Welcome to the 76th edition of Deep Tech Catalyst, the channel by The Scenarionist, where science meets venture!
If you're building something real in a world dominated by code, this one is for you.
Hardware and deep tech founders operate on a different frontier—where progress means atoms, not just algorithms. And while the markets are massive, the path is anything but easy: capital intensity, long cycles, and the need to scale physical systems with precision.
To unpack how to navigate this terrain, we’re joined by Colin Greenspon, Co-Founder and Partner at Narya!
In this edition, we dive into:
The real difference between building in hardware vs. bits
Why commercial thinking isn’t optional—even at the proof-of-concept stage
What makes a market signal credible
When formal partnerships add value—and when they just add noise
How to think about valuation, and dilution—without overengineering the model
Let’s get into it. ⚙️
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BEYOND THE CONVERSATION — REFLECTIONS & STRATEGIC INSIGHTS FROM THE EPISODE
Hardware vs. Software Startups: Key Differences in the Early Stages
The early stages of building a startup look fundamentally different depending on whether the company is rooted in software or in tangible, physical technologies. Software ventures often begin with minimal infrastructure. A few laptops, a lean team, and a clear user problem are enough to get started. Iteration is fast, costs are low, and feedback loops are immediate. In these cases, the core challenge lies more in distribution, user acquisition, and defensibility than in raw capital requirements.
Startups that operate in sectors involving physical assets—whether advanced manufacturing, energy systems, biotechnology, or other forms of deep technology—face an entirely different landscape. These companies must contend with significant capital expenditures from the outset. Access to equipment, custom hardware development, testing infrastructure, and regulatory pathways often requires careful planning and substantial upfront investment.
One of the most common pitfalls for founders coming from academic or institutional backgrounds is underestimating the true cost of building their first product. In research settings, access to facilities and instrumentation is often taken for granted. When launching a commercial venture, however, the same tools now come with price tags—and the responsibility for budgeting shifts entirely to the founding team.
Without a clear understanding of the financial demands involved, early fundraising efforts can fall short, creating long delays or structural weaknesses that persist through later stages of company growth.
Building Big Ideas with Limited Resources
Despite these challenges, early-stage hardware ventures that succeed often distinguish themselves through a combination of technical depth and creative execution.
Especially in capital-intensive fields, “strategic scrappiness” becomes a competitive advantage.
Some of the most compelling early-stage companies demonstrate an ability to reach key technical milestones using off-the-shelf components, low-cost fabrication techniques, or novel design choices that circumvent traditional cost structures. These approaches allow founders to achieve proof-of-concept results quickly and affordably—results that rival or even exceed those of larger, more heavily funded incumbents.
This mindset reflects more than just frugality. It indicates a disciplined, systems-level view of company building, where engineering decisions are tightly coupled to market goals and capital strategy. Founders who combine rigorous technical understanding with inventive resource management tend to advance more quickly toward commercial viability, even in fields where timeframes and capital demands are inherently long. In early-stage investing, that combination—of realism and ingenuity—is often the clearest early indicator of long-term potential.
Building the Right Team and Strategy for Deep Tech
One of the defining challenges in deep tech ventures is the translation of highly specialized technical insight into a functioning, scalable business. Many founding teams emerge from research environments where scientific rigor is paramount, but commercial acumen has been secondary or entirely absent. As a result, early-stage teams often bring a deep command of the technology but little experience in pricing, distribution, or organizational scaling.
From Science to Business: The Need for Integrated Thinking
This gap becomes particularly acute when the product roadmap involves complex engineering, regulatory hurdles, or long development cycles. A best-in-class product is necessary but not sufficient. In markets driven by physical infrastructure, energy systems, life sciences, or novel materials, winning does not automatically follow from superior performance.
The product must not only be technically sound but also priced in a way that reflects its value to the market and delivered through a business model that makes it accessible, scalable, and defensible.
At the earliest stages, the presence of business thinking within the founding team is a critical differentiator.
While not every founder must be commercially trained, there must be someone in the organization—often one of the co-founders—who sees the complete picture: how the technology maps onto a viable business, how the company will go to market, and how the team will evolve to support that growth.
