What is The Deep Tech Way and Why it Matters
“It is not clear who first used the term deep tech” ChatGPT prompted. So I curiously turned to my good old friend Google to learn Mat Taveres, an operations manager for Raytheon Service Company, was first quoted in 1998 using the term (or at least that is what I could find). He called a deep tech company one with engineering-based technocracy.
What is deep tech?
Deep tech is a term used to describe solutions based on scientific or engineering breakthroughs that require significant research and development investment. These solutions are often complex and challenging to replicate, and they have the potential to disrupt entire industries.
While that is an acceptable definition, deep tech is a subjective label. For example, some define deep tech solutions around the type of risk they bear; technical versus market risk. Some focus on the amount of R&D, investment and patience required to see deep tech come to fruition. Others might focus on the approach and define deep tech as an approach rooted in basic science, engineering, and continuous investment from ideation to commercialization.
I have a focus on deep tech startups, and here is what defines them for me:
- They work on cutting-edge and esoteric technologies such as advanced materials, advanced AI algorithms (not regression), quantum computing, and biotechnology that are poised to solve the world’s biggest problems.
- They require significant investment in research and development.
- They often have a long lead time before bringing a product to the market.
- Most deep tech startups are founded by scientists and engineers, have a team of engineers or scientists and come out of research labs. Sometimes the years of “R&D” is hidden in the subject matter expertise and years of field experience that cannot be gained anywhere else.
- Deep tech startups are built on top of intellectual property in the form of patents, data, know-how, and expertise.
What is not deep tech?
Shallow tech, or commoditized tech, refers to scalable and simple solutions that often operate in a perfect competition market structure. For example, digital and web solutions can still solve some inefficiencies in laggard industries. However, the global problems related to food, health, climate, energy etc., are so complex that another food delivery app or D2C mattress business cannot solve them. Shallow tech is not protectable, is a price taker, does not have meaningful IP and does not require much R&D.
Why do we need to care about deep tech startups?
Early investments in SpaceX, Palantir Technologies, Jawbone, Nest, and Beyond Meat were done by various VCs and Angels and have proven to have outsized returns and impact on investors and society. Governments worldwide are investing in research and development to solve challenging problems. Large corporations have started investing in deep tech to find viable solutions for their problems. Additionally, a number of organizations, such as the NSF in the US, NSERC in Canada and the European Union, are working to support the development of deep tech.
Without the push from these sectors and the full engagement of universities and research labs, R&D efforts will not take place at the necessary scale. But the push cannot stop at the R&D stage. One of the challenges is to commercialize IP generated at universities. Commercializing deep tech solutions is often challenging. These disruptors can’t just enter the market with their solutions. They need buy-in from large corporations that would rightfully so engage in pilots first, or they require various types of regulatory approvals. In Ontario, Ontario Centre for Innovation has recently announced a new Life Sciences Innovation Fund taking a bet at years of R&D done in Ontario universities to help with the commercialization. But we must do more than just wait for grants and government-subsidized funds to unlock deep tech’s revolutionary potential and create a utopian society. Access to funding is one of the biggest challenges for deep tech startups.
While global investment in deep tech startups is on the rise, there are many gaps in deep tech investment, specifically in the early stage. Most VC and Angel investors avoid deep tech solutions such as advanced materials or biotech. Looking at the investment ecosystem, one can see that most tech-savvy VCs have made their money from IT and software. So obviously, they do not have the skillset to evaluate a deep tech startup. To change that, scientists and engineers must join VC firms to help reduce the knowledge gap.
What is the outlook for deep tech?
The future of deep tech looks promising. Deep tech has the potential to change the world. In collaboration with Hello Tomorrow, BCG has done multiple studies that show there is no way but for deep tech to double or triple in the next couple of years. As more investment is made into research and development, we will likely see more breakthroughs and new products that will change how we live and work. However, it is crucial to keep in mind that developing and commercializing deep tech is challenging, and it may take some time before we start seeing the full potential of these solutions.
Now you know what deep tech is, or do you?
