Nov 15, 2023

Fundraising in 2024: The Essential Guide for Hardware Startup Founders

Susanne Stock-Jakobsen
Content Specialist at Next Big Thing AG
Fundraising: Guide for Hardware Startup Founders
Introductory Snapshot: The Funding Landscape in 2023

In the thick of 2023, the economic landscape for hardware startups presents a paradox. While the funding pool appears to shrink — Germany’s startup investments halved to €5.4 billion — the entrepreneurial spirit remains indomitable, with a 16% surge in new ventures. For hardware innovators, these figures aren't just numbers; they represent a tightening but not impassable road to success.

The VC Caution and the Angel Investor Dilemma: Understanding the Venture Capital Slowdown

Venture Capitalists (VCs) are navigating the same turbulent economic waters as startups, leading to a 6% drop in seed round frequency. At the same time, the angel investors – often the first believers in startups – have also tightened their purse strings.

Global deal share by series

The result? A more competitive arena for seed funds. For founders, this means a heightened need for due diligence and a compelling pitch that transcends beyond mere numbers to a narrative that captures the VC’s strategic interests.

Oliver von Sperber, CEO of AXO Track, recently closed a financing round. Ultimately, he was able to convince the investors with facts: AXO’s wide partner network, strong demand from customers and great market potential. “We have a tangible product with a fast return on investment for our customers. Additionally, we are addressing global problems such as sustainability in transportation  and challenges of aging infrastructure,” says Oliver.

Hardware vs. Software: The Investment Disparity

As a hardware founder, you're in a unique spot. While software startups often enjoy the spotlight with their lean operations and quick scalability, you're playing a longer game that requires significant upfront investment in design, prototyping, and production.

Some ventures are embracing the Hardware Challenge and focus on innovation with impact. Hardware startups are at the forefront of tackling tangible problems — from sustainability to advanced manufacturing. NBT's focus on these sectors highlights the growing investor interest in startups that promise not just financial returns but also societal impact.

Europe's Resilience: A Beacon of Hope

Despite a global investment slowdown, Europe's startup scene is flourishing. Notably, Series-A deals are on the rise, and mature-stage funding (Series-B+) has surged by 160% over the last four years. This trend underscores the importance for early-stage (Pre-Seed and seed) founders to focus on product-market fit early on. Securing investment is not just about the funds; it's about proving your product's value to the market. A robust European tech ecosystem suggests that investors are keen on startups that demonstrate a clear understanding of their target customers and how their product meets those customers' needs.

Venture Studios: The New Frontier for Founders

Venture studios like Next Big Thing AG (NBT) in Berlin are changing the game for new startups by offering more than just money. They give you the full package: advice from experienced pros and mentors, the tools you need to build your product, and connections to people who can help your business grow — all critical factors in securing and demonstrating product-market fit. This is really helpful for hardware startups because making physical products can take a lot of time and money. NBT's program philosophy ensures founders not only maintain a majority share of their venture but also steer their products toward market needs, creating solutions that truly resonate with end-users.

Venture studios have gained traction in the startup world, experiencing an impressive growth rate of 625% over the past seven years. Explore the business model

The Numbers Game: Ownership, Investment, and Control

For founders, the makeup of your company's ownership — your cap table — is more than just numbers; it's the future of your startup. Holding a majority stake, like the 74.9% you keep with NBT's program, isn't just a bigger slice of the pie; it's about having the final say in the big decisions that shape your company's journey. The up to €700k in funding, coupled with NBT's technical expertise and network, can speed up the creation of your first market-ready product, potentially in just six months. 

This is crucial not just for growth but for attracting future investors. Investors look favorably on founders who've guided their startups successfully while holding a majority stake. It's a vote of confidence and a signal of stability, indicating that you, the founder, are driving the startup's vision and execution. Maintaining this control can be pivotal in negotiations, allowing you to dictate terms that align with your long-term vision and operational philosophy. This leverage is invaluable as you navigate through subsequent funding rounds, partnerships, and strategic decisions.

The Investment Thesis: Leveraging Hardware Innovation to Tackle Global Challenges

NBT recognizes the importance of hardware innovation in addressing pressing global challenges. Drawing upon their proficiency in sensor technology, IoT (Internet of Things), and computer vision, NBT actively contributes to achieving Sustainable Development Goals. They focus on various fields such as resource-efficient manufacturing, smart cities & green mobility, and sustainable supply chains.

What is NBT’s investment thesis?

Visionaries Program: A Founder-Friendly Structure

NBT's approach is founder-centric. Our Visionaries Program underlines NBT's commitment to fostering innovation and empowering founders. By completing our 100-day incubation phase, you gain more than investment; you gain a collaborative partner dedicated to maintaining your majority ownership and autonomy as you navigate the complexities of the startup landscape.

NBT's Chief Venture Officer, Dr. Corinna Sinzig, says: “We strategically position our incubation program Visionaries at the heart of the startup ecosystem and have successfully established a mentor and business angel network to support our founders from day one.”

Quote of Dr. Corinna Sinzig

Learn more about the Visionaries Program

Joining Forces with NBT

If you're ready to take your hardware startup from an idea to a market contender, NBT's Visionaries Program is where your journey could accelerate. It's a call to action for founders who are set to build not just a product, but a future.

Join us at NBT and kickstart your hardware innovation journey with the Visionaries Program. Whether you're ready to dive in full-time starting March 10th, 2024, or prefer to explore the world of entrepreneurship without stepping away from your current role through our Impact Challenge, we're here to support and scale your vision.

Don't have an idea just yet? No problem. Our job board is teeming with co-founding opportunities waiting for someone with your drive and passion.

Take the leap; your entrepreneurial future awaits.