The Deep Tech

Investment Paradox:
a call to redesign
the investor model
 Contents
4 Executive Summary
6 1. Introduction: the great wave of deep tech innovation is coming, but the current
investment model is broken
8 2. Despite growing funding, deep tech suffers from a capital gap with insufficient
and imbalanced investment
12 3. Frictions appear along every link of the deep tech investment chain, while
uncovering four paradoxes
12 a) Venture Capital funds
14 b) Private Equity funds
14 c) Limited Partners
15 d) Corporates
15 e) Governments and Institutions
18 4. Create and spread an articulated narrative for deep tech investment
20 a) Deep tech market and technology risks are high, but they can be mitigated
21 I. Problem-oriented mindset and problem/market-fit
21 II. Design-Build-Test-Learn (DBTL)
21 III. Design to value and cost
21 IV. Deep tech IP
21 b) Deep tech equity needs can be controlled
23 c) Deep tech investment track record is growing but it’s just the beginning
30 5. The deep tech investment model requires a new approach and new principles

The Deep Tech T

his paper is the third of a series of reports 31 a) Adopt a new approach
on deep tech. It focuses on the investment
31 I. Grow in-house deep tech knowledge and build an ecosystem
dynamics of deep tech.

Investment
31 II. Become problem-oriented
In this third report, we outline the different friction
32 III. Rethink the portfolio strategy and the value of distributed returns
sources along the investment chain as well as the
opportunities of investing in deep tech. We conclude 34 b) Embrace new investment models

Paradox: a call with a proposal on how to improve and rethink the

investor model and create new investor archetypes.
34 I. Adapt financing tools to future needs
35 II. Invest for longer

to redesign the
We will address the “why invest now” question
35 III. Adopt new investment structures
and the strategic imperatives that investors must
understand in order to seize the full potential of 37 c) Emphasize the profound and societal impact of deep tech

investor model
deep tech.
38 6. New investment archetypes required in an ecosystem of dynamized players
38 a) Deep Tech Venture Capital funds
42 b) Deep Tech Adaptive Capital
43 c) Deep Tech Venture Building Capital
43 d) Deep Tech Private Equity funds and institutional investors
43 e) Deep Tech-Savvy Corporates
44 f) Governments and Institutions
46 7. Now is the time for investors to seize the deep tech investing advantage

2 THE DEEP TECH INVESTMENT PARADOX: A CALL TO REDESIGN THE INVESTOR MODEL HELLO TOMORROW | BOSTON CONSULTING GROUP 3
 •G
 overnment & Institutions power research in when SDG and climate concerns are becoming
universities but lack (as a state-mission) sup- ever more central and become mission driven
port for deep tech ventures, to move them from for the coming existential challenges ahead for
grant to venture funding and scaling. humankind.

Despite frictions, four paradoxes arise and raise These principles shape investor archetypes in
hopes that we can rethink the investor model an ecosystem that is shifting from few players
• Deep tech offers an opportunity to rediscover and assumptions trapped in a static equilibrium,
that early venturing mindset, just when VC has to players engaged in the evolution of both the
shifted away from its pioneering roots, relying boundaries and rules of the game in a dynamically
on the power of distributed returns adaptive equilibrium:
• While investors categorize deep tech as risky, • Deep tech VCs are better suited to support
the reality is that not being exposed to deep ventures across investment stages, empowered
tech investment is riskier, as it is poised to dis- by approximate 10-15-year lifetimes, $150-300
rupt incumbents and PE portfolios million fund size, multi-disciplinary teams, a re-
• Barriers to raise deep tech funds are increasing, search engine and a wide network
consolidating capital towards the largest funds, • Deep tech adaptive capital offers a wider array

Executive
Despite investment growing to more than $60 bil-
whereas barriers to innovation and deep tech of financing tools to ventures and a new value
lion in 2020 and its massive disruption potential as
venture building are falling along with the re- proposition to LPs willing to diversify their risk
the Fourth Wave of Innovation, deep tech is hin-
combination of scientific breakthroughs profile and maximize deep tech impact

