Raising for a deep tech or hardware company requires a different playbook than SaaS. GenapSys, which raised over $240M for its DNA sequencing device, shows the need for a long-term capital strategy, specialized investors who understand science, and a narrative that connects complex technology to a massive market need. Founders in this space must de-risk the science first, then prove a path to commercial viability.
Key takeaways
- Map your financing strategy across multiple rounds; you’ll need more capital than you think.
- Target investors with a deep tech or biotech specialization who understand long R&D cycles.
- Your Series A must show a de-risked prototype, not just a concept or scientific paper.
- Build a syndicate that blends scientific specialists, commercial connectors, and financial firepower.
- Your narrative must be simple: connect your complex tech to a huge, urgent, and understandable problem.
- Avoid investors who apply SaaS growth metrics to your deep tech timeline.
Your idea requires atoms, not just bits. Your fundraising strategy needs to be different.
When Hesaam Esfandyarpour set out to build GenapSys, he wasn’t building a simple mobile app. He was creating a portable, iPad-sized DNA sequencer to revolutionize genomic testing. This is deep tech—a world of hardware, biology, and chemistry that requires immense capital and patience to get off the ground.
GenapSys ultimately raised over $240 million from a syndicate of sophisticated investors including Oxford Finance, Foresite Capital, and Decheng Capital. For founders in biotech, hardware, or any "hard tech" field, this journey offers a masterclass in how to finance a company where the path to revenue is measured in years, not months.
Forget the SaaS fundraising playbook. This is how you fund a company that touches the physical world.
Why Deep Tech Fundraising Is a Different Game
Software startups can often raise a small seed round, build a minimum viable product (MVP) in a few months, and start generating revenue. The capital requirements are relatively low, and the feedback loops are fast.
Hardware is the opposite. You face three fundamental challenges:
High Capital Intensity: You need money for R&D, materials, prototyping, and manufacturing before you have a product to sell. A company like GenapSys can’t "ship an update"—it has to build and test a physical device. · Long R&D Cycles: The timeline from a scientific breakthrough to a commercially viable product can be 5-10 years. Investors must be willing to wait, and your budget has to reflect that reality. · Specialized Risk: Investors are betting on scientific and engineering breakthroughs. Can you actually build it? Will it work at scale? Can you manufacture it economically? This requires a different kind of due diligence than evaluating a software product.
Investor Expectations: What You Need to Show at Each Stage
Raising over $240 million doesn't happen in one go. It’s a multi-stage marathon where each round buys you progress to the next set of milestones. Here’s what investors expect to see at each step for a deep tech or hardware company.
Pre-Seed & Seed ($1M - $5M)
What you have: A brilliant idea, a strong technical team, and a foundational piece of intellectual property (IP). You likely have a scientific paper, a proof-of-concept, or a lab-bench validation.
What investors are betting on: The team and the science. They need to believe your founding team has the unique technical insight to solve a problem others can't. Your IP strategy is critical; investors need to see a path to a defensible moat.
Use of funds: Building the initial prototype, hiring 2-3 key technical roles, and securing the core patents. You aren't building a commercial product yet; you are proving the fundamental science is sound.
Series A ($10M - $30M)
What you have: A working prototype. For GenapSys, this would have been a device that could successfully and reliably sequence DNA, even if it wasn't yet portable or cost-effective. You also need a clear, budget-backed roadmap to get to a commercial product.
What investors are betting on: De-risking the technology. The core question is no longer "is this scientifically possible?" but "can you turn this into a product?" They will bring in experts to grill you on your engineering, manufacturing plan, and bill of materials (BOM).
Use of funds: Engineering the commercial version (the "product"), refining the manufacturing process, and making key strategic hires on the business side.
Series B and Beyond ($50M+)
What you have: A commercial-ready product and early signs of market adoption. You may have early customers, pilot programs, or significant partnerships. In the case of a medical device, this is where you show your progress with regulatory bodies like the FDA.
What investors are betting on: Market execution and scale. The focus shifts from technology risk to market risk. Can you build a sales team? Can you manufacture at scale? Can you win against incumbents?
Use of funds: This is growth capital. The huge checks GenapSys wrote were for building out their commercial team, scaling manufacturing, and funding the market penetration required to make their device a standard tool in the fight against viruses like COVID-19.
What’s More Important Than the Money: Choosing Your Investors
In deep tech, your investors are more than just a source of capital—they are a source of patience and specialized expertise. Choosing the wrong partner can kill your company.
