Here are 5 Important Resources to Access Funding or Financing your Industry 4.0 Startup
1 – Venture Client: The client invests in the startup by buying the product or solution for a strategic benefit of their own company offering. By definition, the difference between a “normal” client and a venture client is that the startup with cutting-edge, disruptive technology presents an unknown benefit as it hasn’t yet been widely proven in the marketplace. The venture client company accepts the additional risk because the startup product solves a strategically relevant problem better than alternative solutions.
The best thing an established company could offer is a contract and client relationship with your tech startup because, ultimately, what makes a startup successful is having customers. This can be done through the Corporate Venture Client units or via Open Innovation programs with a venture-client model, like BIND 4.0, that connect Industry 4.0 Startups with one or more clients in the sector looking to contract teams with disruptive solutions.
- ⦿ Receive a paid contract for applying your services or solutions
- ⦿ Fine-tune your product and value proposition with insight from a real-use case
- ⦿ POC, Proof of concept, is very useful and relevant for early-stage companies from an investors perspective
- ⦿ Adds credibility as you grow your clientele organically, leading to more paid contracts
- ⦿ Lean approach is enticing for corporations, don’t have to set up an office or workspace in the corporate environment, working remotely on solutions reduces production costs
2 – Venture Capital & Corporate Venture Capital Investors: Provide a boost of capital in exchange for equity in the company. The venture capital investor buys a stake in an entrepreneur’s idea, nurtures it for a period of time, and then exits at some stage, usually with the help of an investment banker. Traditional Venture Capital is a form of private equity where financing is provided by professional investors who believe the startup has exponential growth potential. Additionally, there is a more recent trend of CVC, Corporate Venture Capital where the corporation allocates funds for new initiatives.
While both methods of investing have the same objective, to create value for the investors, they have different approaches. VCs want to generate high return on investment (ROI) and will focus on maximizing the value of their portfolio. The CVC focuses more on strategic long-term value like access to new technologies, improving methodologies and increasing speed of processes. Corporate Venture Capital also offers the benefits of a venture client, where they are taking the risk of working with a startup but helping fine-tune the solutions, acting as reference customers and in many cases, providing proof of concept.
Apart from the boost in capital, traditional VC firms have a value-added or platform function wherein they can offer more than just funding, but additional client introductions, referrals when hiring and helping spread the word throughout their networks, providing access to preferred suppliers and introductions to the entire community of portfolio members. Thus both Venture Capital and Corporate Venture Capital methods of investing offer enticing financial benefits for Industry 4.0 startups looking for funding solutions.
- ⦿ Get a boost of capital for important phases in the company: hiring team members, scaling solutions, establishing a new location, internationalization, etc.
- ⦿ Equity in exchange for investment, VCs want growth and high return on investment
- ⦿ Identify firms that specialize in your field as they are aware of the latest technologies and ready to invest in your sector
- ⦿ Investors may offer support post-investment, will have many industry connections and referrals
- ⦿ Value-added, like entry into portfolio community and potential client introductions
Quick Tips To appeal to VCs
- ⦿ Research which VC firms are investing in your stage and sector
- ⦿ Have a business plan and a well-prepared pitch
- ⦿ Be honest and straightforward about what you need
- ⦿ Display some market confirmation or prove customer traction
- ⦿ Have a good team who are committed to the problem the company is solving, because there will be ups and downs
The BIND 4.0 Venture Club has 20 members, composed of Europe’s leading venture capital firms that invest in early growth stage and B2B startups, specialized in the areas of Advanced Manufacturing, Energy, Health Tech and Food Technologies.
*Insight provided by BIND 4.0 Mentor and VC firm Cardumen Capital
3 – Public Funding and Grants: Funds that are provided for a specific purpose or under clear terms, grants offer money that doesn’t have to be repaid. Governments, whether on the national level or within local councils and regions, often dedicate public money for programs that improve the business environment or boost competition and innovation in specialized markets. In the early stages of a disruptive startup company, it can be challenging to get investors, thus public funding options can help entrepreneurs develop an idea into a product or provide the opportunity to grow. Public funding can offer long-term financing with advantageous conditions, including specialized loans whose terms are better suited for cutting-edge technologies startups.
Grants come in many forms and sizes and can be focused on the digital transformation of factories, clean technologies, renewable energies, or boosting industrial innovation in different areas. Subsidies and grants typically have very specific targets and requirements and thus it is important to invest time in preparing applications properly.
