Synopsis
Deep Tech Defined
Deep Tech involves new scientific and engineering breakthroughs now entering products and companies for the first time. This sector has been at the forefront of major innovation waves, like the creation of electricity or the transistor. Deep Tech companies present a distinct risk profile, with high technological but lower market risks, demanding a different investment approach.
European Deep Tech Opportunity
Europe stands poised to become a global hub for Deep Tech excellence. It has robust fundamental research, including six top global computer science schools, a greater number of STEM graduates compared to the US, significant public support (e.g., the €1bn NATO fund SPRIND JEDI), and a positive public opinion towards science and technology.
Funding Landscape
Deep Tech is one of the most resilient categories in venture capital, maintaining around $15 billion in funding in 2023, on par with 2022. The UK, France, and Sweden lead in European funding. Key Deep Tech hubs are emerging in Stockholm, London, Paris, Grenoble, and Munich. Prominent exits include ARM’s IPO and BioNTech’s acquisition of InstaDeep.
Segment Deep Dives
- Novel AI: Saw a 50% increase in funding from the previous year, reaching $1.3 billion.
- Future of Compute: Funding grew by 10%, totaling $1.1 billion.
- Space Tech: Funding increased slightly by 5% to $784 million.
- Novel Energy: Experienced a 50% reduction in funding, down to $656 million.
- Computational Biology & Chemistry: Also witnessed a 50% funding decrease, dropping to $288 million.
Challenges & Recommendations
Europe faces challenges like encouraging more entrepreneurs into Deep Tech, standardizing university spinout terms, creating dense talent clusters, expanding the LP base and involvement of institutional investors. Furthermore, highlighting the role of governments and corporations as customers, enhancing exit channels, and fostering diversity among founders and investors are crucial.