Summary
dered by the current investment model:
• Investment dry powder has never been so high; • Deep tech venture building capital (e.g., studios,
•  Difficulty in shifting from laboratory (grant/
bond returns are expected to be depressed accelerators) broadens investment opportuni-
subsidy-based) to venture funding
while deep tech offers the next wave of invest- ties for the creation and acceleration of deep
• Insufficient and unequally-spread VC funding,
ment returns tech ventures and moves them through key mo-
mostly directed to Synthetic Biology, Artificial
ments of truth, growing deep tech deal flow and
Intelligence and Advanced Materials, and domi-
To solve these paradoxes, it is a prerequisite to signaling new opportunity niches
nated by US ventures
refra­me and articulate the narrative for deep tech • Deep tech PE funds have a higher value propo-
• Paradoxically, investment “dry powder” is reach-
investment, and share it widely across ventures, sition on growth of ventures or diversified pro­
ing record levels at $1.9 trillion across PE, VC and
direct investors and their LPs: ject financing, and can benefit from vertical in-
Growth money and is at risk of the depressed
• Deep tech market and technology risks are high, tegration; Sovereign Wealth Funds can enrich
returns of bonds and safe investments, pushing
but, once the early science risks have been elim- their portfolio as trusted investors in deep tech
investors towards higher risk-adjusted invest-
inated in the laboratory, they can be mitigated and contribute to societal transformation
ments
by shifting to a problem-market orientation, ac- • Deep tech-savvy corporates act as go-to-mar-
celeration of DBTL cycles, design to value and ket accelerators to catalyze their industry’s eco-
Both the deep tech-based battle against climate
cost and defensible IP systems while validating deep tech business
change and Sustainable Development Goal (SDG)-
• While deep tech ventures require higher early models through a venture client model
supporting progress are being impeded due to
dilutive equity compared to digital, it remains •  Governments and institutions provide strate-
frictions along the investment chain, fueled by
controlled on average over time, as revenues gic stimuli, impacting on R&D funding, seed-
mindset paradoxes and investment model biases:
from the first commercialized product enable ing provocative grand challenges, establishing
• VC funds are structurally unfit (lifetime, size, in-
ventures to switch to non-dilutive instruments deep tech hubs and clusters to build the future
centives) to invest in deep tech, relying on the
• Deep tech investment activity is already grow- knowledge workforce needed to scale the mar-
traditional blueprints of ICT (high market risk,
ing with billions invested, unicorn valuations, ket, provide blended finance, emerging talent
low technology risk) and Pharma / biotech
corporate M&A, and is maturing, with sovereign production and matching, and signaling drum-
(high technology risk, low market risk) and they
wealth funds investing directly, most tradition- beat investors
often lack the expertise needed to understand
al funders see the swells but misdiagnose the
advanced science, engineering risks and to sup-
coming wave deep tech represents Deep tech investing presents a unique opportunity
port ventures
for investors as well as a moral imperative
• Part of the VC landscape has lost its original
The deep tech investor model is emerging along • Deep tech addresses massive untapped mar-
“venture” mindset and has ended up relying in-
three design principles: kets (e.g., quantum, nature co-design)
stead on the power of distributed investments
• Adopt a new approach: growing in-house know­ • The deep tech “tax” is lower than ever (e.g., low-
• Deep tech remains outside the risk profile and
ledge and building a large ecosystem to support er tech costs, descaling infrastructure)
deal flow of most PE funds, despite the high risk
ventures, acquiring a problem-market orienta- • Now is the time to seize a first-investor advan-
of disruption to their portfolio companies by
tion mindset favoring risk mitigation over risk tage, to avoid missing the exponential wave
these new technologies
minimization, and rethinking the portfolio strat- • We estimate that deep tech investments could
• LPs remain risk-averse towards deep tech, pre-
egy thus reshaping the distribution of returns exceed $200 billion by 2025 if this new investor
ferring to invest in “big names” and the largest
• Embrace new investment models with adapted model (and ecosystem) is mobilized into action
funds
financing tools, larger funds with possibly lon- • Investors have a critical part to play in support-
• While at the pointbreak of the innovation wave,
ger timelines, and new investment structures to ing in parallel all the breakthrough solutions that
most corporates are not as well-equipped as ICT
support it. alone can meet the world and society’s most in-
/ PharmaCos to be deep tech-savvy and digest
• Emphasize the profound SDG and societal im- tractable problems
external innovation
pact deep tech ventures aspire to have at a time

