[awelkie]

It's easy to see how this advice applies to a SaaS company, but what about a more capital-intensive startup? Like a startup with an innovation in manufacturing, energy, telecoms, how do they have leverage when approaching investors, especially at the beginning? Are patents the main way or are there others? What metrics can they show if they're working on a proof-of-concept and don't yet have customers?

I don't doubt that the advice still applies but I'm having a hard time understanding how. Are there illustrative examples of startups that did this well?

[tomhoward]

It's worth thinking about this in terms of the snowball metaphor.

What's the smallest/simplest/fastest version of your thing you can build that demonstrates that (a) you can make the thing work, and (b) people will pay for it?

Do that, then find customers who will commit to purchase, or investors who know enough about your space that they'll back you to keep working on it.

For hardware manufacturing in the consumer space, pre-orders (Kickstarter etc) are an ideal way to raise funds and prove demand.

For enterprise, you can get pre-commitments to purchase from customers, contingent on the concept working. E.g., Boom Aero came up with a design, then lined up purchase commitments from major airlines, then were able to use that to fundraise to get them through development. The incentive for the airline to commit to purchase is that they will be the first to have your product when it's ready.

For large-scale energy or telecoms innovation, you could build relationships with utilities companies, government bodies, etc - offer them priority access to your technology in exchange for purchase commitments backed by pre-payments or grants, which can then justify private investment.

[awelkie]

I found some answers here: https://www.ycombinator.com/library/4r-yc-and-hard-tech-star...

[ant6n]

I still wonder how it can work with the funding. Hard tech often requires a lot of funding, and if ycombinator takes a big chunk early on, the founders will get diluted so much that they lose control and financial incentive to build the company.

[tomhoward]

YC's stake is 7% (perhaps give or take 1-2% depending on the conditions at the time).

Good early-stage investors, especially YC, are experienced enough to know better than to damage the company's future prospects by screwing the cap table through taking too large a stake in the early stages. And now they have their Continuity fund and other programs to help growing companies, they'll work with the company to ensure that their fundraising strategy is optimal for the long term.

[tixocloud]

As you rightly pointed out, the funding strategy will be quite different for hard tech startups. They have different milestones and different investor bases with different risk appetites. You’ll also look at other options (grants, collaborations, etc.)

[htrp]

We've seen a couple of these that have gone through to the strategic partership/investor where they are using a customer to front the capital as a form of risk-sharing.