By Cédric Favier & Louisa Mesnard
The term “deep tech” is now widely used in France. But let’s not forget that a couple of years ago, this wording (almost) didn’t exist! After the high tech era that popularized computing and the low tech era that shook business models up, we have now shifted to the deep tech revolution. Are we at a critical milestone where deep tech is a breakthrough disrupting yesterday? Is deep tech a long term trend that is here to stay or is it rather a trendy subject and an opportunist buzzword?
So, fundamentally, what is a deep tech startup?
Nowadays, it can be argued that almost every kind of business has a “tech” aspect to it. So where is the limit between tech and deep tech?
A deep tech startup brings an advanced technological solution to a market that is either established or emerging with a strong potential of growth. The founders are often researchers or engineers who are close to academic research, who build a significant intangible intellectual property or develop a strong competitive advantage based on their R&D.
Deep tech are disrupting technologies such as AI, AR/VR, biotechnology, cybersecurity, industrial IoT, new materials, robotics, etc. Every sector (finance, health, manufacturing, marketing, transport, etc.) will be impacted or even disrupted by these technologies.
The digital revolution has accelerated R&D processes and integrated into deep tech product offerings up to the point that a large number of deep tech startups are now data driven.
Is the French startup scene shifting towards deep tech?
In recent years, we have seen an increase of about 20 to 30 % per year in the number of new deep tech startups in France. However, building an ecosystem is a long game and takes 20 to 30 years and several generations of startups. The ecosystem benefits from early generations who are actively involved in the community. Elaia has been contributing to strengthening this ecosystem for more than 15 years.
The fundamental success criteria of an ecosystem is to foster collaboration. It’s the density and the quality of the relationships — open innovation, strategic partnerships, acquisitions, etc. — that will encourage deep tech entrepreneurship and innovation. Good news is that historically Europe had a solid industrial background in aeronautics, automobile, chemistry, energy, life science, etc. — which contribute to the development of deep tech startups.
Let’s not forget, French higher education and research is a breeding ground for ideas and talents — which is essential to the success of the ecosystem. The public research excels academically and has significantly improved its ability to transfer technologies. Inria research institute and PSL University are good examples of the increasing maturity of our ecosystem. And we need more research-entrepreneurs like Jacques Lewiner, “the man with 1 000 patents”.
Is investing in deep tech any different from a “classic” investment?
According to Dealroom, European investments in deep tech startups have been multiplied by 10 during the past five years. With the recent announcements of the French government and more and more venture funds proudly displaying the “deep tech” wording in their investment strategy, the deep tech sector should benefit from several billion euros of investment in the coming years.
At the end of the day, it could be thought that investing in deep tech is just like a “classic” investment. But when investing in deep tech, the founders’ profile, the combination of high risk and potential high reward as well as the temporality are fairly different. The consequence is that the networks required to source the best projects, the expertise required to understand the product-market fit and the level of support provided to founders are very specific.
Our investments in Criteo or Sigfox, and more recently in Shift Technology, Stanley Robotics and Tinyclues prove that at Elaia, we have been investing in startups that would, today, be defined as deep tech. We understood that the more deep the tech is, the closer you need to be to academics and conversely researchers need to be supported to create companies with risks and temporality that are proportional to the depth of their research.
With more means and collaboration than ever before, our ecosystem is based on a new generation of entrepreneurs with global ambitions and a unique technological expertise. Let’s take Gleamer as an example. Within a year, the founders raised 1.5M and negotiated strategic partnerships with major medical imaging players as well as with the best research laboratories to bring AI to radiology.
I believe that VCs should play a role in accelerating the creation of world-class tech ecosystems by providing support beyond the companies for whom it writes the cheques and, at Elaia, we are convinced that France is the next deep tech hub!