4 THE DEEP TECH INVESTMENT PARADOX: A CALL TO REDESIGN THE INVESTOR MODEL HELLO TOMORROW | BOSTON CONSULTING GROUP 5
 While there is no such thing as a “deep” technology, Imagine it is the early 1980s and the PC and biotech
successful deep tech ventures all share a unique ap- revolutions are starting to get traction… At that
proach and differentiate themselves with four main time VCs provided the steppingstones to activate
attributes1 (see our report Deep Tech: The Great the disruption. Venture capital pioneers from the
Wave of Innovation) 1960s-1980s invested in science and technology
• Successful deep tech ventures are problem-ori- companies: Georges Doriot (Digital Equipment
ented. Very often they work on solving large Corporation - DEC) and Arthur Rock (Arthur
and fundamental problems: 97% of deep tech Rock & Co) funded the rise of minicomputers
ventures contribute to at least one of the UN’s and microelectronics. Kleiner Perkins, then KPCB,
Sustainable Development Goals. participated in the emergence of semiconductors
• They look at using the best existing or emerging and microprocessors (Sun Microsystems) and was
technologies to solve the problem at hand. As deeply involved in the rise of the biotech industry
a result, they play at the convergence of tech­ with the creation of Genentech. These pioneers
nologies: 96% of deep tech ventures use at least were the founders of the venture capital industry
two technologies and 66% use more than one and created its forward-looking mindset.
advanced technology. They generate defensive
IP: 70% of deep tech ventures own patents in However, most VCs have found it difficult to explore
their technologies. new horizons beyond biotech and ICT/digital since
• They are shifting the innovation equation from then, and some of them have further constrained
bits alone (digital) to “bits and atoms” (physi- their investment strategy opting instead for the
cal). They build on the ongoing digital transfor- power of distributed returns. They started to de-
mation, the power of data and computation, to pend on the rearview mirror for their investment
develop mostly physical products, rather than strategy rather than looking through the windshield
software. About 83% of deep tech ventures are at what lies ahead.
building a physical product.
• They are at the center of a deep interconnect- While deep tech ventures face both high market
ed ecosystem: because of the complexity of and technological risks (mainly engineering and
the task at hand and the deep scientific back- science risks), these risks are often misunderstood.
ground needed, it is impossible for two people Deep tech ventures are often only seen as requir-
in a garage to come up with a meaningful deep ing bottomless equity funding compared to today’s
tech innovation. Some 1,500 universities and re- scalable Software-as-a-Service (SaaS) and digital
search labs are involved in deep tech, and deep ventures, paired with uncontrollable development
tech ventures received some 1,500 grants from timelines. However, these risks can be methodically

1. Introduction:
governments in 2018 alone. and systematically mitigated leading to controlled

W
hile digital transformation is accelerating development timelines and funding in the long run.
across world economies, catalyzed by the Deep tech has the potential to impact the world In addition to the approach embraced by deep tech
as fundamentally as the Internet did and is leading ventures, a new investment model should be es-
the great wave
Covid pandemic and led by the GAFAMs,
BATXs (tech giants including Google, Apple, Face- the fourth wave of innovation. The first wave tablished that is a better fit with the unique charac-
book, Amazon, Microsoft, Baidu, Alibaba, Tencent, gave birth to the first two industrial revolutions teristics of the field.
Xiaomi) as well as data-savvy startups, a deeper especially through chemical inventions such as

of deep tech revolution is on the way. What we call deep tech

ventures are at the forefront of this wave of techno-
logical innovation. One of the largest constellations
the Haber Bosch process for ammonia or the
Bessemer process for steel production. The second
wave post-WWII, the information revolution, was
Investors need to grow deep tech know-how to ad-
vise and understand the landscape, adopt a prob-
lem-focused and DBTL-based approach to de-risk

innovation is
of satellites in orbit is launched by a startup (Planet driven mainly by corporate labs such as IBM, Xerox investment portfolios and offer appropriate sup-
Labs); another startup is working on building su- Parc, with high-caliber multi-disciplinary teams port (funding and timeline) to their ventures. This
personic airplanes (Boom Supersonic); others lead strongly involved in the scientific community, doing new breed of deep tech investors should bridge the
basic research, among which came the revolution capital gap and help bring deep tech ventures more
coming, but
the synthetic biology revolution (Ginkgo Bioworks,
Zymergen); more of them are revolutionizing food of semiconductors. The third wave, the digital easily through the funnel, while exploring different
by cultivating cell-based meat (e.g., Memphis Meat) revolution, saw the decline of corporate research, exit options including M&A by deep-pocketed and
or through precision fermentation (e.g., Impossi- and the emergence of small disruptive firms, backed ideally “deep tech-savvy” corporates. In parallel,

