Deep Tech Scaling: Towards an Integral Approach

Anieke Wierenga

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With the current challenges and opportunities around AI, Climate, Quantum Computing, Biotech and Food Security, investors and governments are looking at Deep Tech Startups as an important source of innovation and economic growth for the future.

Deep Tech startups are rooted in cutting-edge scientific or engineering innovations and often started as spin outs from universities or research labs. Although based on promising technologies, most Deep Tech Startups struggle to bridge the gap between a working prototype and a viable business: ‘The Valley of Death’.

According to the famous blog by Marc Andreessen (2007), ‘the Only Thing that Matters’ for a startup is ‘product-market’ fit. But how do Deep Tech Startups develop exactly that?

The ‘lean startup’ approach, in which Blank and Ries (2011) structure the ‘go-to-market’ journey of a startup as a stepwise iterative process to find customer traction builds on this logic.

Although the ‘lean startup’ approach has proven successful for B2C and B2B SAAS startups, startups with deep tech or clean tech propositions will struggle to apply this approach to their startup journey.

The focus on Product-Market fit overlooks the complexity of building a company in the context of market innovation, high capital requirements and the necessity of co-innovation and collaboration with a large variety of partners during the decades-long process of deep tech development.

We argue for an integral approach to venture development for such startups because of the following 10 reasons:

Product-Market Fit becomes obsolete: Offerings in spaces like quantum computing, fossil free chemistry or cell-based proteins will require a significant market innovation before they become mainstream. When the market itself is innovating, fitting a product to it becomes a temporary illusion.
Agile product development is not possible: Rapid prototyping and pivoting to develop a ‘Minimal Viable Product’ are unrealistic in the context of Deep Tech. Viable propositions are the result of decades of research and development and high capital investments and cannot easily be ‘tweaked’.
DeepTech is not a quick (VC) win: The valley of death always takes longer than planned, costs more than projected and leads to a different outcome than envisioned. Traditional Venture Capital Funds will only be a limited source of funding this journey. This journey will demand a creative mix of tactical moves and strategic decisions to stay alive and progress. Preparedness for the unexpected is essential.
Minimal Viable Product becomes Minimal Viable Ecosystem: The end-user will not perceive the value of the Deep Tech innovation without complementary value propositions and innovations from others. (Ron Adner). An MVE aligns innovation partners to create new economic value around the Deep Tech. The journey through the traditional valley of death is the opportunity to align ecosystem partners and mature the joint value proposition through evolving valorization of the Deep Tech’s invention.
Market Creation instead of Market Validation: Deep Tech propositions can learn from Henry Ford that customers will ‘ask for faster horses’ and not for cars. Disruptive technology alone is not enough to create a new market. A new market can only be created by developing new logic, new rules and new narratives with the relevant stakeholder groups. Arrikka Stenroos)
Storytelling instead of Pitching: DeepTech is not a transactional game. Instead, the success depends on the ability to build long-term relationships with all kinds of stakeholders and business partners: a movement. Communication from DeepTech founders focuses on inviting more (relevant) people to join their dream. Engineering the right story, images and emotions around the startup’s mission is essential for funding, market formation and eventual scaling. (Niels Sprong)
Stay Small to Scale: FTE Growth and Invested Capital are popular KPIs to gauge scaling success. For flexibility and versatility however, many Deep Tech startups keep their core team small and avoid heavy investments in hardware by creative use of resources and assets of industry or technology partners.
Collaborative Advantage: In the context of disruptive technologies and evolving markets, the winners will be the teams that surround themselves with the most powerful partnerships and networks. This goes against the notion of a strong autocratic leader that builds competitive advantage based on the 5 forces of Porter.
Winners are Outliers: Most Deep Tech startups never scale. The winners are the ones that dare to stay true to their mission and take well-informed creative decisions towards their future.
Emotional Intelligence over Technology Savviness: leading yourself, your team, partners, investors and stakeholders through the valley of death requires the ability to keep all parties engaged, energized and positive about the eventual success of the venture. Leading a Deep Tech Startup takes much more than a great talent for new technology.

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