Funding Terminology Dictionary

Context: Unlike typical software startups, deep-tech ventures require significant R&D investment, longer development cycles, and often substantial capital before generating revenue. European funders prioritize deep-tech because of its potential for global impact and defensible competitive advantages.

Context: TRL 1-3 represents basic research and proof of concept. TRL 4-6 is where most innovation funding begins (lab validation through real-world testing). TRL 7-9 represents near-commercial to fully operational systems. Most EU programs require TRL 4 minimum, with preference for TRL 6+.

Context: Prototypes range from simple lab models to fully functional systems. For funding purposes, evaluators want to see that you've moved beyond theoretical concepts to something tangible that demonstrates feasibility.

Context: MVPs are essential for validating market assumptions quickly. Get feedback early so you build what customers actually need, not what you think they need. For deep-tech, MVPs often take longer to develop than software startups.

Context: Funders evaluate both offensive IP (patents that protect your innovation) and defensive IP (freedom-to-operate analysis showing you won't infringe others' patents). A comprehensive IP strategy is critical for deep-tech companies.

Context: Patent strategy is crucial for deep-tech. Key decisions include: which inventions to patent vs. keep as trade secrets, which countries to file in, and how to handle continuation patents. Patent portfolios signal to funders that your technology is defensible.

Context: Trade secrets offer indefinite protection if you maintain secrecy, but lose protection if disclosed. Many deep-tech companies use a hybrid strategy: patent some innovations while keeping others as trade secrets.

Example: Coca-Cola's formula is a famous trade secret that has been protected for over 130 years without patent protection.

Context: FTO analysis is critical before commercialization. If you infringe others' patents, you could face lawsuits, injunctions, or forced licensing agreements. European funders expect deep-tech companies to have conducted FTO analysis.

Context: Patent landscape analysis helps you understand the competitive environment, identify white space for innovation, and inform your own patent strategy. It's a key component of IP strategy evaluation.

Context: Market validation reduces perceived risk for funders. A company with strong technology but zero market validation is riskier than a company with moderate technology but proven customer interest. See our article on Market Traction for detailed proof points.

Context: Traction is what separates promising ideas from actual businesses. Funders want to see that you're not just building something cool--you're building something people will buy and use.

Context: Successful pilots are one of the strongest proof points for market validation. They demonstrate that customers are willing to invest time and resources to evaluate your solution, significantly reducing technical and market risk.

Context: Indicators of PMF include: sales becoming easier, word-of-mouth growth, high customer retention, and customers willing to pay premium prices. For deep-tech, PMF often takes longer to achieve than software startups.

Context: Positive unit economics means you make more money per customer than you spend--a key indicator of business viability. Funders scrutinize unit economics to assess whether your business model is sustainable.

Context: A strong go-to-market strategy bridges the gap between having great technology and building a successful business. Funders want to see that you've thought through customer acquisition, pricing, and distribution.

Context: Different business models suit different technologies. Deep-tech companies might use licensing, subscription, one-time sales, or hybrid models. Funders evaluate whether your business model is sustainable and scalable.

Context: Investors want to see you've thought through this journey. What are the key milestones? What revenue targets do you need to hit? When will you break even? A clear path to profitability demonstrates business maturity.

Context: Holocen Tech uses benchmarking to show you how your 9-dimension readiness profile compares against previous successful Nordic applicants. This gives you concrete targets for improvement.

Context: The EIC is designed for deep-tech companies with global ambitions. It's highly competitive but offers substantial funding and mentorship. The program evaluates companies across multiple dimensions including technology, team, market, and IP.

Context: Horizon Europe is broader than EIC and includes many funding tracks. It's a good option for companies that don't yet qualify for EIC or want to focus on specific research areas.

Context: Non-dilutive funding is attractive because you keep full control of your company. EU grants are typically non-dilutive, making them valuable for early-stage deep-tech companies that need capital without giving up equity.

Context: Grants are highly competitive but valuable for deep-tech companies. EU grants often come with reporting requirements and conditions on how funds are used.

Context: Equity funding is dilutive (you own less of your company) but provides capital without repayment obligations. It's common for growth-stage deep-tech companies.

Context: A strong capital strategy shows funders that you've thought through your financial needs realistically. It should connect funding to specific milestones and demonstrate efficient capital deployment.

Context: For deep-tech, team capability is critical. Funders want to see domain expertise, relevant industry experience, and a track record of execution. A strong team can overcome many obstacles; a weak team will struggle even with great technology.

Context: Funders look for founder-market fit because it increases the likelihood of success. If you're a team of materials scientists launching a biotech company, that's poor founder-market fit. If you're launching a materials company, that's excellent fit.

Context: A strong advisory board signals to funders that you have access to expertise and networks beyond your founding team. Advisors can open doors, provide credibility, and help navigate challenges.

Context: European funders increasingly prioritize innovations that create both economic and social value. Companies addressing UN Sustainable Development Goals or major European strategic priorities have an advantage.

Context: Funders evaluate whether your company addresses EU strategic priorities. Companies working on strategic technologies (semiconductors, AI, clean energy) have better funding prospects.