Deep Tech investing

Extracted Attributes

• R&D Cycle

  Lengthy and uncertain research and development

• Challenges

  Extended, uncertain R&D cycles, high capital intensity, complex regulatory hurdles, difficulty of assembling teams

• Definition

  Classification of organization or startup providing technology solutions based on substantial scientific or engineering challenges.

• Key Output

  Valuable and hard-to-reproduce intellectual property

• Market Risk

  Often significantly lower due to clear potential value of solution to society

• Primary Risk

  Technical risk

• Societal Impact

  Addresses critical societal challenges (e.g., healthcare, climate change, energy independence, security, food shortages, disease)

• Capital Requirement

  Large capital investment, significant upfront capital

• Investment Timelines

  Average 25% to 40% more time to mature between funding stages than other tech investments

• Competitive Advantage

  Strong intellectual property

• Average Net Annual IRR

  16-17% (compared to 10% for traditional tech)

• Product Characteristics

  Typically involves hardware or physical-world components

• Emerging Investment Area

  Quantum computing

• Investment Growth (2016)

  $15 billion

• Investment Growth (2020)

  Over $60 billion

• Primary Investment Areas (2020)

  Synthetic biology, Artificial intelligence, Advanced materials (accounted for 80% of investments)

Timeline

• Deep tech investments began consistently outperforming traditional tech sectors in terms of returns. (Source: web_search_results)

  2003-XX-XX

• Deep tech investments totaled $15 billion. (Source: web_search_results)

  2016-XX-XX

• The Tax Cuts and Jobs Act of 2017 was enacted, creating the R&D Tax Problem which impacts startups, including those in deep tech. (Source: document_0b0b85f3-ba5b-4c47-97b8-fddea126d4a0)

  2017-XX-XX

• Deep tech investments grew to over $60 billion. (Source: web_search_results)

  2020-XX-XX

• Synthetic biology, artificial intelligence, and advanced materials accounted for 80% of deep tech investments. (Source: web_search_results)

  2020-XX-XX

• One-third of 136 newly minted unicorns (startups valued over $1 billion) were deep tech companies, collectively valued at over $500 billion. (Source: web_search_results)

  2021-Q2

Deep tech

Deep technology (deep tech) is a classification of organization, or more typically startup company, with the expressed objective of providing technology solutions based on substantial scientific or engineering challenges. They present challenges requiring lengthy research and development, and large capital investment before successful commercialization. Their primary risk is technical risk, while market risk is often significantly lower due to the clear potential value of the solution to society. The underlying scientific or engineering problems being solved by deep tech (and hard tech companies) generate valuable intellectual property and are hard to reproduce.

Web Search Results

• Deep Tech Investment: High Risk, High Reward in ... - VC Stack

  Deep tech is rapidly becoming a hotbed for investment. In fact, deep tech investments have skyrocketed from $15 billion in 2016 to over $60 billion in 2020. This growth isn’t just about money; it's about the massive potential these technologies have to disrupt industries and create new markets. For instance, in the second quarter of 2021, out of 136 newly minted unicorns (startups valued at over $1 billion), one-third were deep tech companies. These firms are now valued at over $500 billion [...] Interestingly, deep tech investors aren’t just confined to Silicon Valley. While well-known firms like a16z, Kleiner Perkins, and Khosla Ventures are active in this space, other significant players are emerging across the globe. For example, Apex Ventures in Los Angeles focuses on deep tech in the medical field, while Cottonwood Technology Fund in Santa Fe invests heavily in optics, photonics, and advanced materials. Lux Capital in New York is another key player, investing in emerging science [...] Currently, most deep tech investments are concentrated in three main areas: synthetic biology, artificial intelligence, and advanced materials. These sectors alone accounted for 80% of deep tech investments in 2020. However, quantum computing is rapidly gaining attention, offering revolutionary potential in industries like pharmaceuticals, finance, and logistics. As the world becomes more data-driven, the need for powerful quantum computers is expected to grow, making this an exciting area for

