We have written several times previously about the impact that the COVID-19 pandemic has had on a myriad industries. It should be no surprise then that deep tech investments is another area that is being affected by it, with investors now looking for unicorn startups that are working on innovation related to disrupting the landscape post-pandemic.
For those unfamiliar with deep tech, it is described as offering breakthrough innovations to address sweeping problems, with climate change serving as a potential example.
According to a research report published by the Boston Consulting Group (BCG) and Hello Tomorrow, there’s potential to accelerate growth of these aforementioned unicorn startups if a new investor model can be built.
“We need to do a much better job telling the many success stories and exit opportunities in deep tech,” explains Massimo Portincaso, co-author and chairman of Hello Tomorrow. “Deep tech still lacks a clear narrative to educate investors and attract more funding,” he adds.
In the Middle East and Africa (MEA) region, the research has found that $400 million was invested into these types of innovative technology during 2020, with the hope that this will increase throughout this year.
Portincaso and his co-authors have found that although deep tech risks are inherently higher, there are methodical practices designed to mitigate them. The authors also found that though deep tech’s equity needs are higher than digital’s in the early years, the former’s lifetime needs tend to be lower on average.
That said, no one has a crystal ball to determine which ventures will fly or fail.
Here they point to the power mRNA technology, which saw the successful development of vaccines within a matter of months. It therefore serves as an example of the the way people think about the risks of investing in breakthrough technologies has changed.
“In the end, deep tech will catalyse a new approach to public-private partnerships. To accelerate and deliver on this opportunity, government funding needs to be more focused and flexible, and private investment needs to be more willing to take big chances. Deep tech gives investors the chance to be part of the next wave of innovation and to solve some of our most fundamental problems,” adds Antoine Gourévitch, co-author, MD and senior partner at BCG.
To find out more about meeting the challenges of deep tech investing, as well as other stories penned in this series, head here.