- ⦿ Public Funding can offer accessible financing terms for disruptive technologies
- ⦿ Grants do not have to be repaid, and no equity is exchanged
- ⦿ Gain credibility not only from organizations and investors but also from potential leads or clients
- ⦿ Waterfall effect, getting your first one makes it easier for you to get the second or third grant
Public funding is easy to find in your area, start with local government organizations. Here in the Basque region, we recommend SPRI as a business resource, here is a short list of current funding options:
- ⦿ Luzaro: Granting Participative Loans
- ⦿ Basque Fondo: Basque Venture Capital Fund
- ⦿ Aurrera: Long Term Financing Options
- ⦿ Gauzatu: Funding & Grants for R&D, Digital Transformation and Internationalization
4 – Startup Accelerators and Open Innovation Programs: Provide funding and introductions into new networks, often in exchange for equity in the company. Accelerator programs typically offer mentorships, business support and networking opportunities in addition to funding for participation. It is possible to find zero-equity programs, like BIND 4.0, public-private initiatives that don’t take equity in exchange for participation in the program.
Open Innovation Programs typically connect startups with a paying client, a corporation looking to leverage emerging technologies to fill the innovation gaps in their operations. The financial benefits of an Open Innovation Platform are numerous, including the ability to establish a venture-client relationship while receiving a paid contract for delivering solutions, as is the case for programs like BIND 4.0.
Network introductions are a key value in startup accelerator programs, by making connections and finding synergy, leading to more contracts. It is important to focus on finding a program that is within your industry, is well-respected and has the support of known partners or sponsors.
- ⦿ Offer access to funding at a critical stage for startups
- ⦿ Integration into an ecosystem, introductions into business networks and alumni contacts
- ⦿ Offer credibility for investors and potential clients, by way of being selected for a program that has seen the value proposition and is focused on boosting the startup
- ⦿ Networking can be one of the biggest benefits of any program as contacts, client leads and collaborations allow businesses to grow. Typically programs select startups in specialized sectors, in areas the program seeks to promote like Industry 4.0, DeepTech, Smart Energy, etc.
- ⦿ Receive valuable business support via professional mentors and targeted training
- ⦿ Capture the attention of investors looking for startups with new technologies already confirmed and tested by real customers, through participation in the program in addition to presenting your solutions in any networking and Demo Day events
5 – Challenges, Awards & Contests – Offering prize money in addition to visibility and promotion in specific sectors. Awards provide signaling, like a degree from Harvard or Cambridge, symbolizing a high quality or outstanding product. Competitions and challenges can be established by universities, large companies, investors and governments looking to boost competition or innovation in set fields like cloud computing, nanotechnology, new materials, fuel cells, energy storage, robotics, smart cities, augmented reality, artificial intelligence and all solutions which can be applied to Industry 4.0.
- ⦿ Prize money, certain contests offer equity-free money for disruptive solutions
- ⦿ Get media attention and visibility thru award and contest promotions
- ⦿ Some awards offer access to state-of-the-art facilities for research and development
- ⦿ Provide credibility for new clients by way of outside recognition of your solutions
- ⦿ Establish a positive reputation for Investors seeking startups that stand out
Looking for Startup Contests and Technology Challenges in your field?
- ⦿ Startup Battlefield Competition by TechCrunch offers $100K prize money
- ⦿ Innovate UK & UKRI offer specialized contests for innovation all throughout the year
- ⦿ CITA Emprende annual startup competition in the Basque Country
- ⦿ EPSRC award world-class science and technology facilities for the industrial engineering and physical sciences research communities to use throughout Europe
- ⦿ Get in the Ring a global startup competition that has been hosted in over 200 cities
$130 Billion Invested in equity deals throughout Europe
According to CBInsights, since 2015, “Nearly $130 billion has been invested across more than 23,600 equity deals to tech startups throughout Europe.” Whether they come from acceleration programs, investors, contests or government funded programs, these equity deals are actively available and a great resource for startups looking for the next level of financing and funding.
BIND 4.0 Offers Credibility, Funding and Investment Opportunities
Look no further! We think BIND 4.0 is the best all around resource as it combines Venture Client with startup acceleration thus expanding your business network, plus introductions to industry-specific investors and access to economic support and public funding. We hope this guide has offered some insight into key financing and funding resources, as you select the best tools for your Industry 4.0 startup.
Research, Stay Vigilant and Make the Most of the Resources Selected
There are so many viable options for young companies of all sizes and fields. Remember to be vigilant and invest your time looking for and applying for these exciting resources. Additionally, once you have accepted an investor, competition or program, then continue to invest your time. Catch the attention of investors and clients by participating in the programs and presenting your solutions on time and delivering as promised. Establishing a good reputation will lead to more business, so make the most of the resources you choose.