Starting a hard-tech or biotech company may seem daunting, but it is actually easier than starting an easy company. Complexity and non-obvious nature of hard-tech can scare off founders, but these challenges make it easier to succeed. Y Combinator is a major investor in biotech and hard-tech companies, funding over 250 bio companies and a couple hundred hard tech companies. Hard-tech and biotech startups have a higher acceptance rate at Y Combinator's Startup School. The two biggest problems specific to hard-tech are long development cycles and high capital requirements, as well as difficulty in finding product-market fit and scaling the business. Hard-tech and biotech founders often require a significant amount of money to build their first product, but there are alternative ways to make progress on ideas without needing millions of dollars. Strategies include doing things that don't require money, starting small, launching a simplified version, bootstrapping with a service, starting with a proof of concept, and selling before making. Pre-sales and letters of intent (LOIs) are valuable strategies for hard-tech and biotech founders to validate market demand before launching a product. Fundraising is crucial for hard-tech and biotech companies, and a better fundraising plan involves breaking down the process into smaller races with specific milestones. Jared Friedman offers valuable advice for hard-tech and biotech founders in a Q&A session. AI companies, particularly hard-tech and biotech founders, are discussed, with emphasis on the importance of having a minimum viable product (MVP) and collaboration with nonprofit hard-tech companies. Obtaining LOIs in hard-tech and biotech industries is challenging but valuable, and proving that an idea will work is crucial for success. Sales can be challenging in hard-tech and biotech industries, but obtaining LOIs can help uncover the needs and preferences of stakeholders. Finding founders and early employees for hard-tech companies is advantageous due to the appeal of crazy and ambitious ideas, and location is not a limiting factor.
Introduction
- Jared Friedman, a partner at Y Combinator, discusses starting hard tech and biotech companies.
- Over a thousand companies in the startup school are focusing on these areas.
- The talk is relevant for those currently in these fields or considering starting a company in the future.
Outline
The video discusses the challenges faced by hard-tech companies and provides advice on overcoming them. It also covers fundraising strategies tailored for hard-tech companies.
- Two main challenges faced by hard-tech companies
- Advice on overcoming these challenges
- Fundraising strategies for hard-tech companies
What is a Hard Tech Company?
- A hard tech company requires significant time and financial investment to develop its first product
- Even with ample resources, there is uncertainty if the product can be successfully built
- This definition applies to a wide range of companies, not limited to physical products
- It is not exclusive to science and technology
Market vs Technical risk
- Market risk and technical risk are two different types of risks that companies face.
- Companies building websites or mobile apps mostly face market risk, as it is uncertain if people will want the product.
- Building websites and apps is considered a solved problem, so the technical risk is low in this case.
- Hard-tech companies, on the other hand, have a clear market demand but face the challenge of whether they can actually develop the product.
Why start a hard-tech company?
Starting a hard-tech company may seem daunting, but it is actually easier than starting an easy company. This may sound paradoxical, but it is a deep truth. Many founders are scared off by the complexity and non-obvious nature of hard-tech, but it is precisely these challenges that make it easier to succeed.
Key points:
- Starting a hard-tech company is easier than starting an easy company.
- Complexity and non-obvious nature of hard-tech can scare off founders.
- Challenges in hard-tech make it easier to succeed.
Story about Boom
Boom is a YC company building a supersonic passenger jet to replace the Concorde. The founder reflects on the difficulties of turning his previous mobile shopping app into a big company, compared to the relative ease of building a supersonic jet. There is a unique opportunity to start hard tech companies, but many founders are intimidated by the complexity. Jared Friedman shares a story about Boom, highlighting the challenges faced by hard-tech and biotech founders and emphasizing the importance of perseverance and adaptability.
- Boom is building a supersonic passenger jet to replace the Concorde
- Launching a mobile shopping app was easy, but turning it into a big company was difficult due to lack of interest from press, employees, and investors
- Building a supersonic jet is incredibly hard, but everything else around it is easy
- There is a high demand for funding ambitious ideas in hard tech
- Many founders are intimidated by the complexity of hard tech ventures
- Jared Friedman shares a story about Boom, emphasizing the importance of perseverance and adaptability for hard-tech and biotech founders.
