Capital for Deep Tech Dual Use Companies — Deep Tech VC and Other Expanding Options

If the hydrogen atoms in a pound of water could be prevailed upon to combine together and form helium, it would suffice to drive a 1,000-horsepower engine for a whole year. If the electrons — those tiny planets of the atomic systems — were induced to combine with the nuclei in the hydrogen, the horsepower liberated would be one hundred and twenty times greater still. — Winston Churchill — 50 Years Hence

This is the promise of so-called “Deep Tech” innovations — where entrepreneurially minded inventors, scientists, engineers, along with their exceptional research base and creative business models, give birth to the means to solve the world’s biggest challenges. Yet, though these visionaries represent exactly what venture investors are looking for in terms of the “next big thing”, more than 80% of deep tech startups are underfunded.

Deep tech companies require patience as commercialization often takes time, as these founders mature the technology while also defining a business model. These firms often encounter a “Valley of Despair” challenged by getting past Series A — raising $25M+ checks — without material social proof and company comparable metrics.

How investors view certain types of Deep Tech company is important. The unit economics of many deep tech domains are yet to be defined. The markets they are entering are new, the use cases evolving, and the product/market patterns to consider are sparse. This makes it hard for investors to evaluate efficacy and the valuation.

Deep Tech investors, more than others, have to have faith, have to cull relationships with subject matter experts. They develop heuristics over time so that they are able to assess the funding required over time. One of Seraphim’s investors — where Seraphim is a venture firm that focuses on space investments — mused: “ space startup “unit economics” are becoming clearer. We are starting to be able to compare company valuations with the stage of product development they are in, even if they do not yet have revenues.”