“Most entrepreneurs at an early stage have an immense amount of optimism,” says Brian Kerns, an angel investor and advisor with SWAN Impact and Investor’s Circle. “But there’s also an immense amount that they don’t know. Many are a bit naive; what they’re taking on is not trivial.”
This is why Kerns serves as a mentor-in-residence for Aspire Climatetech—so he can help these entrepreneurs learn about what they’re taking on by founding a novel software, hardtech, or hybrid software/hardware company. In the program, Aspire mentors advise early-stage startups on how to get over the first essential hurdles, like securing initial funding and market alignment to get their ventures to the point where they can be of interest to larger investors and strategic corporate entities.
As an experienced product leader, Kerns has led multiple product introductions and transformations in the data, communications, scientific solutions, procurement, and security markets. He specializes in innovation and acceleration, emphasizing agile adoption, user experience practices, and rapid prototyping.
As an investor-mentor for Aspire, Kerns encourages founders to actively explore creative funding sources to navigate the startup world’s so-called “valley of death”—a critical funding gap that, without strategic planning and financial management, often leads to the downfall of complex software and hardtech startups.
“Venture capitalists (VCs) aren’t going to fund you until you have something tangible,” Kerns says. “The challenge founders often describe: How do I build something tangible if you’re not going to fund me?”
Angel investors like Kerns are more willing to invest at an earlier stage, but founders must learn how to interact with them effectively.
“One of the biggest lacks of understanding for these founders is where money really comes from and the requirements to secure it,” Kerns says. “In the tech startup space, many founders are introverts—people who are comfortable in the lab but less so when pitching to investors and funding sources. I get it. I’m a closet introvert, but I’ve learned to turn on my extrovert side when it matters.”
Kerns hopes to teach and advise as many climatetech startups as possible to develop these outbound communications and creative funding skills so they can successfully bring their innovations to market. “I feel we are leaving behind amazing companies that could make a significant difference, simply because they cannot navigate the funding challenge,” says Kerns.
Alternative Funding Sources
Early-stage entrepreneurs, especially those working in complex solutions like hardtech and deep software, face a challenging path to fundraising. The silver lining? Those who succeed become even more attractive to angel investors and VCs when the time comes to pitch. “How have you gotten to where you are?” Kerns asks. “That shows how creative you will be going forward.”
Grants and Non-Dilutive Sources
No creative funding discussion would be complete without mentioning grants and non-dilutive sources—an intense area of discussion in investment circles this year. Climatetech startups, especially those with large hardtech startup costs, need to be resourceful on all the options for non-dilutive funding.
“In previous years, we expected startups to pursue impact grants and sources of funding that do not require ownership,” Kerns says. “Though the grant landscape is more challenging this year, creative founders will still turn over all rocks—explore federal, state, and local options as well as accelerators, incubators, and assistance programs.”
Ideally, startups with significant research and development costs will attempt to leverage non-dilutive funding for the early technology fuel, forging a prototype that can unlock more traditional investment or partner validation. Angel funds often complement this path by funding the business requirements and early go-to-market activities. Kerns says, “As with all good things, non-dilutive funding should be approached with eyes wide open.”
He notes that grants may come with contractual milestones, matching fund requirements, or payout structures that don’t adequately maintain cash flow. Additionally, several programs require startups to give up equity.
Strategically Collaborate With Manufacturers
A major hurdle for hardtech entrepreneurs is creating the prototype, or MVP—a minimum viable product. “It is likely the most expensive unit you’ll ever build,” says Kerns.
While software founders can quickly iterate by writing new code to fix problems or modify features, hardtech founders must proceed more deliberately. Each prototype requires manufacturing and often cannot be easily adjusted after production. Most manufacturers won’t produce a single or low-run-rate item, and building an entire factory for a prototype is simply not feasible.
Kerns suggests that founders get creative and build relationships that can support their efforts. Smaller factories or local assemblers often have downtime or excess capacity, so founders can collaborate with a fabricator to use the facility when it would otherwise be idle, allowing them to produce their first units at a substantially lower cost. Additionally, founders can get creative in leveraging warehouse facilities for storage and local assemblers for their shipping relationships and rates.
“Think of this kind of deep discount as a source of funding,” Kerns says. “It’s less money you need to raise right now.”
Negotiate for Essential Services
Effective negotiation is an essential entrepreneurial skill; practicing it early on can create valuable opportunities.
For example, every startup has legal and regulatory needs, and hardtech startups, in particular, must comply with industry-specific regulations and certifications. Legal and certification fees add up quickly. While some law firms and testing groups will offer discounts for startups, they rarely advertise them, viewing them instead as a customer acquisition strategy. For founders, these discounts can mean the difference between startup survival and failure.
“Talk to local firms or nonprofits that are invested in growing the local economy,” Kerns advises. “Ask if they’re willing to defer billing so payments are delayed, or if they offer discounts for early-stage startups.”
Regulatory fees can be prohibitive for early-stage ventures. Some fee-waiver programs exist, particularly for innovations that address underserved markets or public needs. However, these programs can be challenging to find and navigate, so founders should proactively seek them out and take advantage of available guidance when applying.
Nurture Relationships With Investors in Your Industry
This advice applies to all startups but is especially crucial for hardtech and highly complex software startups. Most investments don’t begin with a cash ask—they start with a conversation.
Founders should begin researching investors in their industry—including angel investors in their region or sector—as early as possible. Investors want to stay informed about emerging technology trends. In return, they can offer valuable advice and connections long before they are ready to invest financially. They often have ties to the different service groups that are built for startup support.
“Investors respect founders who demonstrate grit and fortitude,” Kerns says. “They want to get to know you before they write that first big check.” Founders can start with a brief email inquiry, followed by periodic updates, or by adding investors to their newsletter list. Consistent updates show progress and highlight the creativity and resilience that investors value.
The Benefits of Creative Fundraising
The benefits of creative fundraising extend beyond short-term gains. Investors aren’t just looking for a great product. They want a strong, adaptable team that can make real progress, solve problems, and overcome challenges as they arise.
On the path to funding a successful startup, the entrepreneurial mindset can be just as vital as the innovation itself. As Kerns notes, nearly every Series A company he’s invested in has undergone at least one major pivot.
“It’s really not about whether the idea and proposal they have at that time is the one,” he says. ”It’s whether they have the process and the fortitude to push through to the right approach.”
Are you a startup founder preparing for investor engagement? Learn more about the Aspire program.