• Deep Tech for Dummies (& Smart VCs Who Want an Edge) - Medium

  Deep tech ventures offer investors the potential for substantial global impact by addressing critical societal challenges — from healthcare and climate change to energy independence and security. As traditional software investing matures, deep tech offers new avenues for significant financial returns and societal impact, often proving more resilient during economic downturns. [...] Deep tech presents investors with the unique opportunity to pioneer entirely new markets and revolutionise existing industries through groundbreaking scientific advancements. Strong intellectual property in deep tech often provides substantial competitive advantages. However, these investments aren’t without their challenges, such as extended, uncertain R&D cycles, high capital intensity, complex regulatory hurdles (particularly in healthcare and energy), and the difficulty of assembling teams [...] Deep tech investing differs fundamentally from traditional tech investing. It requires significant upfront capital to finance prolonged research and development cycles, primarily directed towards creating defensible intellectual property rather than rapid commercialisation or marketing. Products typically involve hardware or physical-world components, distinguishing them from purely digital startups. ## Why Deep Tech is Crucial for Venture Capitalists

• European deep tech: What investors and corporations need to know

  This surge in technology investment has produced strong returns, particularly for deep tech. Since 2003, deep tech investments have consistently outperformed traditional tech sectors, delivering a superior net annual average internal rate of return (IRR) of 16 percent after all fees and costs, compared to just 10 percent for traditional technology investments.4Preqin database (self-reported data on net IRR). [...] While the performance of individual funds varies in deep tech and regular tech, deep tech funds have, on average in the years available for analysis to date, generated outsized returns. Investments in deep tech outperform those in traditional tech, producing an average net IRR of 17 percent compared to 10 percent for traditional tech funds (Exhibit 2).6While Europe has witnessed fewer deep tech–focused funds closing and reporting IRR, the anticipated performance is expected to align with [...] Focus on large-scale breakthroughs or pressing societal challenges. Deep tech fundamentally aims at delivering breakthrough scientific or technological advancements, such as AI or space exploration, or at providing solutions to some of the most pressing global challenges, such as climate change and energy transitions. Global scope. Deep tech ventures typically operate on an international scale in worldwide markets.

• Deep Tech's Growth is a Generational Opportunity - Space Ambition

  ### What advice would you give to limited partners or venture capitalists who are new to deep tech investing but want to be part of this emerging supercycle? First, invest in learning before investing capital. Deep tech requires understanding scientific principles, regulatory environments, and technology development cycles that differ fundamentally from traditional venture investing. Build relationships with technical advisors who can evaluate breakthrough claims and market potential. [...] In an exclusive interview with International Finance, Alexandra Vidyuk, CEO & General Partner of Beyond Earth Ventures, shares insights on why deep tech is becoming the most resilient and essential investment class in today’s volatile geopolitical climate, highlighting how strategic sectors like space, energy, and next-gen computing are shaping a new era of infrastructure, national security, long-term wealth creation, and beyond.

• An Investor's Guide to Deep Tech | BCG

  Our new report looks at where and how investors can play in deep tech and how the current pool of investors approaches the asset class. We analyzed deep tech investments along two dimensions—technologies and use cases—in four areas of impact: climate and sustainability, demographics, technology, and security. Our analysis of investment patterns over the past several years reveals five types of investors that are active at different stages of the investment life cycle and that offer a variety of [...] Timelines are long. Deep tech investments take longer than other tech investments to mature—an average 25% to 40% more time between funding each stage from seed capital through series D. [...] Forward-looking investors understand that deep tech offers attractive rewards because its companies tackle large problems. Startups seek to make big societal, technological, or economic impacts that unlock hefty markets in fields such as climate change, food shortages, and disease. Investors are making bigger bets. The size of the average deep tech investment has significantly increased in recent years, with many investments now reaching $100 million or more. Billion-dollar funding commitments