This commercial orientation is not something that can be deferred indefinitely. Teams that delay thinking about product-market fit, pricing models, or go-to-market strategies often find themselves unable to communicate a compelling investment case, even if the science is exceptional. Building a business is not a downstream activity—it is foundational from day one.
Vertical Integration as a Strategic Advantage
In some cases, the most effective way to bridge the gap between technical innovation and market success is to control more of the value chain. Vertical integration—where a company handles multiple stages of production or delivery internally—can increase cost and complexity, but also offers significant strategic advantages.
For example, in sectors like gene therapy or advanced biomanufacturing, vertical integration allows tight coordination between upstream research and downstream production. Feedback from the manufacturing floor can inform discovery efforts, while discovery teams can design with delivery constraints in mind. This integrated approach reduces friction, accelerates iteration, and improves the odds of delivering a commercially viable product.
While such strategies require larger capital commitments and longer planning horizons, they often produce organizations that are more resilient, more responsive, and ultimately more likely to succeed. A vertically integrated company may not be the right model in every case, but where the product and market justify it, it can be a powerful framework for building enduring value.
What often distinguishes successful deep tech companies is not just their technical depth, but their ability to build an operating model that aligns innovation, execution, and market demand. This is a matter of strategy, but it is also a matter of team composition. Teams that reflect both scientific excellence and commercial intuition are far more likely to survive the transition from lab to market—and far more likely to thrive once they arrive.
Exits in Advanced Materials Startups
3 case studies on how exits were strategically engineered behind the scenes.
Market Validation: What Really Matters to Investors
The Limits of Letters of Intent
In the early stages of company building, especially in capital-intensive deep tech—founders often feel pressure to show market interest before the product is ready. LOIs and MOUs are among the few tools available to signal early traction, but as the guest highlights, their real value is often limited.
These documents are typically non-binding and lack the technical or commercial specificity needed to validate actual demand. Vague language and open-ended conditions make them weak signals from an investor’s perspective.
As discussed in the conversation, relying too heavily on LOIs can suggest a misalignment: a focus on optics over substance. Unless they include concrete details—specs, pricing, volumes—they tend to be discounted during due diligence and may even raise concerns about a team’s understanding of what truly drives value.
A Better Signal: Conviction and Granular Understanding
Founders who are deeply confident in their product and the market opportunity tend to approach customer engagement differently: they focus on understanding the specific technical and commercial requirements of their target market. When documentation does exist, the most useful examples include granular detail—technical specifications, volume estimates, pricing frameworks—that suggest serious engagement from both parties.
Even so, the best early-stage companies often avoid publicizing or leveraging customer interactions too early. Instead, they prioritize building a compelling product, executing internally, and entering the market only when they are ready to command attention. In highly technical industries, exposing an immature product prematurely can undermine future procurement efforts. Revealing incomplete features or unresolved issues too soon risks diminishing confidence among potential buyers or partners.
The best validation at this stage comes not from external endorsements but from internal clarity. A team that can clearly articulate who the customer is, why the product solves a critical pain point, and how it will be brought to market is already ahead.
Ultimately, investors respond to clarity of vision and quality of execution.
The strongest signal is not who might buy a future product, but how well the founding team understands the commercial landscape, how committed they are to solving a specific problem, and how prepared they are to deliver a solution the market will value.
Joint Development and Offtake Agreements
As deep tech companies mature, questions often arise around more formal market-facing agreements, particularly joint development agreements (JDAs) and offtake contracts. These instruments are more substantive than early-stage validation tools like LOIs and, when structured carefully, can serve as meaningful milestones for both investors and commercial partners.
While both types of agreements can provide important strategic and financial benefits, they come with real complexity. Negotiating a credible JDA with a major corporate or strategic player often takes anywhere from 6 to 18 months. The length of the process reflects the technical, legal, and financial diligence required on both sides.
These discussions are rarely productive in the earliest stages of a company’s life, simply because there isn’t enough product definition, maturity, or operational capacity to engage meaningfully.
Founders sometimes underestimate the time and effort needed to reach this level of engagement. Before a company is technically ready to execute on what the agreement requires, the negotiation is often premature. In sectors such as biotech, for instance, strong preclinical data is a prerequisite for a serious partnership. In energy or industrial systems, a reliable prototype or validated process must usually be in place. Only at this stage does a joint development or offtake agreement begin to carry genuine weight.