the current ble Foods), just to mention a few. Some even have
ambitions to unlock the power of atoms: Common-
wealth Fusion Systems and Seaborg Technologies
by venture capital, defining a Silicon Valley model,
focusing on Internet-based ICT/digital giving birth
to Apple, Google, Alibaba, and in biotechnology to
20% of the 2050 target for reducing greenhouse
gas emissions (to bring global warming to a 2°C
target –not even 1.5°C) cannot be achieved with

investment
are planning to build the next small-size nuclear Genentech. US governmental agencies like DARPA, conventional solutions. After a decade of frenzied
(fusion and fission respectively) reactors by 2025, NSF and NIH were no strangers to the last two VC activities in digital, venture capital needs to
D-wave is developing quantum computers and ​Sila waves. While the innovation engine is seizing and confront head-on the deep tech opportunity stand-
crystallizing over ICT and biotech, the fourth wave is ing in front of it, much needed for our battle against
model is broken
Nanotechnologies uses nanoparticles to improve
Lithium-ion battery capacity. now building with deep tech and nature co-design. climate change and for a sustainable future.

1. N
 ote: deep tech is still a nascent terminology, there are still
multiple definitions for deep tech and no single consensus

6 THE DEEP TECH INVESTMENT PARADOX: A CALL TO REDESIGN THE INVESTOR MODEL HELLO TOMORROW | BOSTON CONSULTING GROUP 7
 Exhibit 1

Exhibit 1: deep tech investments quadrupled between 2016 and 2020

Deep tech total investments
Deep tech total investments in start-ups and scale-ups ($B)
in start-ups and scale-ups ($B)

x4

62
51 56

30
15
Exhibit 2

2016 2017 2018 2019 2020

Exhibit 2
Note: investments include private investments, minority stakes, initial public offerings, and M&A; ~25-30% of undisclosed transactions
Source: Capital IQ, Crunchbase, Quid, BCG Center for Growth and Innovation Analytics, BCG and Hello Tomorrow analysis

100 40

Exhibit 2:Average
average transaction
amount per amounts of deep tech private investments
Medium amount per are rising
private investment ($M) private investment ($M)
75 30
100
Average amount per private 40
Medium amount per private
Average amount per Medium amount per
investment ($M) investment ($M)
private investment ($M) private investment ($M)
50
75 20
30

25
50 10
20

2. Despite D
eep tech investment is on the rise: disclosed 0
25
2016 2017 2018 2019 2020
0
10
2016 2017 2018 2019 2020
funding amounts increased from about $15
billion in 2016 to more than $60 billion in 2020 0 0

growing funding,
(Exhibit 1). Similarly, when looking at private invest- 2016 2017 2018 2019 2020 2016 2017 2018 2019 2020
ments, transaction amounts rose from $13 million to Exhibit 3
$44 million on average, fueled by the acceleration Advanced Materials Artificial Intelligence Synthetic Biology All technologies
of synthetic biology (Exhibit 2), and transactions

deep tech
Note: ~25-30% of undisclosed transactions
involving corporates among investors rose from $5
Sources: Capital IQ;Advanced
Crunchbase; Quid; BCG Center
Materials for Growth
Artificial & Innovation Analytics;
Intelligence Synthetic BCG and Hello Tomorrow
Biology Analysis
All technologies
billion in 2016 to $18 billion in 2020 (Exhibit 3). Private investments with corporates
Exhibit
among the3: private investments
investors ($B) in deep tech involving corporates are on the rise
suffers from a 18.3

capital gap with

Private investments with corporates
among the investors ($B) 14.0 7.1
12.9

insufficient and
3.0 1.7

9.4

imbalanced
Scale-ups
2.1
Start-ups

investment
5.1 11.0 11.2 11.2
0.7
7.3
4.5

2016 2017 2018 2019 2020

Note: ~25% of undisclosed transactions

Sources: Capital IQ; Crunchbase; Quid; BCG Center for Growth & Innovation Analytics; BCG and Hello Tomorrow analysis.

