How to Raise Money for your Quantum Company
Part I: Seeking Capital
Most Quantum Leap posts have attempted to explain quantum technologies and players in ways that a layperson can understand. However, as a venture investor I’m aware how foreign the investment landscape can be for most quantum entrepreneurs, so this is the first in a two-part series of posts that are aimed at quantum companies and entrepreneurs, to provide some insights into the world of finance. In this “Part I” I’ll describe the overall funding landscape and provide some suggestions on how to navigate through it. In “Part II” I’ll discuss some typical deal terms and structures.
Early Company Landscape
While the life-cycle continuum of a company can vary, below is a very general approximation of a typical path from an initial idea to start a company, through its eventual “exit” (generally a sale to another company or taking the company public). Naturally there are many exceptions and special cases as well as gray borders between steps, but this should help readers understand the general pathway and some of the dynamics that differ depending on the stage of the company.
[1] These are very crude guidelines; exceptions abound
Here are some additional details and dynamics for each stage:
Business Idea: Many companies begin as an idea that an entrepreneur has or has developed at a university or research lab. No matter how great the idea may be, it is very difficult to attract “institutional” investors such as venture capital firms at this early stage. That said, there are some ways to attract external financing from a myriad of possible sources including grants, business incubators or accelerators, from friends and family and certain angel investors. For a very early concept, the best resource would be grants which are typically “non-dilutive” meaning that the grant issuer will not expect to receive equity in the business. I live in Colorado which has robust funding resources (for example OEDIT, Colorado’s Office of Economic Development and International Trade, maintains a funding program directory here), and there are a tremendous number of other federal and state programs available, so digging in and researching possible grant sources would be the best first step.
Prototype Stage: An important first milestone for an early-stage business is to create a working prototype of the product or service, sometimes referred to as a “minimally viable product” or “MVP”. This acts as proof of concept of the product or service to show potential investors that this is more than just a theory or idea. This may be difficult for early quantum companies, so any significant example, working model or experimental results may help confirm the “realness” of your concept. This de-risks the enterprise to some extent, so it should make it easier to attract grants or early investors and would also be a time to consider pitching to angel investors or angel groups. Investment at the “Business Idea” or “Prototype” stage is generally referred to as “Pre-Seed”.
Pilot Customer: It’s one thing to have a protype product to show prospective investors exactly what the business will be building, but it’s even more impressive to have a first user/customer so that real world feedback can be provided. It’s a critical milestone and can often be a gating event for raising external monies, which would generally be considered a “seed stage” investment.
Commercial Launch: A next step after having a pilot customer or two is to begin generating revenues. As we like to say at Corporate Fuel, this is showing that the “dogs are eating the dog food.” Again, this may be difficult for quantum businesses, but it’s the best way to show commercial viability. Once there are customers (and/or early orders), institutional investors such as venture capital firms and corporate venture arms of large companies are much more likely to take an interest, and this type of financing is often referred to as “early growth” and is often a letter-round (i.e., A-Round, B-Round, etc.).
Growth: Once a business is commercially active and growing its revenues, the business is viewed more as an ongoing concern. Rapid expansion of markets and customers is normally the goal and there are many different types of investors that are active at this stage including venture capital firms as well as some private equity firms. The soft distinction between them is that venture firms will often invest at earlier stages whereas private equity firms typically wait until there is consistent revenue growth and/or the company begins to earn a profit.
Exit: While it is easy, especially for the classical entrepreneur that begins in his/her garage, to fall in love with the company, and even the entrepreneur wants to stay involved with it for eons, investors will want to see a path to an exit, so understanding the market for an exit is crucial to attracting investors. If there are a lot of successful IPOs in the given targeted industry (that’s not the case in quantum today, but I expect that will change over the next 12-24 months), working towards a public offering is a viable exit. If not, being acquired by a competitor or financial buyer (a/k/a M&A or mergers and acquisitions) is often the most viable path to an exit, and we’re beginning to see M&A increasing in the quantum space.
One personal side note, I’m not a big fan of crowdfunding for businesses, so did not include that in the chart. While crowdfunding platforms seem attractive in theory, they are quite costly and at the end of the day require the company to do all the heavy lifting, so it doesn’t seem efficient to pay a big fee to a platform that will need you to find most of the investors yourself. It’s not uncommon for companies to pay more in fees than they raise on these platforms, so I can’t endorse them.
Developing Your Pitch
There is a plethora of ways to attract investors/capital, and every investor is different so there is no universal formula for how to pitch your company. That said, here are a few suggestions and guidelines.
Know your audience. If you have an opportunity to pitch an investor, be it a friend or family member, angel investor or venture capital firm, make sure you do some research to see what their investment parameters may be. If you are a pre-seed stage company, don’t try to pitch to a big venture firm, unless you know they specifically have a mandate for your type/stage of business. You also don’t want to pitch a $5m investment to an angel that only makes $50k-$100k investments.
Craft a compelling story with a big vision. For early-stage pitches, sharing your personal journey and motivation for starting the company is important and will help convey your passion. And you should know that investors want to hit a home run, so be bold and present an aggressive (but rational) upside.
Show don’t tell. Use concrete examples of use cases to illustrate your potential rather than relying on theory or abstract concepts.
Avoid jargon. While it may feel like it’s impressive to use a lot of acronyms and terms of art in your pitch, you should assume the audience does not have the level of intimacy with your niche that you do. Even if your audience is quantum-savvy, it’s a very broad niche and most folks are not experts in all facets of it. The story/pitch should be easy to understand and follow, even for someone outside the industry.
