Alternative Financing Approaches for Deep Tech Startups

This is the 3rd and last post in the Deep Tech Investment Series. This post takes a look at where Deep Tech companies — space, drone, aero, maritime, material science, biotech startups — can raise from, and looks at a couple of alternative structures that are starting to emerge that may provide alternatives.

In providing this information, I start with a story…

Once upon a time, there was a very clear definition of venture capital. It was used to fund many of the largest technology companies we know, like Facebook, Twitter and LinkedIn, which received funding from venture capital firms by the names of Sequoia Capital, Kleiner Perkins, and several others. These firms put in millions of dollars in supergiant rounds for a percentage of equity and got up to 1,000 times returns with an IPO. If these venture capitalists (commonly called VCs) got lucky, they would have one, two or three of these moonshot successes in their fund portfolio. This would then give them the return on investment they needed to fall in line with their investors’ expectations.

At the same time, however, many startup founders got sucked in and chewed up in this traditional venture capital model. If their company wasn’t on a trajectory of rocket ship growth, founders were forgotten by their investors. (Some were not able to raise much money because their idea/trajectory could take longer than the typical 7 year). Their VCs had to focus on the top 1 percent of the portfolio that they needed to scale…