8 THE DEEP TECH INVESTMENT PARADOX: A CALL TO REDESIGN THE INVESTOR MODEL HELLO TOMORROW | BOSTON CONSULTING GROUP 9
 Long-term interest rates (%)

Nevertheless, deep tech ventures experience issues In addition to this funding gap, deep tech invest- Exhibit 5: long-term interest rates decreased to record-low levels
moving from grant funding to equity. As shown by ment is unevenly distributed across sectors. Fol- 8
Different Funds, almost 50% of grant-funded deep lowing the previous innovation focus on biotech
tech ventures require several rounds of grants be- and ICT / Digital, deep tech ventures in Artificial 7 Long-term interest rates (%) France
fore failing or succeeding at attracting VC funding. Intelligence and Synthetic Biology collected two- 6
This is confirmed in our latest BCG and Hello To- thirds of deep tech investment in 2020 (Exhibit 4), Germany
morrow survey, 41% of deep tech ventures state thus leaving only one-third to the remaining hetero- 5

that “there is more security with grant funding than geneous and vast population of deep tech startups. Italy
4
with equity funding” (Exhibit 7). Synthetic Biology itself has been the fastest grow-
ing technology segment with a CAGR 2016-20 of 3 Japan
61% (after Quantum Computing).
2
United Kingdom
1
United States
0
Exhibit 4: deep tech investment is unequally
Exhibit 4spread with around 80% accounting for
-1
Synthetic Biology, Artificial Intelligence and Advanced Materials
Deep tech total investments by 0,2 61,8
2008 2010 2012 2014 2016 2018 2020 2021
Deep tech totalin
investments by 0,5
technology 2020 ($B) 4,5
Source: OECD
technology in 2020 ($B) 5,2 Exhibit 6 Exhibit 6
8,2
9,6
Exhibit 6: capital raised through SPACs boomed in 2020, mainly driven by the US
33,6 IPOs (20-YTD) by stock exchange
IPOs (20-YTD) by stock exchange
Capital raised throughraised
SPACsthrough
by regionSPACs
in B$ by region in B$ 3x Euronext, 1x DB
~80% of total
Capital
Capital raised through SPACs by region in B$ 3x Euronext, 1x DB
484 NSYE + NASDAQ
484 NSYE + NASDAQ
investments
Europe RoW US
Europe RoW US
83
~2/3 of total 83
investments

74
74
2 2 2 2

Synthetic Biology Artificial Advanced Drones & Photonics & Quantum Blockchain Total
intelligence Materials Robotics Electronics Computing

CAGR
61% 27% 48% 23% 17% 115% -10% Various SPACs with EU
2016-20 79 Various SPACs
70 79 listed in US
focus
focus listed in U
70

Note: investments include private investments, minority stakes, initial public offerings, and M&A; transactions mapped on several
technologies were split equally between these technologies; ~25-30% of transactions remain undisclosed 12
Source: Capital IQ, Crunchbase, Quid, BCG Center for Growth & Innovation Analytics, BCG and Hello Tomorrow analysis 12
8 9
8 9
2
2

Deep tech investment is also uneven at the regional This dry powder is at risk of depressed returns. Low 2016 2017
2016 2018
2017 2019
2018 2020
2019 YTD
2020 YTD
level where the US comprises almost 75% of total (or even negative) interest rates are driving inves-
Note: YTD, year to date is March 23rd, 2021
investments. However, when looking at private in- tors away from bonds and safe placements (Exhib- Source: S&P Capital IQ, BCG analysis
vestments only, Europe and China have grown fast- it 5), towards higher risk-adjusted return pockets
er than the US with respective CAGRs 2016-20 of (equity and stocks). As a matter of fact, the num- While part of this dry powder is actively reserved able to promote a business that could be several
49%, 34% and 28%. ber of active PE investors grew by CAGR 11% over for follow-up rounds, investors have not yet been years out from today, a significant share of them
the past 10 years2 and the S&P 500 annual return able to fully match this excess of available capital first fail because they ran out of money and less
But it’s not because there is a dearth of available over 2009-2019 reached 13.6% according to Berk- with the funding needed by deep tech. Lux Capital because of market risks. Hopefully, this has been
capital. Paradoxically, investment “dry powder” is shire Hathaway (including earnings from dividends managing partner, Peter Hebert analyzes the cap- improving over the past years thanks to deep tech
at record levels (totaling $1.9 trillion2 in Decem- paid by stocks). The most recent symptom of large ital market situation as follows: “near-zero inter- ventures proving their successes to investors”. Fail-
ber 2020, of which $1.1 trillion is in Private Equity pools of available capital is the boom in SPACs est rates have moved trillions of dollars to equities ure to consider a significant capital reallocation not
and $331 billion Venture Capital and $250 billion is (Exhibit 6). on the risk curve looking for better performance, only risks capital missing the rewards of the next
Growth Capital). These record sums are driven by and venture as an asset class has been among the wave of innovation: it also risks slowing down the
PE & VC funds raising capital from LPs more easily greatest beneficiaries. But unless deep tech ven- progress of humankind and our race against time to
than ever before. tures have charismatic founders like Elon Musk combat climate change.
2. Preqin

