8 reasons Why Deep Tech Start-ups Differ From Other Start-ups

Kenna Castleberry

For venture capitalists and investors, start-up businesses within the deep technology industries (like AI, quantum technology, biotechnology, or robotics) can hold promising opportunities. There are thousands of start-ups within deep tech all over the world, each in a different phase of fundraising, design, or production. As a VC or investor, it’s important to understand the differences between deep tech start-up companies and other start-ups. While some differences are subtle, and others are monumental, and all can affect ROI. It’s important to understand how an investment or partnership impacts a deep tech start-up, and what the timeline looks like for that business. At Deep Tech Insider, we’ve had a history of covering deep-tech start-ups. From our experiences, we highlight the following eight differences that set deep tech startups apart from the rest.

  1. Deep Tech Start-ups Require More Resources and Time

This is because most deep tech businesses are designing and developing new products or software with barely any foundation from other products. This can take more time to acquire the right individuals to develop this product or make the product itself.

  1. Deep Tech Start-ups Have Different Timelines

Because of the previous point, most deep tech start-ups have a longer timeline to get a product to market. They are also typically in need of more front-end capital for their business to start finding the right talent, getting the proper materials, and developing a prototype for a product. This can make it tricky for an investor or VC to consider an investment. It’s important to ask the right questions to better understand the timeline.

  1. Deep Tech Start-ups Develop New Production or Design Processes.

Depending on the product, an entirely new manufacturing process may be created, or a new design process established. Many deep tech companies are creating entirely new software or materials, which can require new manufacturing methods. This can create a longer timeline or create more costs for the start-up.

  1. Deep Tech Start-ups Require Special Talent

Because many deep tech businesses are creating specific products, they’re in need of experts in such fields as quantum computing, robotics, supercomputing, and others. The talent pool feeding into the deep tech industry is quite small, making talent more expensive and constraining. As an investor, it’s important to understand the talent within a business, as well as the talent a business may potentially need.

  1. With Longer Timelines, Deep Tech Start-ups Rely Heavily on Grants and Universities

While many other start-up businesses rely on grants or universities, the deep tech industry has a higher-than-average number of university-based or grant-based startups. This is to make the longer timeline more cost-effective and to help attract other investors.

  1. Deep Tech Start-ups Use Different Business Models

With longer timelines, a smaller talent pool, and a front-end heavy investing need, most deep-tech startups use unique business models. Be sure to ask any deep tech business you want to invest in about their business model to better understand their needs and their timeline.

  1. Deep Tech Start-ups Rely on a Whole Ecosystem of Groups for support.

Many times, deep tech start-ups aren’t just looking for investors to secure funding. They also rely on universities or social groups (like LinkedIn) to provide market access and partnerships for design and development. This ecosystem can also supply a more customized talent pool or more options for funding. These ecosystems also help to create close networks of similar businesses or like-minded individuals, leading to productive partnerships and networking opportunities.

  1. Deep Tech Start-ups look at the Big Picture

While many start-up businesses develop a product to solve a specific problem, deep tech start-ups often look to develop a product or technology to solve many problems or societal problems. These problems can include issues like climate change or alternative energy.

While deep tech start-ups are unique compared to other businesses, all start-ups come with their own quirks and challenges. As an investor, it’s important to understand the methods of the business, as well as their goals and timeline.

References:

Chen, Elaine. “What Is Different about Deep Tech Startups?” MIT Orbit, 3 Sept. 2021.

Soussan, Philippe, and Arnaud de la Tour. “What Deep-Tech Startups Want from Corporate Partners.” BCG Global, 7 July 2020.

Image courtesy of Freepik.com

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