10 questions to be answered before investing in deep tech start-ups

Deep tech start-ups have the potential to transform and reinvent industries. Deep technologies are known to work. The risks are understood but still require further exploration. While deep tech companies usually own or license patents, their products are not fully proven or validated. Deep techs can come from a variety of sectors. Some of the more common ones are advanced material science, photonics and electronics, power electronics, vision and speech algorithms and techniques, artificial intelligence, biotech and quantum computing.
Investors need to be careful with deep tech. The technology risks are still significant. Investors must accept the fact that product development will be long, hard and require multiple iterations. A final product typically takes 2-5 years to complete.

The best way to evaluate, if a deep tech start-up is worth-while to invest in, is by answering the following 10 questions:

1. How well does the technology work?
2. Can it be manufactured at a reasonable cost?
3. Can it be manufactured and marketed at scale?
4. Has the start-up found potential customers to help with testing and feedback?
5. Do the most lucrative applications for the technology align with the fastest product development?
6. What other technologies could emerge in the next few years that might offer an appealing alternative?
7. How might user trends change?
8. Will the product be a nice-to-have or a must-have?
9. Is the market moving closer to or further away from where the product is heading?
10. Will regulations become more or less restrictive?

Many legacy tech companies are entering middle age and slowing down. Investors are looking for new tech opportunities. The deep tech companies offer huge potential. If you want to add deep tech to your start-up portfolio, look for companies that have done the best job of removing the majority of technology risk while shortening the long product development cycle.

Sven Franssen