Deep tech is not designed for cheap thrills or convenience.
Almost the antithesis of consumer tech, it’s climate change reversing, carbon cleansing, world hunger combating, future-critical stuff.
Deep tech (DT) is a catchall term spanning extremely diverse and complex technologies that are not focused on the end-user.
They include – but are not limited to – artificial intelligence (AI), machine learning (ML) robotics, IoT (internet of things), blockchain, life sciences, genetic engineering, advanced material science, photonics, biotech, and quantum computing.
DT inventions often begin their life with a single, specific use case, and end up providing aggregated economic, social, and financial returns over decades (Wi-Fi began as a means to clean radio astronomy signals in 1977. By 2020 it had over 12 billion commercial users).
And in stark contrast to the 30-year run of digital/SaaS-based/non-tangible innovation, DT is now increasingly grounded in the physical realm, with “83% of deep tech innovators designing and building physical products”.
Deep tech is based on invention, not innovation. It’s the new and never-before-seen, not the repurposed or reimagined.
It’s often the result of years spent in labs and (in the case of 70% of DT startups) securing patents.
It’s a long game, but when the tech is adopted, it’s often so powerful it can provide crossover solutions in multiple sectors – like aerospace technology that monitors crop conditions, or an AI advance monitoring a hospital patient.
So why do we need it?
Fires, floods, the pandemic, supply chain crises, and ever expanding global populations have placed added strain on fragile systems, demanding rapid problem solving and fast remediation.
Deep tech startups are both highly knowledge-based and mission-driven. They’re not running competitions or social media campaigns. They’re pitching to the highest levels of government to address the problems that seem too vast or intractable to solve.
It’s a broad term, but some of the extremely cool things emerging from deep tech include:
Electrokinetics: as in the case of Queensland based Rainstick, which is “combining indigenous knowledge systems and modern electrokinetics to encourage fungi and plants’ natural systems to grow faster”.
Artificial Intelligence: MaxusAI can fly a drone over erosion-prone regions near the Great Barrier Reef and use granular, AI-based analysis of the footage to detect where silt is being washed away. It can comb through aerial photography to survey critical infrastructure, spot corrosion of nuts and bolts from miles away, or assess damage after natural disasters.
Clean energy and clean tech: In a round led by deep tech venture firm Main Sequence, Sydney-founded Avarni has just raised $3 million to speed up its carbon management and decarbonization efforts.
Blockchain and DAO: Emanate is a music marketplace built on the blockchain, partnering with Decentralised Autonomous Networks to bring equity to musicians and fans by cutting out the middleman.
Geospatial: SmartPaddock has integrated LoRaWan (long range wide area network) to its smart ear tags to enhance their long distance animal tracking capabilities while keeping the product affordable in large quantities.
In 2011, 29% of global startups were involved in deep tech.
By 2018, the number was 44%.
Thanks to macro events like the pandemic, climate change, supply chain disruptions leading to shortages, and ageing populations, global necessity has been the mother of invention. Deep tech is growing because it needs to.
But it’s been a response to opportunity as well as necessity. Rapid yet positive changes have played into the way new technology is fed into the market. Including:
- The painstakingly slow but shifting governmental attitudes away from trusted old incumbents to younger, brighter, more agile contractors
- The advent of rapid prototyping, 3D-printing, DNA sequencing, computer-aided design, and freemium SaaS making starting up more accessible than ever
- The slowly synchronising tech transfer between university research and those who know how to monetise it.
Commercial profit can be a long way off. Just look at how long crypto technology has taken to filter into the mainstream.
But when the tech does filter down to commercial adoption, it often wins “OG” status and is hard to beat. Oculus Rift isn’t the only VR deployer in the game, but it’s by far the dominant force in.
Tesla is far from the only EV manufacturer – in fact most automakers are developing some electric or hybrid option – but it’s often the first one people name.
Deep tech is exciting for investors because the past 30 years of investment opportunities have been grounded in the intangible. DT combines software and hardware, and provides the almost forgotten bonuses of physical assets and patents to hedge their bets against.
But DT startups need much more capital upfront and take longer to deliver ROI than your standard tech company.
A lot longer.
Research on the polymer bank note began in 1968. Australia got the polymer $10 note 20 years later, and converted all notes 10 years after that.
Research into implantable hearing devices kicked off in 1967. The first cochlear implant wasn’t approved by the US FDA until 2000.
Because of the extremely long time in the returns waiting room, compared to the 7-10 years most VC firms are used to, we’re still lacking standardised funding models for the later stages of deep tech development that can take mind-bending inventions and turn them into something marketable.
Deep tech also requires corporations to champion R&D – something we’re frustratingly bad at, with only 12 out of 2500 world-leading R&D firms based in Australia.
But we have a greater research output than the US, the UK, Germany, and France, and we produce “nearly twice as many scientific and technical journal publications per capita than the OECD average”. So we’ve got more than a fighting chance at the title for deep tech world leaders.
It will be worth our while. Just six DT startups that were incubated by Cicada Innovations generated “over $370 million in value for business, consumers and society”, and four returned over $625 million in exits.
Innovation in consumer tech drives purchasing.
Innovation in deep tech drives human progress.