You may have heard of founders or funders describing their startups or their funds as “Deep Tech”… but what does that actually mean?
“A deep tech startup is a newly established business founded on breakthrough science or engineering. Swati Chaturvedi…defined the term “deep technology” to identify new businesses on the cusp of momentous scientific and technological breakthroughs that will define the next century.”
A number of funds, especially in the US, have based their investment focus on bringing science from the lab to the commercial mainstream such as Lux Capital and DCVC [aka Data Collective]. One could also argue that most BioTech funds are, by definition, “deep tech.”
With a nod to one of my favourite authors, Michio Kaku, and his book, Physics of the Impossible, I’d like to suggest we refer to Deep Tech startups as those seeking to tackle the Science of the Possible, and would argue that Europe is a fertile ground for such ventures (and venture funds to back them).
Lets use Artificial Intelligence as an analogy where, through the decades of the AI winter, most of the focus and progress (or lack thereof) was taking place in academia, from Montreal to Cambridge, before the cambrian explosion of AI burst forth four to five years ago (h/t to Dag Kittlaus, the man behid Siri and Viv, for calling it). Very few investors knew what AI was, let alone how to back it. Horizon Ventures was quietly leading the pack and was able to back the likes of DeepMind, Siri and Sentient. By this point, of course, we are all receiving pitch decks with some allusion to AI/ML/Deep Learning… and we have entered an era in which something that was once an academic backwater is driving a broad swath of the technology innovation ahead of us and as Ian Hogarth eloquently points out, is leading to a geopolitical arms race around data and algorithms.
In hindsight, DeepMind emerging in London should not have been a surprise given the amount of AI talent in the UK specifically and in Europe in general. As Jean-Francois Gagné of Element.ai pointed out in this blog post, the UK ranks second to the US in terms of AI “talent” and only UK plus Germany, France, Spain and Switzerland would represent close to 4,500 AI specialists.
NB: A caveat on this data set is that it is scraped from LinkedIn profiles, and counts “talent” based on where they live not where they are from, which calls out the immense talent battle across geographies for these scarce resources.
So, if we as European investors missed the opportunity with Deep Mind (funded by Horizons from Hong Kong and Founders Fund from the US) how do we go about ensuring we all have what Accel founder Jim Swarz called the “Prepared Mind” as technology evolves from labs to science of the possible?
First step, I would suggest, would be for many of us to define our own views of what breakthroughs science will enable in the near-term future. Some areas of focus might include:
- Commercial applications of synthetic biology across the likes of agriculture, pharma and genomics or new materials and there are already dozens of fascinating startups across the region:
If we consider biology and DNA a “platform” , what we are seeing is a digitalisation of that platform on top of which a computational layer is now being appended. This creates a whole tech stack in which we, as tech investors, can back. This, however, is one specific area where I hope EU regulators allow innovation to flourish, unlike recent rulings on CRISPR-edited crops.
- The future of transportation (and by association urban environments and social spaces) is already being transformed by Uber, early autonomous efforts and bike/scooter sharing. But the paradigm shift that I find most interesting is taking those “vehicles” from the ground to the sky and startups and large corporates alike across Europe are seeking to build that, from. Volocoptet and Lilium in Germany to Aeromobi in Slovakia and of course, Airbus. The latent talent in the region across automobile manufacturing, aerospace and design, once again provides Europe with the necessary ingredient — talent- to make the flying cars that Peter Thiel asked for a reality.
- Space is, in the infamous words of Jean-Luc Picard, the final frontier, and while Bezos’ Blue Origin and Musk’s SpaceX are get plenty of headlines, Europe is quietly developing the underpinnings for this future industry. From the tiny but forward-thinking nation of Luxembourg establishing a legal base for space startups and allocating a €200M fund to support them. To UK-based Seraphim Capital, a $90m fund dedicated to “to financing the growth of companies operating in the Space ecosystem” who just graduated the first six companies from their Space Camp. To companies like PLD Space building reusable low-cost rockets from Elche, Spain (near Murcia in case you’re wondering!) Just as a reminder that the newly defined ambitious NASA mission for 2020 is to send a probe to a comet. The same comet the European Space Agency launched the Rosetta Mission towards in 2004 and reached in 2016 #JustSaying.
- And if we really want to go “deep” straight out of science fiction, the ability for us to communicate with both each other and computers directly from our brains (Brain-Machine Interfaces, BMI) is beginning to make a leap from lab rooms across the world. From Prof. Nicolelis’ amazing work at Duke (watch his TED talks especially the one of the monkey controlling the robot arm with his brain!) to Facebook hiring neuroscientists for BMI projects to the work being done at DARPA to capture and transmit memories directly from the brain (some more here on what Justin Sanchez and his team are doing at DARPA around the brain including flying an F35 simulator via brain signals!). If we hone down on Europe, a vast amount of scientific talent is focusing on BMIs across research being conducted at Oxford, Imperial, Max Planck in Germany, CNRS in France and dozens of other labs across Europe.
There are dozens of other areas of scientific breakthrough that will shape our future, and as posited at the beginning of this post, I believe Europe has a intrinsic opportunity to help bring these from the lab to the world.
I must state that have been impressed by — given the smaller ecosystem of VCs in Europe — how proactive and willing so many fellow investors have been to help the rest of us get to a “Prepared Mind” state on Deep Tech. Local Globe has been hosting salon-style sessions on SynthBio and an upcoming one on “AI Diagnostics & Pathology”, Ciarán O'Leary and the BlueYard Capital team has been hosting some amazing dialogues (with *some* VCs invited). For example, this one on Quantum Computing:
Venture Capital is not an individual sport and I believe we all know we will need to have fellow partners in the ecosystem with whom we can identify and jointly back some of the ambitious Deep Tech startups of the future.
True disruptive innovation comes not from incremental gains or efficiencies but from bold breakthroughs. We, the founders and funders of Europe, must accelerate our prepared minds to take on the opportunity ahead of us given how many of the building blocks of an ecosystem we have around the Science of the Possible! This implies closer links with academia, corporates and government-backed organisations, but also a rethinking of the Venture Capital model and metrics away from purely unit economics and valuation upticks, and a modification in funding reserve ratios that truly allows the science to leap from the lab into the real world.