When These Agreements Add Value
The strategic value of these agreements varies by context. In some cases, a thoughtfully structured partnership can accelerate development, reduce capital requirements, or improve market access.
For example, collaboration with a strategic partner may grant access to specialized facilities, personnel, or distribution channels. A well-aligned JDA might also inform product design in ways that increase future competitiveness.
However, not all agreements are created equal.
What matters most is not the form of the agreement, but the depth of thought behind it. If a founder can articulate a clear rationale—whether to hedge against market shifts, secure early customer commitment, or exploit a time-sensitive pricing opportunity—then the agreement reflects strategic intent rather than simply investor signaling.
As with LOIs, there is a risk that some founders may view these agreements primarily as investor signals. But substance—strategic alignment and readiness matter far more than optics.
Expert investors will look beyond the headline and evaluate whether the agreement aligns with the company’s technical readiness, go-to-market strategy, and long-term control over its product and IP.
Ultimately, these instruments are tools—valuable when used at the right moment and for the right reasons. Companies that succeed in forming productive partnerships typically do so from a position of strength: they have a clear product roadmap, know exactly what kind of support they need, and enter negotiations with a well-defined sense of what the collaboration must achieve. At that point, a joint development agreement or an offtake deal is no longer a signal for investors—it is a strategic asset for the company itself.
Capital Efficiency and Valuation in Early Deep Tech
In the early days of a deep tech company, financial modeling and valuation discussions often carry a level of complexity that can obscure the more important fundamentals.
Founders may be encouraged to build project long-term cost structures or simulate future pricing strategies based on unproven assumptions. While this kind of modeling has its place, particularly when planning scale-up or evaluating manufacturing feasibility, it should not distract from the core objective: building a viable company with the capital available.
Don't Overengineer the Financial Model
At the pre-revenue or pre-product stage, a valuation is not a reflection of intrinsic company value. It is simply a negotiation tool—a mechanism to determine how much capital an investor will contribute and how much equity they will receive in return. The valuation does not correspond to any liquid market, nor does it guarantee future pricing.
What matters more than the number itself is whether the founders retain enough equity to remain motivated and whether the team has sufficient ownership to attract and retain future talent.
Founders should approach this phase with clarity rather than precision. The goal is not to produce a perfect forecast, but to make a compelling case for how the capital will be used, what milestones it will unlock, and how those milestones will reduce risk and increase value. A well-structured early round should provide enough funding to reach a clear inflection point—whether technical, regulatory, or commercial—while preserving long-term flexibility.
Dilution, Ownership, and Long-Term Alignment
In most early-stage high-tech ventures outside of biotech, there is a commonly accepted range of dilution that accompanies a venture round. Typically, this ranges from 20% to 33%, depending on the size of the raise and the perceived maturity of the business. The specifics may vary with market conditions, but the underlying logic remains consistent: the round must provide meaningful progress for the company without leaving the founding team under-incentivized or structurally disadvantaged.
Biotech can be an exception, where higher capital requirements at earlier stages may justify more aggressive dilution—sometimes 50% or more. But in most deep tech sectors, there is still a strong preference for protecting founder equity early on, particularly when the company will likely raise multiple rounds over a decade or more.
Rather than obsessing over maximizing valuation, founders are better served by focusing on long-term alignment. The critical questions are:
Will this round allow the company to achieve its next major milestone?
Will there be enough ownership left to keep the team focused and invested over the long haul?
And does the deal structure support the kind of partnership the company needs for the road ahead?
Valuation, in this context, is not just about numbers—it is about building the right foundation for the next phase of growth. Experienced founders and thoughtful investors understand this. Negotiations that center solely on price often miss the point.
A slightly higher or lower valuation at the seed stage has limited impact if the company succeeds in building something truly valuable. But the wrong partner, or a poorly structured cap table, can create friction that undermines progress for years to come.
The best outcomes emerge when both parties are aligned not just on terms, but on time horizon, ambition, and mutual respect. Deep tech startups are not transactional ventures—they are long-duration commitments. Building the financial structure to support that journey is not just about capital efficiency; it’s about trust, vision, and shared belief in what the company is trying to achieve.
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