the technical and complex vision into a story that impacts a wide spectrum of investors. It is not about diluting the technical aspects or simplifying the science; Instead, it involves crafting a story that highlights the potential impact and value of the idea. Investors need to see not only the brilliance of the concept but also its practical implications: how it addresses a real-world problem, the scale of its potential market and its viability.
It takes complex, technical insight into a story that resonates with a broad spectrum of investors.
Every great company has a story: a story of challenges, advances and visions of a changed world. Telling that story in a compelling way can capture the imagination of generalist venture capitalists, who are often looking for the next big idea to revolutionize the market. A general guide to follow:
- Because right now: Start by contextualizing the problem that the specific venture is solving. Explain why this issue has not been resolved to date and what has changed, so now is a good time to resolve it. Draw a picture of the current landscape and the void that technology aims to fill. This is especially important for innovative ideas, which often have higher R&D and CapEx (capital expenditure) costs, but are now possible thanks to other technological advances of the day.
- Humanize technology: At the center of every technical solution is a human problem. Relate entrepreneurship technology to real-life scenarios and possible impacts on people's lives. This human connection makes complex ideas more relatable and compelling.
- Show momentum and speed: Share the story of the company's evolution: the challenges addressed, the progress made and the lessons learned. Demonstrate that the startup can push its limits in terms of who it can attract and what it can do. That you can do more with less. Show resilience, innovation and the progressive realization of the vision. Generalist venture capitalists hear many pitches from software companies that promise rapid growth.
- Share the vision: articulate a vivid vision of the world transformed by newly developed technology. It's not just about the technical aspects of the product, but the broader impact it can have on industries, societies and everyday life. It has to be compelling enough for smart people to join the initiative. You are being sold to an investor as a candidate for the company, and he wants to evaluate your ability to attract talent.
- Emotional appeal: connect with the audience on an emotional level. Share personal motivations, the passion that drives the team and the aspirations behind the company. An emotionally charged narrative can create a lasting impression and clarify why the founder and team are best positioned to undertake this initiative.
Storytelling is about creating a compelling, holistic narrative that connects the dots between cutting-edge technology and its broader implications. It's about making the vision relatable, understandable and exciting, transforming a complex idea into a story that inspires and motivates.
Safe milestones achievable in one or two years
While narratives are powerful, they must be based in reality; Ideas must be aligned with the interests of generalist venture capitalists. This requires a deep understanding of what drives these investors: return on investment, market potential, scalability and risk mitigation.
It should express how the idea of success, while ambitious, has a viable path to profitability and growth. It's about showing investors a path from a brilliant idea to a market-leading product.
Provide clear, data-backed insights into the size of your target market and how the solution scales to meet this demand. Outline the great opportunity that lies ahead of us. Find ways to showcase a community that is already excited about the product, whether it's testimonials from early adopters, results from pilot programs, or even partnerships with prominent industry players. Demonstrating that there is genuine market interest and adoption potential goes a long way toward convincing venture capitalists of viability.
Consider a startup developing an advanced composite material with an exceptional strength-to-weight ratio to revolutionize aerospace, defense, space, and many other industries. However, the initial technical complexity and uncertainty about market adjustment could cause doubts among generalist venture capitalists. What can be done is to conduct thorough market analysis to identify sectors where the material could be immediately applied, such as in the creation of lightweight, fuel-efficient vehicles. Secure contracts with clients from major automobile manufacturers, tangibly demonstrating market interest. Establish a clear and detailed roadmap to scale material for mass production. Venture capitalists are generally wary of the go-to-market plans of pioneering companies, so it is key to ensure the startup's market support with evidence and data of the progress achieved.
Show evidence of exceptional ability
Deep technical knowledge is the main strength. Take advantage of it to generate trust and credibility among investors. Show how unique experience and knowledge give the company a competitive advantage. It's not just about the technology itself, but also the solution it provides.
Back up claims with evidence. This could be in the form of patents, research articles, prototype development, or endorsements from other experts in the field. Tangible proof of your technical prowess can significantly bolster credibility.
Build in public: show the work
Building relationships with venture capitalists goes beyond the boardroom. It's about cultivating relationships that extend to various factors in the ecosystem. Interact with them at industry events, through mutual connections, or even on social media. Share progress updates, target industry insights, and thought leadership content. Regular and informative updates can be educational elements for them and alleviate initial barriers to understanding the technology.
Resilience: financing is rarely easy
Navigating the venture capital market with an unconventional idea requires resilience and adaptability. Rejections are part of the process. Every “no” brings a “yes” closer. Founders should be prepared for initial skepticism and rejection and use each interaction as an opportunity to learn and improve.
The next big milestone or proof point is what attracts investors, especially those who are more risk averse. Customer interest and validation are the key indicators of success, not just obtaining venture capital funding. Investors are often attracted to the momentum created by customer interest. It is essential to distinguish venture capitalist validation from actual market success; True validation comes from customers. You have to focus on earning them and investors are likely to follow that set path.
Being able to build something that people want is rarer than being able to write a check.
If we assume that the founder is confident that he and his team have a real opportunity to create something extraordinary that people want, then you have a hot, in-demand product. The founders who can bring cutting-edge science to the world are the ones who advance society.