Hard-tech and Biotech - Big part of YC
Y Combinator is a leading investor in biotech and hard-tech, funding over 250 bio companies and a couple hundred hard tech companies. They are the largest seed investor in both sectors globally. Many hard tech companies seek funding from YC.
- Y Combinator is a major investor in biotech and hard-tech companies.
- They have funded over 250 bio companies and a couple hundred hard tech companies.
- YC is the largest seed investor in both sectors globally.
- Many hard tech companies apply to YC for funding.
Startup School
- Hard-tech and biotech startups have a higher acceptance rate at Startup School
- Ambitious founders are attracted to these industries
How much of YC's advice applies to hard-tech founders?
- Y Combinator's advice is applicable to hard-tech and biotech founders
- There are more similarities than differences between hard-tech and biotech companies and other startups
- The majority of YC's startup school curriculum is relevant for hard-tech and biotech companies
Two biggest problems specific to hard-tech
The two biggest problems specific to hard-tech are:
- The long development cycles and high capital requirements
- The difficulty in finding product-market fit and scaling the business.
Heavy MVP
The video discusses the challenges faced by hard-tech and biotech founders in need of significant funding. It highlights seven YC companies that found alternative ways to make progress on their ideas without requiring millions of dollars.
- Hard-tech and biotech founders often require a significant amount of money to build their first product.
- Seven YC companies found alternative ways to make progress on their ideas without needing millions of dollars.
Boom - Do things that don't cost money
- Doing things that don't require money can help achieve goals
- Examples from the hard-tech and biotech industry show strategies for gaining credibility, showcasing design, and generating customer interest without spending money
- These efforts can ultimately lead to raising funds for projects
Solute
The solute is the most important component in a solution, as it determines its properties and behavior.
- The solute is the substance that is dissolved in a solution.
- It can be a solid, liquid, or gas.
- The concentration of the solute affects the properties of the solution.
- The solute particles are dispersed evenly throughout the solvent.
- The solute can be separated from the solvent through various methods such as evaporation or filtration.
- The solute concentration can be measured using different units such as molarity or molality.
- The solute-solvent interaction plays a crucial role in determining the solubility of a substance.
- The solute can affect the physical and chemical properties of the solution, such as boiling point, freezing point, and conductivity.
- The solute can also influence the rate of reactions that occur in the solution.
- Understanding the behavior of solutes is essential in fields such as chemistry, biology, and environmental science.
Solugen - Start small
Solugen, a hard-tech and biotech company, started small by producing hydrogen peroxide using synthetic biology. They began with an MVP, a beaker that produced 1 cup of hydrogen peroxide, proving their industrial process concept. They scaled up gradually to larger installations and built a large hydrogen peroxide plant.
- Solugen is a hard-tech and biotech company.
- They started small by producing hydrogen peroxide using synthetic biology.
- Their MVP, a beaker, produced 1 cup of hydrogen peroxide.
- This proved the concept of their industrial process.
- They gradually scaled up to larger installations.
- Eventually, they built a large hydrogen peroxide plant.
AirX - Launch a simplified version
AirX, a hard-tech and biotech startup, overcame the challenge of FDA approval by launching a simplified version of their medical device using an existing FDA-approved device and developing software around it. This allowed them to quickly launch their product within three months at Y Combinator, without the need for FDA approval.
Key points:
- AirX faced the obstacle of FDA approval for their medical device
- They found a solution by launching a simplified version using an existing FDA-approved device
- Software development was done to support the simplified version
- The product was successfully launched within three months at Y Combinator
- FDA approval was not required for the simplified version.
Notable Labs - Bootstrap with a service
- Notable Labs is a company that provides tumor screening services to pharmaceutical companies.
- They generate revenue and collect data through these services.
- They are using the collected data to develop their own drugs for cancer.
Astranis - Start with a proof of concept
Astranis advises founders to start with a proof of concept, as it helped them gain credibility and raise funds. They built a test satellite in less than three months during YC for less than $50,000, which led to the launch of a fully functional telecommunication satellite.
Ginkgo Bioworks - Sell it before you make it
- Ginkgo Bioworks is a hard-tech and biotech company that raised funds by closing contracts with large companies to create organisms before actually making them.
- These contracts served as proof of customer demand and helped Ginkgo Bioworks raise millions of dollars from investors.
- Selling before making is a common technique used by many hard-tech companies.
How do you prove people will want your product if it is not built yet?
