Deep tech, or deep technologystartup companies are startup companies with the objective to provide technology based on substantial scientific advances and high tech engineering innovation. They require lengthy R&D, may take a long time to reach commercial application, and often require large investments to achieve commercial success. The underlying intellectual property of deep tech innovations is usually well-protected and hard to reproduce, making it a strong competitive advantage or barrier to entry.
Deep tech innovations are often radical and may create new markets or disrupt existing ones. Deep tech companies often address big societal and environmental challenges and have potential to impact everyday life. Silicon chips are an example of innovation that enabled calculation at previously unimaginable speed and scale.
The time required to move from basic science to appliable technology in deep tech exceed the development time of startups based on widely available technology. For instance, the development of technology behind artificial intelligence took decades, and now AI companies are rapidly developing in many fields. According to Hello Tomorrow, as of 2019 it took average 4 years to reach market in biotech and 2.4 years in blockchain.
The demand for huge early-stage funding for R&D and prototype development and lengthy life cycle of deep tech startups forces them to abandon the established funding progression from friends and family to angel and seed money, series A and subsequent rounds leading to trade sale or IPO.
History
The funding for deep tech companies has increased over the years. According to Boston Consulting Group, the total investments in DeepTech companies increased from $1.7 billion to $7.9 billion from 2011 through 2016. Investment activities are concentrated in the United States and China that totaled for about 81% of global private investments in deep tech from 2015 through 2018 with approximately $32.8 billion and $14.6 billion invested in each country, respectively. China acts as the main driver in deep tech investments with funding increasing 80% each year over that period compared to 10% each year in the US. European countries are also active in deep tech investing. According to the Financial Times, in 2017 the total funding towards deep tech companies reached around €3 billion across 600 deals. Corporations such as Google, Facebook, Amazon, IBM and Apple show increased interest towards deep tech applications in AI, virtual reality, drones, self-driving cars. Business accelerators also shift focus from narrow digital startups towards deep tech. In 2016 Y Combinator's batch there were 32 deep tech startups including 9 in biotech, 4 in drones and 3 in advanced hardware.
