What is a Deeptech startup?

The question “What is a Deep Tech Startup?” keeps popping once in a while, typically,  if you are a part of the ecosystem and conversing about infant ideas with aspiring or been-there-done-that entrepreneurs is just another day of your work life and most of your social life(‘coz as humans we introduce ourselves through our work). There is a lot of on-going confusion around Tech startups and Deeptech startups, and how the technologies or rather the products offered are different in both the cases. We would aim to clarify this confusion through this article.

Coming back to the question, indeed, What is a Deeptech Startup? and why is there a discreet category existing, to begin with?

Deeptech innovation stands apart

At IIITH we use a simple definition – If a startup can execute a research group to work with them then they are Deeptech 

Leading the centre for innovation and entrepreneurship for over 12 years and a resonating zest for fostering Deeptech innovation and help startups in the space, Ramesh Loganathan, COO CIE IIITH emphasises on the importance of the thinking behind building a Deeptech Startup and leveraging research to build solutions. According to him, at a high level, Deeptech startups are startups that are using emerging technologies to build their solutions with deep technical skills and systems thinking.  Sometimes these startups may work with research groups to pick the latest technology from the on-going research.

Some types of Deeptech innovation is sourced through

– Solutions built using latest and still-emerging technologies that are non-trivial to work with

– Products  built using very sophisticated frameworks and tools, that are complex in capabilities it enables

– Products or platforms that very complex in its design and engineering, needing a very strong development team to build

– Research-based solutions, where the knowledge and experiences  from recent  research is central to the solution

Note that the term “innovation” is used in reference to engineering, delineating it from the business model innovation or offline to online business model transition using existing technology. Take Netflix and Uber, for example, Netflix works on Online movie rentals, eased with the subscription model and boosted by a strong content strategy; Uber operates on “sharing economy” – a business model innovation enabling individuals to share existing resources.

The Defining fundamentals

Though the definition of Deep Tech startups deviates with a CV<1, there are few corollaries around the definition, to keep the understanding intact:

  • Deep Tech companies necessarily deploy breakthrough technologies or disruptive innovation, scientific advancements and inventions(or ambitiously discoveries)
  • The deployment or application of these technologies could be right after the breakthrough or years after when the technology itself matures and set ready for creating value
  • The innovation is entirely technology-driven and hence comprise the “secret sauce” protected through IPs in most of the cases
  • The focus for Deep Tech startups, unlike others, is on designing solutions with proven, eminent and high impact

Tech startups vs. Deeptech startups

To further aid our understanding, we approached Prakash Yalla, Head Technology Transfer Office at CIE IIITH. Quoting him as what separates the Deeptech startups from the rapidly emerging swarm of Tech startups,

Startups need to have technology differentiation and protect their intellectual property for long term viability. A Deep tech startup leverages emerging technologies by cracking hard technical challenges and deliver IP embedded solutions. 

The term that essentially distinguishes Deeptech startups from Tech startups is Disruption.  In contrast to the digital platforms, software and apps, technological advancement will be driven by deep technologies.

The disruption that we refer to in our argument, stems from scientific progress and technological breakthroughs, in the intersection with changing demands due to bigger effects or issues such as Rapid urbanisation, Climate change and resource scarcity, Demographic and social change and shifting global economic power to name a few.

Nevertheless, Deep Tech companies differ from other tech companies or what we call at CIE as an “average SaaS company” in several other indefinite terms. These terms range from the development timeline to risks and superficially, the Cash needs and so on.

 The Challenges, Risk and raising funds

Timeline for developmentDeeptech startups typically require longer to come to life.

  • It needs more time, money and qualified expertise to grow and evaluate science-based research to the point that it is ready for commercialisation.
  • If the innovation requires the development of an innovative device or a modern method, it may take time to create a revolutionary manufacturing/designing process for the manufacture of a consumer product.
  • Unless the new product is a fully integrated device instead of a high-value component, the start-up may need to develop its own production plant and recruit human resources to do this, which is very capital-intensive and may take a very long time to complete.

Risks involved – Risk is inherent to a Startup but when it comes to Deep Tech startups, the chances of survival and the perseverance needed is at a different level altogether.

Technology Risk
Coming from the very nature of it, Deep Tech startups carry significant technology risk. From clinical trials of new drugs, feeding data to Ml models to deploying AR/VR for augmented sales and IoT-driven Industrial operations, precision and quality is of utmost importance.

Regulatory Risk
Typical to mostly Medtech and cybersecurity startups, Regulatory risk remains the silent worry for Deep Tech startups. In some cases, the Startup takes the blow of not having a regulation in place, which contributes to uncertainty and lack of trust.

Execution Risk
Invention is different from Innovation and in the case of Deep Tech startups, it takes huge efforts for the plans for going through TRLs and make the product market-ready. Sometimes it is tough to either find use-cases for the tech or to refine the tech to create value for customers. Not-to-mention, the age-old problem, most of the founders come from the academia or Engineering background and find it difficult to adjust to the management fronts.

Securing an Investment

Though there has been tremendous growth in VC investments for Deep Tech domain, the startups struggle to find funding because of their complex nature.

It is often challenging to grasp the promise of a Deeptech startup, as it is difficult to identify an investor so clearly knowledgeable in a particular subject matter that he/she truly knows the creative technologies that the start-up offers – Abhinav, Investment head, CIE

Low valuation at investment, Longer timeline of a deep tech Startup, terms of investment etc. are some of the commonly encountered reasons for hindered investments. For these reasons and others, given a chance, Deep Tech Startup founders prefer options of getting Acquired and Acqui-hired more often.

Summing up, Deep Tech startups are companies based on technological breakthroughs or scientific advancements, aims at building solutions for major shifting trends across globe unlike a classic tech-based startup and hence carries distinct challenges and risks to reach from inception to execution.

Insightful? Watch this space for more such takeaways ↑→ https://cie.iiit.ac.in/startup-jukebox/

Until next time!

Sunita Kumari, Team CIE