
Hardware Startup Prep for Series A Fundraising – Global Village Space
How to Raise Series A Funding for Your Hardware Company in the Post-Low-Interest-Rate Era
The world we used to live in, where cheap money was used to pump up ARR, is gone. With rising interest rates, VCs have shifted their focus from growth-at-all-costs to instant profitability. Funding metrics have also shifted from just revenue and growth to including costs as well. In this post-low-interest-rate era, hardware companies face a challenging proposition when it comes to raising Series A funding. However, there are ways to do it.
Commit to Having Deployable Hardware
At the Series A stage, VCs want to know that they can pump money into a product that will start going into the market. This means that the product needs to be sufficiently mature to function in a more unconstrained environment outside of the startup lab. Hardware companies should aim to have deployable hardware that can function on a meaningful scale.
Use Your Ratio of Engineering Support per Hardware as a Metric
Your ratio of engineering support per hardware can be used as a metric for whether your product is deployable in the way it needs to be. If you have one engineer for the hardware piece you are deploying, you do not have a deployable product. At a one-to-four ratio, the unit economics become more reasonable. As a stretch goal, you should target to get the human out of the loop entirely, but everything eventually boils down to unit economics.
Show Tangible Proof of High-Quality Demand
Hardware companies should show tangible proof of high-quality demand. This means that they should have a clear understanding of their target market and their customers’ needs. They should also have a solid understanding of their competition and how they differentiate themselves from them. Companies should be able to demonstrate that they have a unique value proposition that sets them apart from their competitors.
Have a Clear Path to Revenue
Hardware companies should have a clear path to revenue. This means that they should have a solid understanding of their revenue streams and how they plan to generate revenue. They should also have a clear understanding of their costs and how they plan to manage them. Companies should be able to demonstrate that they have a solid business model that is sustainable in the long run.
Have a Strong Team
Hardware companies should have a strong team. This means that they should have a team with the necessary skills and experience to execute on their business plan. They should also have a team that is passionate about their product and committed to its success. Companies should be able to demonstrate that they have a team that can execute on their vision and take their product to market.
Conclusion
Raising Series A funding for hardware companies in the post-low-interest-rate era is challenging, but not impossible. Companies should aim to have deployable hardware, show tangible proof of high-quality demand, have a clear path to revenue, and have a strong team. By focusing on these key areas, hardware companies can increase their chances of raising Series A funding and taking their product to market.
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