Deep Tech

In space, nobody can hear you scream: five facets that obscure our understanding of deep tech’s performance (and the unhealthy investment obsession)

It has been a couple of years since we launched our Deep Tech stream at CCgroup. I’m often asked “what’s happening in deep tech?” It’s a difficult question to answer because its many complex features obscure how we view and measure performance for the ‘sector’ overall. So my response to the question is usually and simply, “it depends…”

“Markets” are the essence of business. Whether you’re a buyer or a seller, or any of those involved along that continuum, comfort comes from understanding the particular market or sector you’re operating in. A familiarity with its key trends, drivers, behaviours and so on. Yet ‘deep tech’, is so

poorly defined that it’s impossible to track its behaviours, trends, successes and failures in any meaningful way.

This blog delves into some of the facets that obscure meaningful analysis, and attempts to sharpen the focus for how we might see things differently.

1. Key industries

At CCgroup we’ve embraced the notion that “there’s no such thing as the ‘deep tech sector’”. Unlike our other streams that focus client comms on their end user audiences (telecoms, fintech, enterprise and so on), there is no single customer “buyer” for deep tech. Instead, we group a wide array of industries under the deep tech banner, all broadly characterised and recognised as those at the cutting edge of technology and innovation. It can include those involved in artificial intelligence, the metaverse and immersive technologies (AR/VR/XR), aerospace & transport, energy, the environment and sustainability, food & agritech, medical tech, materials science, quantum – and plenty more. “They are far more divided and have such little in common as the things unite them,” one might badly plagiarise. In other words, they’re so diverse that there’s little commonality on which to base analysis.

2. Specification

There’s very little consensus on a definition of what makes a deep tech innovator any different from any other innovator. Especially as innovation pathways and development cycles differ so enormously across those sub sectors. So, we have designed our own typology, as follows.

The organisation in question must be:

  1. Working in pursuit of identifiable socio-economic challenges
  2. Creating original / novel solutions to solve them
  3. Collaborating with a wider ecosystem to commercialise those solutions

To each of these there’s an obvious counterpoint, for example, that solutions aren’t solving socio economic problems, or an organisation is trying to do everything itself, or its solution is a “me too” product.

You’ll also notice that financial metrics are absent from that typology – that’s deliberate. While very many “deep tech companies” are young start-ups or scale-ups who have attracted significant investment, not all are – by our definition, even a multinational with a $1bn market cap can still be a deep tech innovator. This is a key point often overlooked by deep tech ‘sector’ commentators, who are very often obsessed with the early stage of investment end of things, rather than the innovation process and output itself.

3. Investment and investors

This is a key driver in the sector. Investment in innovative technologies is absolutely essential for driving those solutions to socio economic challenges, and more besides. Most commentators tracking investment in deep tech companies agree that investment has continued to rise year on year, with Boston Consulting Group noting that global deep tech investments in start-ups and scale-ups quadrupled between 2016 and 2020.

That’s good, right? Well yes, to a point, but make no mistake, investors are “in it for the money,” and sometimes it goes badly wrong. In the wake of Elizabeth Holmes’ sentencing in arising from the Theranos scandal, I wrote how I believe not all investors actually know what they’re investing in, often because they’re 1. rarely technology experts and 2. susceptible to waves of hype. Misplaced, overenthusiastic and impatient investments are good for no one – neither the investor, nor the deep tech. As I wrote then:

“Unless you properly understand the technologies involved, it’s far harder to be able to look at potential tech investment opportunities objectively and truly understand whether you’re being pitched snake oil, or opening a gold mine of genuine, original innovation with market potential.”

4. Success measures and investment again

It’s almost impossible to get a grip on how well the deep tech scene is performing overall. There are plenty of measures for other sectors – things like revenue CAGR, customer unit shipments, manufacturing reports etc. – but no real equivalent, overall performance metric in deep tech. So what are the challenges in doing so?

Firstly, while investment tracking is used as a rough proxy for overall sector growth, it’s really only an “input” to a company’s development path. Perhaps one output/outcome measure of the result of investment is eventual market exit (acquisition, IPO) of those invested companies, and there are plenty of those reports out there. But that tells us nothing about the state and condition of those still on their journey towards that point – those doing the hard yards between investment and exit. Secondly, and directly related to this, it fails to incorporate deep techs who are already revenue-positive / investment-free. Thirdly, you can’t possibly track the detail in each of the sub-categories and markets deep tech encompasses in a way that can be summed up to represent the sector overall. It’s not even like trying to compare apples and oranges, it’s a whole supermarket of fruit.

I think there’s an unhealthy obsession with investment that is misguided and misleading. For example, Unicorn status is held up as some sort of utopian nirvana, but all it really means is that a company has attracted a bucket load of investment. It tells you very little about how it will fare in the long run, especially if the hype engine has been working overtime to drive that investment (see above).

Yes, investment is absolutely necessary – it’s the life-giving oxygen and rescue breath every start-up and scale-up needs to survive and thrive. But it can’t be the be-all and end-all of commercial success. Investment necessarily fuels a range of other growth activities and I think these are sometimes overlooked by the deep techs seeking that investment, and the investors themselves.

A new methodology is needed to measure deep tech performance, something that tracks actual innovation at scale regardless of sector, and then measures the impact that innovation brings to bear in the real-world, regardless of an organisation’s point in its corporate lifecycle.

5. Marketing:

While “I would say that, wouldn’t I”, for me this remains the biggest single, unaddressed elephant in the room. I’ve sat through countless deep tech investor pitches, where they’ve explained the market challenge and opportunity, stated the investment ask, and explained how they’ll spend the money on new product development, hiring developers and engineers, moving to a new workspace etc. Never have any of them mentioned how some of the investment will be spent on marketing.

The Frontier Deep Tech conference I attended recently saw presentations and pitches from organisations in sectors as diverse as data privacy, chip manufacturing, jet propulsion systems and asthma detection using AI. The truth is, they all know marketing and PR is critical to their eventual success; despite the usual absence of stated investment in marketing, one of those that presented has now sought out CCgroup’s PR services.

What are deep techs afraid of saying? That their hard-won funding is going to be squandered on immeasurable marketing efforts? (Incidentally, the notion that marketing success is immeasurable is plain wrong.) Or are investors so obsessed with the outcome that marketing is assumed to be some sort of hygiene factor that just happens by magic?

With investment in place, and with product development well underway, go-to-market is the next single biggest challenge most deep techs have. They must grapple with how they describe themselves, demonstrate a market need, work out how to position themselves against potential competition, and determine how they find the right channels, means, and modes to reach their potential customers.

In space, nobody can hear you scream. In deep tech, after the “sash and the flashbulbs” of investment fades, if you’re not finding the right ways to reach, communicate, and connect with your customers, you’re Dead On Arrival. Deep tech needs better ways to measure its progress, impact and success.

We can help. We’ve helped countless organisations find their voice, reach their customers and fulfil their potential. If you’re a deep tech, please let me know if you’d like to discuss your challenges.

Written by Duncan McKean


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