The Deep Tech Investment Paradox: a call to redesign the investor model
While digital transformation is accelerating across world economies, catalyzed by the Covid pandemic and led by the GAFAMs, BATXs (tech giants including Google, Apple, Facebook, Amazon, Microsoft, Baidu, Alibaba, Tencent, Xiaomi) as well as data-savvy startups, a deeper revolution is on the way. What we call deep tech ventures are at the forefront of this wave of technological innovation. One of the largest constellations of satellites in orbit is launched by a startup (Planet Labs); another startup is working on building supersonic airplanes (Boom Supersonic); others lead the synthetic biology revolution (Ginkgo Bioworks, Zymergen); more of them are revolutionizing food by cultivating cell-based meat (e.g., Memphis Meat) or through precision fermentation (e.g., Impossible Foods), just to mention a few. Some even have ambitions to unlock the power of atoms: Commonwealth Fusion Systems and Seaborg Technologies are planning to build the next small-size nuclear (fusion and fission respectively) reactors by 2025, D-wave is developing quantum computers and Sila Nanotechnologies uses nanoparticles to improve Lithium-ion battery capacity.
While there is no such thing as a “deep” technology, successful deep tech ventures all share a unique approach and differentiate themselves with four main attributes1 (see our report Deep Tech: The Great Wave of Innovation) • Successful deep tech ventures are problem-oriented. Very often they work on solving large and fundamental problems: 97% of deep tech ventures contribute to at least one of the UN’s Sustainable Development Goals. • They look at using the best existing or emerging technologies to solve the problem at hand. As a result, they play at the convergence of technologies: 96% of deep tech ventures use at least two technologies and 66% use more than one advanced technology. They generate defensive IP: 70% of deep tech ventures own patents in their technologies. • They are shifting the innovation equation from bits alone (digital) to “bits and atoms” (physical). They build on the ongoing digital transformation, the power of data and computation, to develop mostly physical products, rather than software. About 83% of deep tech ventures are building a physical product. • They are at the center of a deep interconnected ecosystem: because of the complexity of the task at hand and the deep scientific background needed, it is impossible for two people in a garage to come up with a meaningful deep tech innovation. Some 1,500 universities and research labs are involved in deep tech, and deep tech ventures received some 1,500 grants from governments in 2018 alone.
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