The £150K problem: how to properly fund #iot startups

I was invited to speak at Fund Forum in Berlin a few weeks ago and wanted to share the crux of my argument to a room full of investors and investment managers.

I believe that fundamentally, the investment model that Silicon Valley has developed around software is completely useless when it comes to helping early stage hardware startups get off the ground.

Traditionally, as a founder, you might look to raise £50K in seed, friends or family or angel money. That’s great except that will never get you a physical connected product to test out on the market. Never. Not with the materials you need to use, not with the embedded software that needs to be developed. Never.

Spending 3-4 months in an incubator gives you a break from your daily obligations of paying the rent but doesn’t cover the cost of expert engineering, industrial design, moulds, certification.

Some investment funds are starting to concentrate on #iot and that’s great, but good god I wish people would START by investing £150K. And then leave companies be for a while, because £150K is enough to get going or hang yourself with if you don’t know what you’re doing. But it’s not enough to make your investors cry either (as a fund manager).

£150K will cover the certification costs for EU/US sales, the design work with a team or a partner, some marketing. That’s kindof all a team needs to ‘test’ the product with people, to have something in their hands. And it’s possibly enough to start to just sell the damn thing. Later the founders can go after VC money if they’re keen (or mad) but for the love of God(s) let’s give startups a chance. Anything below £150K and they are just bidding their time, missing one Christmas after the other, missing opportunities for that ‘growth’ which all investors look for.

Help them out first, in a serious and productive way. £150K/startup. That would be great.