Raising capital: lessons from Bygen's fundraising success

Raising funds is a critical priority for early-stage ventures like Bygen, which produces eco-friendly activated carbon for water purification and filtration applications. Bygen replaces traditional coal-based options with sustainable alternatives made from nut shells and wood, making it an attractive investment for those interested in climate technologies.

Bygen's managing director and co-founder, Lewis Dunnigan, emphasises the importance of a strategic approach to fundraising. The company initially secured funding through a grant from the University of Adelaide and support from the South Australian government. 

“This initial capital allowed us to focus on developing our technology full-time,” he says.

In late 2020, Bygen raised $1.2 million in a seed round from investors familiar with climate tech. Dunnigan notes that venture capital (VC) funding was the most viable option for their early-stage business due to its potential for scalability and strong margins. Traditional debt financing was not feasible, as it typically requires established cash flows.

Bygen continued its fundraising journey with a $2.6 million Series A round in early 2024, attracting additional VC investors. This year, the firm raised another $3.5 million from existing shareholders. Dunnigan mentions plans for a Series B raise, which will be significantly larger than previous rounds, to support their rapid growth.

Is external funding right for your business?

While VC funding has been successful for Bygen, Dunnigan warns that it may not be suitable for every early-stage venture.

“Many businesses pursue VC funding without fully understanding the requirements. Investors seek companies capable of delivering substantial returns, so founders must ensure their business can meet these expectations,” he says.

Consistency in meeting fundraising milestones has been key to Bygen's success. Dunnigan advises setting clear goals for each fundraising round and achieving them to build investor confidence. He also recommends seeking advice on term sheets from experienced founders and VCs to avoid pitfalls, such as disproportionate liquidation preferences that can severely impact future exits.

Aligning your goals with investors’ expectations

Before seeking capital, entrepreneurs should clarify their desired relationship with investors. Understanding investor appetite is crucial, especially in uncertain global markets, where diversification is becoming a priority.

Jonathan Hoe, associate director at Nash Capital, highlights that capital is available for well-led companies with clear visions and business models. 

“Founders must demonstrate their ability to execute their strategies and build effective teams. Investors look for signals indicating market demand for products or services, as well as a sustainable business model,” he says.

As AI technologies evolve, investors are increasingly interested in understanding their potential to disrupt industries. Hoe stresses the importance of long-term viability and the founder's leadership skills in determining a business's success.

“Entrepreneurs must also be able to pitch their ideas clearly, addressing four key questions: What does the business do? Why does it need to exist? Why will it succeed? And why are the founders the right people to lead it? Clarity in communication is essential; overloading pitches with data can obscure the core message,” he says.

Ultimately, what’s key is to keep fundraising simple. Many early-stage entrepreneurs fail because they give up too soon. Those who succeed are persistent and willing to endure rejections. Grit and determination are often more important than perfection in the fundraising journey.

Finally, investors are attracted to businesses that can properly manage their risks. Insurance is an essential part of that. If you’re an up-and-coming small business, talk to Steadfast today about how you can manage your risks and make your business fit-for-purpose for prospective investors. 

 

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