How Traxyl Built a Hardware Startup Without Venture Funding: A Bootstrap-First Approach to Deep Tech

Learn how Traxyl built a successful deep tech startup through bootstrapping and government contracts before raising venture capital. Discover their unique approach to hardware startup funding.

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How Traxyl Built a Hardware Startup Without Venture Funding: A Bootstrap-First Approach to Deep Tech

How Traxyl Built a Hardware Startup Without Venture Funding: A Bootstrap-First Approach to Deep Tech

While most hardware startups race to raise venture capital, Traxyl took a different path. In a recent episode of Category Visionaries, CEO Daniel Turner revealed how his company generated nearly $5 million in revenue before taking their first venture investment. Their approach offers valuable lessons for founders looking to maintain control while building complex technology.

The Decision to Bootstrap

Early in Traxyl’s journey, Daniel and his co-founder faced a common startup dilemma. “My co-founder and I had questioned whether we should raise or maybe we should raise some amount, 500,000, or maybe we raise a million and try to get to some milestone,” Daniel explained. “And every time we looked at that, we just said, let’s just keep trying to do this on our own.”

Instead of pursuing traditional venture capital, they focused on an often-overlooked funding source: government contracts. “Let’s bootstrap it. Let’s utilize the SBIR program through the federal government,” Daniel shared about their strategy. “So there’s a lot of good grants and contracts that we leveraged to the point where we’re doing probably close to 5 million in revenue before we ever raised our seed round.”

Leveraging Government Programs

Traxyl’s approach to government funding was systematic. They started with the Small Business Innovation Research (SBIR) program, which provides non-dilutive funding for early-stage technology development. This initial funding helped them validate their technology and build credibility for larger contracts.

The company has since worked with various government agencies, including the Air Force and Army Corps of Engineers. As Daniel noted, “We’ve actually done a lot of installations for a variety of customers. A lot of them are on military bases. So Air Force customers and army corps of engineers we’re working with.”

The Path to Venture Funding

Interestingly, Traxyl’s eventual venture round came not from necessity, but opportunity. “We had Incutel come to us and said, hey, we’d like to invest in you, but the way we work is you have to have previously had a price round,” Daniel explained. This led to their first venture round, but on their terms and with significant revenue already in place.

Building a Sustainable Model

The bootstrap-first approach allowed Traxyl to develop a sustainable business model before seeking external capital. They created a dual-track strategy: one division handling installation and market education, while another manufactures and supplies equipment to existing fiber installation companies.

This model emerged from their experience working with government contracts, which helped them understand the market’s needs before scaling. “The government right now is doing well to help derisk the technology and really find good use cases for it and help evolve the machines that are installing the technology,” Daniel shared.

Lessons for Hardware Founders

Traxyl’s experience offers several key insights for hardware startup founders:

  1. Government contracts can provide substantial non-dilutive funding
  2. Early customer revenue can create stronger positioning for eventual venture rounds
  3. Bootstrap-first approaches allow time to develop sustainable business models
  4. Military and government work can help derisk new technologies

The Future of Funding

While Traxyl eventually took venture funding, their bootstrap-first approach gave them significant advantages. As Daniel explained, they now continue to “leverage the nondilutive funding that comes from the SBIR program and other government contracts that customers we’ve been working with over the years.”

For hardware startup founders, Traxyl’s journey demonstrates that venture capital isn’t the only path to building a successful deep tech company. By leveraging government contracts and focusing on early revenue, founders can maintain control while developing breakthrough technologies.

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