How frequently should deep tech startups raise capital?

Deep tech startups need a lot of capital. This means that:

💲 The work of raising capital must be a core discipline in the leadership team. One that is nurtured and practiced at all times, not pulled out of the drawer as the end of the runway draws near.

💲 The startup needs to increase in value faster than it needs capital in order to minimise dilution for the founding team.

A startup should raise money when it CAN raise capital, not when it MUST raise capital and it should plan milestone proof points that make this possible as frequently as possible.

At Main Sequence, we call this a "Slam Dunk Financing", where the work we focus on is anchored on investor proof milestones.

Most startups raise every 2-3 years and generally avoid it because the founders hate it. Of course, we've all been extending the time between raises in the recent 'Venture Winter' but spring is here and it is time to show investors th evalue we have created.

I propose that raising capital every year can deliver great advantage. Here are the benefits I can see:

🌱 We maintain relationships. The relationship between startup and investor becomes one of collaboration and creation vs a moment of value assessment on the scales.

🌱 We spread the frog kissing throughout the year. No doubt, there is no avoiding the 9/10 conversations with non-believers.

🌱 Frequent check ins on value fit/perception between investors and founders teach both about what is happening in the market in real time. These ideas that flow back into product and future pitches. Continuous improvement.

🌱 Incremental valuation uplifts become possible, assuming the milestones are being hit. Investors don't like being asked for a huge leap between a target valuation and the post-money price of the last round.

The argument against this is that it is a distraction. But I think that this IS the work for a CEO. Understand what is valuable, align teams to express this value in products, bring in the people and the $ to take that product forward.

WDYT?

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I'm a Partner at Main Sequence, a VC purpose-built to create global companies from scientific ideas with the inventors who imagine them. I build-out-loud here: https://philmorle.substack.com