🤖 #8: Vivian's Deeptech Insider: Exclusive Insights from Top Investors

Jobs at Nourish Ingredients, Seldon, Starlight Ventures and Sorenson Impact

Author

Vivian Chan, PhD
October 10, 2024

Hello and welcome to #8 edition of the fortnightly Vivian’s Deeptech Insider.

It’s investor series this edition! If you've been following our newsletters, you know we alternate between founder and investor perspectives. Last time, we explored Unlocking the 4Ps Framework for Founders, so now it’s time to focus on investor insights.

We also track jobs to monitor market momentum, this time outlining opportunities at Nourish Ingredients, Seldon, Starlight Ventures and Sorenson Impact (scroll down for details).

Deep Dive (Investor Series):

Deeptech Investor Shifts, Scaling Challenges, and the Race to Commercialisation

As part of staying connected to the broader Deeptech ecosystem, I have the privilege of hosting deeptech investor dinners a few times a year. I thought it would be helpful to share some non-confidential insights which covered a wide range of topics—from the energy transition to the unique hurdles and opportunities facing deeptech investors.

Energy Transition: Navigating Renewables and Their Infrastructure Needs

Solar and wind power have become the cheapest sources of energy globally. However, their intermittent nature demands additional infrastructure to ensure reliable power supply, such as energy storage solutions (like batteries) or gas plants as backup. Over the next 15 years, gas infrastructure is likely to remain critical until alternative technologies mature.

Hydrogen also plays a role in the energy transition, although it presents its own set of challenges. While green hydrogen is environmentally promising, it's still costly to produce. Meanwhile, grey and blue hydrogen, especially with carbon capture, benefit from significant subsidies, particularly in the US, but remain economically viable only for niche applications at this stage. As for nuclear energy, had development continued from the 1970s, we might be in a different position today. Now, Small Modular Reactors (SMRs), like those being developed by Rolls Royce, are seeing considerable investment. Fusion energy, though exciting, remains a distant possibility for large-scale use.

Investor Trends in Deeptech: Corporate Involvement, Syndicates, and Specialist Funds

Corporate investors are playing an increasingly important role in deeptech due to the sector’s capital-intensive nature. However, this brings concerns about whether their involvement will promote sustainable infrastructure growth or lead to monopolisation of innovation. Syndicating investments has become a common way to reduce individual risk, but it introduces coordination challenges, particularly at the Series A and growth stages. Larger corporate interests often complicate scaling strategies, with increased tranching and M&A activities frequently misaligning long-term growth.

Specialist funds are becoming increasingly vital for sectors like quantum technology and drug discovery, where deep expertise is indispensable. Yet, despite groundbreaking innovations, many deeptech founders face a persistent challenge—the lack of commercial acumen and the soft skills required to scale their ventures effectively. This gap is a growing concern across the ecosystem. We explored the idea of fostering a 'Deeptech Mafia' in the UK—much like the PayPal Mafia in Silicon Valley, which played a pivotal role in shaping the modern tech landscape. The vision is to create a robust network of successful deeptech entrepreneurs who can reinvest in emerging companies, mentor future founders, and help navigate the complex journey from the lab to market.

If you are one of these entrepreneurs, or know someone who fits this description, I’d love to connect and discuss how we can strengthen this network.

Investment Timelines and Patience: Adapting to Deeptech’s Long Horizon

The timelines for deeptech innovations are inherently longer than for other sectors (48% more capital and take 35% longer to reach significant revenue milestones than traditional startups, refer to my earlier edition), and this is proving to be a sticking point for many investors. VCs must adjust their return expectations, as deeptech breakthroughs often take years, even decades, to reach full commercialisation.nvestors at the dinner discussed alternative investment models, such as gradually investing a portion of income annually, rather than relying on single, lump-sum investments with rigid return timelines.

There has also been a noticeable decline in investor patience, especially in high-cost sectors. Many are opting to conserve capital, making it increasingly difficult for angel syndicates to raise funds. As individual contributions decline, the need for more investors rises, further complicating coordination and fundraising efforts.

UK vs US: The Deeptech Landscape

The UK has strong scientific research but has historically struggled with commercialisation, especially when compared to the US. In order to close this gap, discussions around UK-based funds needing to focus on niche strategies rather than attempting to compete broadly. The potential entrance of pension funds into private markets was also discussed and whether it could move the needle, providing capital for deeptech. Additionally, ARIA (the Advanced Research and Invention Agency) in Europe aims to replicate the US's success in innovation capital deployment, although its true impact will take years—if not decades—to fully materialise.

Hope you found these insights helpful! I find it always valuable to hear what’s top of mind as we continue navigating this evolving space.

Now, onto the jobs - Vivian

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Jobs at Deeptech startups:

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