Know your competition. I can’t tell you how many times someone pitching me has said “our product is so great we don’t have any competition.” This is nearly always an automatic disqualifier. There is always competition, even if it is inferior or a soon-to-be outdated technology and investors want to know that you are up at night worrying about whomever may be nipping at your heals.
Practice, then practice some more. You should continuously iterate your pitch based on feedback and practice and should be able to deliver it confidently and concisely.
Here are a few more suggestions for various parts of the fundraising process, and while some are more pertinent at specific stages of company growth, these suggestions should generally help at any stage:
Preparation
Don’t ask for a non-disclosure agreement (NDA), especially for the first few calls/meetings. This is vital at the seed and growth stage where venture investors generally shun early NDAs. Your executive summary and introductory presentation (more on those below) should be non-confidential. After an initial pitch, if a prospective investor wants to dig in deeper or do further diligence, an NDA is appropriate at that point.
Don’t just send mass emails or use AI to do initial screening. Personalize the outreach and do some research on each target. I highly recommend you do some homework and scan your LinkedIn network to try to find some mutual connection and ask for a warm introduction
Make sure you have a solid forecast and know it well. You don’t need a monthly five-year forecast with 50 P&L line items, but you should have a clear multi-year forecast and vision and be fluent enough with it to discuss highlights and answer basic questions such as: What will your growth rate be? What do you base that assumption on? What will be your gross margin once you reach run-rate volumes? How much more capital will you need to raise to execute your plan? When do you expect to become profitable, etc.
Fundraising is the CEO’s job. This is especially true for pre-seed and seed rounds, so it’s unlikely an advisor or broker will win over an early-stage investor. Capital raising, especially for young and growing companies, is a full-time job and early investors will want confidence that the CEO can continue to raise money to fund the business. It’s okay to bring along support, but the CEO should lead the pitch and the discussion.
Presentations
Develop some rapport with your audience. While you may want to respect the time of the prospective investor and dive right in, try to find some common ground before jumping into the technicalities of your product.
Don’t over-complicate the pitch. You should be able to describe your company, its value proposition and its primary strategy in a sentence or two, and your entire pitch should be less than 15 minutes and ideally less than 15 slides. I suggest a 1-page (front and back) executive summary to pique their interest, so they want to invest 15 minutes to learn more. You are not trying to get an investment in a first or second impression, you are trying to get your target to want to learn more.
Make the pitch be about the product/solution. While a long history of all the trials and tribulations of developing the product may be interesting, you want to focus on what your company offers and how it will address some need or problem.
Don’t claim you can defeat the laws of physics. It’s okay to suggest that certain engineering challenges still need to be worked out, but I can’t tell you how many quantum entrepreneurs make pitches to me that include proposed solutions which would violate basic physics and are therefore impossible.
General Advice
Make sure you have a strong team and/or specific needs identified. Investors bet on teams not ideas. It’s a cliché but I’d much rather invest in an A-Team with a B-Product than a B-Team with an A-Product. Having a list of “advisors” is not the same as having full-time dedicated personnel. If you have some holes in the team, acknowledge them and discuss some strategies you have to fill them.
Don’t propose a valuation. You should be clear on specifically how much money you need and what milestones you will achieve with that funding, but let the investor propose the terms/valuation. That said, you should be clear on what sort of level of investment you’d be interested in. If you are a start-up with barely a prototype and you want to raise $10 million dollars, you may need to be prepared to sell more than 50% (i.e., give up “control”). You instead may want to “tranche” investments and solicit less early money to achieve more modest milestones, with the understanding that you’ll raise additional funds once those milestones are achieved (presumably at a higher valuation, which is another way of saying giving up less of the company).
Have a clear “use of proceeds”. An investor will expect you to have a specific capital need and will want to know what will be achieved with that capital. And don’t forget about working capital…as any business grows, it needs cash to fund its working capital (i.e., accounts receivable and inventory).
A non-response is not a “no”, and a no may really be a “not now.” It’s okay to email a target many times (it often takes around 5 emails to get a response) so long as you are succinct and professional, and especially if you’ve done your homework and are certain that your company is a good fit with their investment mandate. Investors are usually very busy and inbound solicitations can get lost in the ether. If you reach an apparent dead-end after 5 emails or so, put that contact in your files to follow up with in 3-6 months, or if you reach some important milestone, feel free to reach back out again to highlight that achievement.
LinkedIn is fine for making initial contact, but it’s not a great vehicle for sharing materials. Email is a much clearer pathway for most investors so whenever possible, use that for your materials.
Remember this is a contact sport and it will likely take many, many attempts with a large number of targets before you will find an investor willing to learn more. And even then, the diligence process can be exhausting and is no guarantee the investor will make an investment or offer terms that you can live with (more on that in Part II). Be patient, be tireless, don’t be afraid of rejection and lean on your network for introductions.
Stay tuned for Part II where I’ll cover what happens after an investor decides they may want in, including typical investment terms.
Further Reading: Here are a few resources that may help you further understand these market dynamics:
https://www.netguru.com/blog/15-common-mistakes-startups-make-when-pitching-investors
https://www.nfx.com/post/23-rules-storytelling-fundraising
https://auren.substack.com/p/everything-you-think-you-know
https://www.mccrackenalliance.com/blog/fundraising-for-startups-a-founders-comprehensive-guide
https://seedlegals.com/resources/ten-pitching-mistakes/
Citations:
In addition to the resources noted above, further content provided by:
Perplexity. (2025) Perplexity.ai (AI Chatbot) [Large Language Model]. https://www.perplexity.ai
