What is a Deep Tech venture?

Thoughts on DeepTech #1

Great to kick off DeepTech Deep!

In these first Thoughts on DeepTech, I want to set the scene and delve briefly into the semantics of the concept of “Deep Tech” and elucidate how Deep Tech ventures set themselves apart from what we might colloquially refer to as “Shallow Tech” ventures. In addition, I will provide some insights on what I believe could constitute a straightforward consensual working definition of the Deep Tech venture. So, what is a Deep Tech venture? Let’s jump in.

Deep Tech ventures, also referred to as Tough Tech or Hard Tech (although I personally find these terms somewhat lacking), encompass inventions across a spectrum of technologies that are, as some call them, era-defining, thus holding significant potential in addressing contemporary global challenges in areas such as climate, healthcare, defense, and sustainability. They stand in stark contrast to shallow tech ventures, which rely on established technology platforms for their business models, exhibiting relatively low levels of complexity and risk, coupled with fragile patent protection (e.g., Airbnb, Getir, Uber, Carvolution and so on). Currently, there is a large interest in Deep Tech, particularly in Europe and the US, with many investment funds redirecting their focus to these types of companies.

However, there still exists a lack of consensus on a universally accepted definition or framework for what exactly makes up a Deep Tech venture, resulting in ambiguity regarding its scope and constituent technologies. This absence of a common understanding presents a significant challenge, particularly given the pivotal role Deep Tech plays in addressing today’s pressing issues.

Establishing a consensus will be crucial, as it can promote more constructive dialogue in research and practice, enable informed market evaluations, and guide the formulation of targeted policy measures and support systems.

In the following, I would first like to present three definitions to give you an idea of the different perspectives and intricacies surrounding the current understanding of Deep Tech ventures in both academic and practical contexts, without delving further into specific dimensions.

One of the earliest practitioner definitions comes from Swati Chaturvedi, founder and CEO of the online investment platform Propel(x). In 2015 she defines Deep Tech companies as:

“Companies founded on a scientific discovery or meaningful engineering innovation. [...] (Deep Tech companies) are built on tangible scientific discoveries or engineering innovations. They are trying to solve big issues that really affect the world around them”.

The Boston Consulting Group/Hello Tomorrow define Deep Tech companies in 2017 as ventures that revolve around:

“Disruptive solutions built around unique, protected or hard-to-reproduce technological or scientific advances”.

Lakestar together with Walden Catalyst and dealroom conceptualize Deep Tech in 2023 as:

“Novel scientific or engineering breakthroughs making their way into products and companies for the first time”.

A research group at the MIT Sloan School of Management, around Prof. Fiona Murray, also in 2023 developed a somewhat more nuanced, academic working definition. It also directly pertains to the probable challenges encountered by founder teams and investors as they support their growth and scaling efforts. They propose 5 characterizing dimensions of Deep tech ventures:

1. Positioned at the knowledge frontier with long and uncertain R&D cycles;

2. Importantly related to tangible products and industrialization processes;

3. Linkages to the ecosystem and especially Higher Education Institutions;

4. Problem orientation or Mission-driven ventures;

5. Creation of an 'option space' and a dynamic de-risking cycle.

Not only do definitions vary, but it is also interesting to observe the varying degrees to which ecosystem stakeholders currently embrace the technologies and industries categorized as Deep Tech. In the following, the varying scopes of technologies/industries considered Deep Tech should be illustrated by some exemplary ecosystem contributors across the US (The Engine, NSTC), Germany (DTCF), and Switzerland (Lakestar, DeepTech Nation Switzerland Foundation):

For now, it should have become clear that there is neither a consensus regarding the definition of the Deep Tech venture nor the associated technologies. While the associated technologies will certainly evolve rapidly over time and can only represent a snapshot of the technological zeitgeist, it seems crucial to focus on more fundamental dimensions when conceptualizing the Deep Tech venture, such as the risk dimensions and its scientific character.

To set the stage for this blog, I propose a broad working characterization of the Deep Tech venture based on my own observations as well as commonalities across various published definitions found during my research work.

In doing so, my goal is to provide readers of this blog with a comprehension of my perspective on a Deep Tech venture. It’s important to acknowledge that this is a work in progress, and as such, this characterization will be subject to refinement over time. I will, however, always update you when the time comes.

In my view, Deep Tech ventures can generally be characterized by the following:

(1) Strong scientific foundation

(2) Cutting-edge technology inventions/R&D at core

(3) Significant financial investment needed

(4) Extended development cycle

(5) Complex risk landscape across engineering, regulatory, and commercialization

(6) Hardware at core

Okay, for those to whom these dimensions seem to have appeared out of nowhere, don’t worry. As this blog’s journey progresses, real-life examples will make it clearer where they originate from, what precisely lies behind each dimension, and how they distinguish themselves from other types of tech startups.

To wrap it up, the notion of the Deep Tech venture remains somewhat ambiguous and difficult to grasp. As politicians, innovation managers, venture capitalists, and founders navigate the distinct challenges posed by these technologies, it will become increasingly important to establish a common language that all stakeholders can agree upon. Only clear-cut definitions and concepts will pave the way for the development of effective analyses, policies, and support systems in the future.

Let’s keep a close eye on what’s happening in this regard - please feel free to join the discussion if you are familiar with conceptualizations that the community should consider or if you wish to share your opinion. Anyway, in the coming weeks, we will delve deeper by exploring very specific technology and venture examples that are shaping Deep Tech innovations addressing the major challenges of our time. This will help us jointly develop a more nuanced understanding of what is and is not a Deep Tech venture. Stay tuned…