But aside from a focus on deep tech, there are a number of capabilities that set us apart from generalist investors. Here are a few unique things that deep tech investors can bring to the table:
1. Understand spin-outs, manage IP and work with the R&D ecosystem
A deep tech company often starts out as exciting research at a university, but it can be challenging to roll out in pursuit of a commercial opportunity. Managing the IP, team building, business planning and infrastructure to support the spinout can all be tricky, but thankfully deep tech investors are well versed in these challenges and can help companies navigate this process with ease.
But it doesn’t stop at spin-outs. Investors well connected to the R&D ecosystem can also help deep tech startups establish high-quality research connections to accelerate their progress and further strengthen their competitive advantage.
Ask the investor: How many spin-outs have you done before? Did you spun something out of my institute?
2. Technical ability and comfort with technical risk
Deep tech investors will have more technical expertise in their teams, giving them a better understanding of the science and engineering behind different technologies.
This is especially important for early-stage investors like ourselves, where we will invest in companies that are both pre-revenue and pre-product. This allows us to better evaluate and underwrite some of the engineering and technical risks, and say yes sooner.
Ask the investor: What is your investment thesis for a particular technology area? Do you have someone on your team with a technical background in the area I’m building in?
3. Sector-specific market, customer and business model knowledge
Being a deep tech investor also requires an understanding of different types of business models, private and public sector clients and complex markets that can face unique regulatory, economic and geopolitical risks.
Companies innovating in quantum have very different challenges than scaling up in synthetic biology. It means having industry-specific knowledge is crucial to successfully navigating the risks and uncertainties inherent in these markets.
Ask the investor: What experience does your team have in the sector I am building in? What are relevant lessons learned that you may be able to share?
4. Experience with deep tech specific financing options
A final point of differentiation is the guidance deep tech investors can provide when it comes to exploring alternative financing options. In addition to dilutive financing, there are often opportunities for deep tech companies to explore non-dilutive grants, and even project financing for more capital-intensive infrastructure at scale. These can be stage, sector and/or even region specific opportunities, so they are well worth exploring as a way to help accelerate your business without causing additional dilution.
Ask the investor: Which grants may be suitable for my company? As I scale and my capital needs grow, what are other good project/debt financing options I should explore?
So if you’re a deep tech founder and thinking about which investors are best for you, hopefully the above shows a few reasons why working with a deep tech focused VC is the best option.
- As always, if you’re building anything in the deep tech space, I’d love to get in touch! You can reach me here or follow me for more on @JunQuG