It’s a flashy term used too often without a good understanding of the actual meaning. However, in the coming decade, and with the proliferation of colliding industries like artificial general intelligence, biotech, autonomous vehicles and more, this term will have a greater and greater impact on our society and the environment. In fact, deep tech has already made a tremendous amount of impact on our everyday lives.

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C-Tribe x TechExec Luncheon with Nicholas Brathwaite

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To help us explore this topic further, Nicholas Brathwaite, Founding Managing Partner at Celesta Capital and one of the leading deep tech investment firms globally, joined us from Silicon Valley for the C-Tribe x TechExec Luncheon. Nic has a storied career as a technologist, entrepreneur, investor, philanthropist. Most notably, he served as Chief Technology Officer at Flex (formerly known as Flextronics) for more than a decade, where he oversaw the launch and growth of several of Flex’s largest business units, including an innovative push into product development. More on Nic’s bio here. Note: this article has been augmented to include research that we have conducted as an organization. The totality of this article does not represent the views of any parties mentioned.

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What is deep tech?

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Simply defined, the term refers to technology that, because of the extreme difficulty involved, has a longer runway to commercial application but has the potential to disrupt existing sectors or create entirely new ones. 

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Deep tech is also structured around scientific advances in leading-edge sectors, design delivery, and tangible engineering innovation. Deep tech companies often possess fundamental and defensible engineering innovations that distinguish them from other companies and are often the foundational platforms that allow for the proliferation of new products. Regardless of the investment involved from computing to biotech, transportation and AI, deep tech has the potential to provide solutions to some of the most challenging problems the world faces.

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History of deep tech

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While the concept of deep tech has been around for some time, Swati Chaturvedi, founder and CEO of the online investment platform, Propel(x) was first acknowledged as being the person who coined the term. According to Swati, most technology companies are derived from innovating around the business model or skeuomorphic direction of bringing offline business models online. While there have been some very successful companies that have created massively, differentiated value propositions, they aren’t necessarily considered deep tech at their roots.

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Examples of deep tech

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A new form of material science that puts faster or cheaper chips into phones would be classified as deep tech, for example. Additionally, companies that are creating sustainable, lab-cultured meat, or a biopharma company that uses machine learning to develop protein therapeutics, are all considered to be deep tech. A concrete example of deep tech that Nic shares in the podcast is the electrification of self-driving cars. According to him, the proliferation of autonomous cars will only be possible when new technologies and systems are built that reduce the cost of the electronics that are invested in self-driving cars. 

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Challenges of deep tech 

As Nic shared, one of the major blockers with deep tech arises when it comes to the roadmap to commercialization. Due to the nature of uncertainty and difficulty when creating new deep tech-enabled products, the pathway to a sellable product is often unclear, meaning it will be a while until profits are produced. 

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Additionally, when deep tech companies do hit the point of releasing a product, they may find that the original team of scientists and researchers that achieved the R&D results isn’t necessarily the best suited for go-to-market efforts. It’s up to the investors and experienced operators to help offer expertise in restructuring or bringing in new leadership that can take a leading-edge technology, with little to no commercializable effort to date, to something that can be mass-produced and sold successfully to customers.

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Challenges also arise for investors in companies moving through the stages from seed to growth. Over 80% of deep tech companies build physical products, which means founders need to be aware of their funding roadmap as later stages require much bigger funding amounts (Series C can command up to 20x higher amounts than Series A investments). Complex, and highly variable ownership models for technology and intellectual property also must be considered.

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Opportunities in deep tech

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Forward-thinking firms such as Celesta Capital recognize the challenges faced by society, such as climate change, food shortages, disease, and housing crises, and the role that deep tech can play in address them. Startups aiming to make significant societal, technological, or economic impacts are targeting large market sizes, making them attractive to investors. The average deep tech investment size has significantly increased, with many investments reaching $100 million or more 

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Moreover, deep tech companies receive a competitive advantage towards the end of their development and applied scientific breakthroughs. Although they take longer to get to market than traditional internet and software-based companies, deep tech companies spend less on customer acquisition due to the competitive advantage they create.  When a deep tech company does go to market, the patents, technology, and team specialization affords it strong insulation from any real competition.

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Specialized firms like Celesta Capital also help companies with the intellectual capital they need to be successful. Building in the deep tech space usually involves backing technologies that are still developing the underlying science; considering potential markets and creating business models that will come into existence in the future. Taking all of this into account, ventures looking to build deep tech benefit from having trusted partnerships with investors that specialize in this area of technology.

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Engineering and commercial risk assessment skills, combined with the ability to inject patient capital, are differentiating characteristics deep fund startups should consider in investors. 

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How deep tech pushes humanity forward

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In the realm of deep tech, success is often gauged by reaching significant milestones rather than conventional metrics like customer acquisition. Early-stage deep tech ventures assess their progress based on achievements such as technological breakthroughs or the acquisition of patents to fortify their intellectual property. Regulatory approvals and compliance can also be pivotal indicators of success, particularly in regulated industries.

Ultimately, the true measure of success in deep tech lies in its capacity to propel humanity forward. The overarching objective is to develop solutions that ignite curiosity, drive further exploration, and enhance societal well-being, thus reshaping the future in ways once deemed unattainable.

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