The Specialist vs. The Generalist
A generalist VC who is used to 12-month payback periods on SaaS investments will panic during your multi-year R&D cycle. You need investors who live and breathe your industry.
Look at the GenapSys syndicate: Foresite Capital and Decheng Capital are well-known life sciences and healthcare investors. Their partners have PhDs and MDs. They understand the timelines, the regulatory hurdles, and the scientific diligence required. They won't ask you for your monthly recurring revenue (MRR) in month six.
Common Founder Mistake: Taking money from a brand-name SaaS fund because of the signaling. If they don’t have another deep tech company in their portfolio, you will be the odd one out. Their advice, network, and expectations will be mismatched with your business.
Building the Right Syndicate
A strong syndicate for a company like GenapSys often blends different types of capital:
Specialist VCs: The core of your syndicate. They lead the rounds and provide the governance and industry expertise (e.g., Foresite, Decheng). · Strategic/Corporate VCs: Investment arms of large corporations in your field. They can offer manufacturing help, distribution channels, and market validation. · Alternative Financing: For hardware companies, debt and equipment financing can be a powerful tool once you have a physical asset to borrow against. Oxford Finance, another GenapSys investor, specializes in this. This is non-dilutive capital that can fund inventory and manufacturing without forcing you to sell more equity.
Investor Red Flag Checklist
They ask for SaaS metrics (like LTV:CAC) in the first meeting. · No one on their team has a technical or scientific background relevant to your field. · They can’t name a single other company that has a similar business model (even if the tech is different). · They push for a valuation or round size that is too small to reach your next meaningful milestone. · Their due diligence process doesn’t involve speaking with technical experts.
Three Pieces of Advice for Deep Tech Founders
1. Your Budget Is a Lie: Double It
Whatever you think you need to get to the next milestone, you are probably wrong. Scientific experiments fail. Supply chains break. Timelines slip. When budgeting for an R&D-heavy business, you cannot assume the best-case scenario. Experienced deep tech investors know this. Show them a realistic budget that includes buffers for unforeseen delays and challenges. If you tell an investor you need $10M to get to a commercial prototype in 18 months, they know it will likely take $15M and 24 months. Be the founder who acknowledges that reality upfront.
2. Tell a Simple Story About a Big Problem
You can spend an hour explaining the nuances of your sequencing chemistry, but investors fund stories, not just technologies. GenapSys didn't just sell a "novel DNA sequencing technology." They sold the vision of an "iPad-sized device that could help fight Coronavirus."
Frame your pitch around the problem, not your solution. Start with the "why."
The Problem: Genomic sequencing is slow, expensive, and confined to large, centralized labs. · The "Why Now": During a pandemic, we need decentralized, rapid diagnostic tools everywhere. · The Solution: A portable, affordable device that brings the power of a sequencing lab to any location.
3. Hire Your Commercial Co-Pilot Early
Many technical founders make the mistake of waiting too long to hire a business or commercial leader. They believe the technology will sell itself. It won’t. From day one, you need a partner who can translate your technology into a business case, build the financial model, and talk to customers. This person isn’t just "sales"; they are your bridge to the market and to the investors who will fund your vision.
How to Apply This This Week
Map Your Investor Landscape: Go to the websites of 5 companies you admire in your space (biotech, climate tech, robotics, etc.). Look up who led their Series A and B rounds. Start building a target list of specialist VCs. · Pressure-Test Your Milestones: Take your current roadmap and add a 30% buffer to the timeline and a 50% buffer to the budget. Can you still tell a compelling story about your capital efficiency? If not, you may need to raise more money or cut scope. · Write Your Problem-First Narrative: Write a three-paragraph email that explains what your company does without using any technical jargon. Start with the problem in the world, then explain how you will solve it. This is the core of your fundraising story.
Frequently asked questions
- How much dilution should I expect when raising for a deep tech company?
- Expect 15-25% dilution for each early stage (Seed, Series A) round. Because deep tech requires more funding rounds, cumulative dilution can be higher than for a typical software startup.
- What are the key milestones for a deep tech Series A?
- Investors need to see that the core technology is de-risked. This typically means a functional, bench-top prototype that proves the science works, along with a clear roadmap and budget for turning it into a commercial product.
- What kind of investors should a hardware or biotech founder look for?
- Look for specialist funds with PhDs and MDs on the team who understand your science. Also consider corporate venture arms (CVCs) from large companies in your industry, as they can provide market access and validation.
- How long does it take to raise a Series A for a hardware startup?
- Plan for a 6-9 month process, significantly longer than a software fundraise. The technical due diligence is far more intensive, often requiring multiple expert consultations.