To prove people will want your product before it is built, you can:
- Demonstrate it to yourself and potential investors
- Use pre-sales to get customers to commit to purchasing in advance
- This provides validation and avoids wasting time on an unwanted product.
Pre Sales
- Pre-sales is a valuable strategy for hard-tech and biotech founders to validate market demand before launching a product.
- It may not be feasible for certain industries like medical, which require FDA approval.
- Founders can use a letter of intent to gauge interest and secure potential customers in such cases.
Letter of Intent (LOI)
A Letter of Intent (LOI) is a non-binding contract that gauges customer interest in buying a product. It resembles a contract and helps determine genuine customer interest. Investors advise using LOIs to assess customer commitment.
- LOIs are non-binding contracts used to gauge customer interest in a product
- They resemble contracts and are taken seriously by customers
- LOIs help determine genuine customer interest in a product
- Investors advise using LOIs to assess customer commitment
Advice about LOIs
- LOIs are crucial for hard-tech and biotech founders as they provide a roadmap for product development and revenue generation.
- Fundraising is also discussed in relation to LOIs for these industries.
Fundraising for Hard-tech and Biotech companies
- Fundraising is crucial for hard-tech and biotech companies as they cannot bootstrap and need to raise money from investors.
- Having a smart fundraising plan is essential.
- Simply pitching an idea is unrealistic, investors require tangible progress before committing significant funds.
- Founders should focus on making progress and achieving milestones before seeking substantial investment.
A better fundraising plan
A better fundraising plan for hard-tech and biotech founders involves breaking down the process into smaller races with specific milestones. The plan is to start small and gradually increase the size of each race as the company progresses. The goal is to achieve enough milestones to successfully raise larger funding rounds. The key is to fine-tune the plan to ensure that each step is as small as possible, making it easier to reach the necessary milestones.
Q&A
- Jared Friedman offers valuable advice for hard-tech and biotech founders in a Q&A session.
- The advice is relevant and helpful for those in the hard-tech and biotech industries.
- The session covers important topics and provides insights for founders in these fields.
AI companies
AI companies, particularly hard-tech and biotech founders, are discussed in this video. The speaker highlights the success of Cruz, an AI company that developed self-driving cars and was acquired by GM for billions of dollars. The importance of having a minimum viable product (MVP) to showcase the technology's capabilities is emphasized. The speaker expresses interest in collaborating with nonprofit hard-tech companies. Challenges in gaining trust from companies and obtaining letters of intent (LOIs) in the face of uncertainty about delivery are also addressed.
- Cruz, an AI company, achieved success by creating self-driving cars and being acquired by GM for billions of dollars.
- Having a minimum viable product (MVP) is crucial to demonstrate the capabilities of AI technology.
- Collaboration with nonprofit hard-tech companies is a potential avenue for exploration.
- Challenges in gaining trust from companies and obtaining letters of intent (LOIs) when there is uncertainty about delivery are acknowledged.
Hard to get LOIs
Obtaining LOIs in hard-tech and biotech industries is challenging due to their scarcity and value. LOIs indicate that a startup is addressing a critical pain point. "Hardtack" and "moonshot" ideas are synonymous in this context.
Key points:
- LOIs are difficult to obtain in hard-tech and biotech industries
- LOIs are valuable as they signify that a startup is solving a critical pain point
- "Hardtack" and "moonshot" ideas are interchangeable terms in this context
How do you prove that your idea is going to work?
- Proving that your idea will work is crucial for hard-tech and biotech founders.
- Reduce the perceived risk of the idea not working by proving as much as possible early on.
- This will make it easier to raise money and reach decision-makers necessary for success.
Sales
- Selling a product becomes challenging when there are multiple stakeholders with different incentives.
- Obtaining a Letter of Intent (LOI) from the organization can help uncover the needs and preferences of each stakeholder.
- LOI provides valuable feedback for the sales process.
Find founder and early employees for Hard-tech companies
Finding founders and early employees for hard-tech companies is advantageous due to the appeal of crazy and ambitious ideas. This can be done anywhere, similar to hiring for any other type of company.
- Talented individuals are attracted to hard-tech companies because of their innovative and ambitious ideas.
- The recruitment process for hard-tech companies is similar to that of other companies.
- Location is not a limiting factor in finding founders and early employees for hard-tech companies.