10 THE DEEP TECH INVESTMENT PARADOX: A CALL TO REDESIGN THE INVESTOR MODEL HELLO TOMORROW | BOSTON CONSULTING GROUP 11
 •T  heir mindset crystallized along the two arche- funds versus $148 million for non-deep tech funds.
types of the previous innovation wave: biotech They lack the size to provide relevant financial
(high technology risk, low market risk) and ICT support and their partnership ecosystem may be
(low technology risk, high market risk) limited. The deep tech investment landscape would
• Deep tech teams inevitably comprise academic benefit from more partners who are capable of both
scientists and too few funds have suitably qual- understanding and funding high-potential projects.
ified experts in-house or a network of advisors,
who can both understand the science and com- Since traditional references do not apply (e.g.,
municate well with the team. According to our clinical trials gates in biotech, customer base /
latest survey, 81% of deep tech ventures con- revenue model / burn-rates in SaaS) or have not
firm that “investors on average lack scientific / yet been properly defined by funds, ventures may
engineering expertise to assess deep tech po- miss milestones and KPI targets because time-
tential” (Exhibit 7). Those issues are especially to-market expectations and business models are
important in the early stages when there is no different, often based on physical products and
or limited commercial traction to compensate. B2B channels. This lack of framework also limits
Because the commercial dynamics of deep tech investors in correctly assessing the deep tech
are not the same as, for example, digital plays, ventures valuations.
VCs struggle to see the true value of a venture’s
IP, technological (i.e., scientific and engineering) But the issue isn’t just that the investment blueprint
risks and opportunities. Investors have issues needs to change: it’s also a matter of finding a
scoping deep tech. Both nascent and complex, diffe­rent mindset.
deep tech lacks an articulated narrative and, as
a result, suffers from a void of understanding or Historically, first business angels and then VCs were
inaccurate reputation. investment entrepreneurs focusing on breakthrough
science, joining efforts to mitigate its risks and
Exhibit 7: 81% of deep tech ventures build innovative businesses. Influenced by digital /
SaaS success stories making the headlines, the VC
indicate that “investors on average lack
industry has seen a progressive mindset change.
scientific  / engineering expertise to

3. Frictions
O
Exhibit 7
bstacles exist at every point in the invest- assess deep tech potential” Short fund lifetime may force managers to invest
ment chain, involving all players in the in- Which of the following statements about too quickly and exit too early in order to meet LP
vestment ecosystem: Venture Capital and fundraising do you agree about
with fundraising
as a deep do tech expectations, sometimes before an investee’s full

appear along
Which of the following statements you agree
Private Equity funds, Limited Partners (LPs), Cor- entrepreneur
with as a deep tech?entrepreneur
(% of deep tech
? (% ventures)
of deep tech ventures) potential is realized. Since the 2000s, the much
porates, Govern­ments and Institutions. lower initial capital needed for new digital ventures
Investors on average lack scientific / engineering
81% made it much cheaper, and faster, to test their

every link of
expertise to assess deep tech potential.

a) Venture Capital funds potential. An exponential digital wave flooded

deal flows. Funds were left with limited time to dig
There is a limited interest from
There are obvious reasons why frictions exist investors regarding deep tech.
48%
into the value proposition of each venture. Some
among standard, generalist funds but deep tech turned from “active-seeker” mode to passive “deal-

the deep tech funds have their own issues too. Generalist funds
which have not yet invested in deep tech can be
There is more security with (non-dilutive)
grant funding than with equity funding.
41%
receiver” mode, as funds with successful deal
reputations often attracted deal-flow automatically.
reluctant to do so for several reasons: Trusted and copy-pasted models of the digital era

investment
Early-stage deep tech entrepreneurs
• Most Venture Capital (VC) General Partners have limited exposure to investors.
33% (e.g., “the Amazon of”, “the Deliveroo of”, “the
(GPs) are used to the structure of large and Instagram of”) became shortcuts to assess the
“safer” funds, comforted by fixed management Pitching to investors is a more difficult
23%
potential of a venture.

chain, while
task than asking for grants.
fees (of one or two percent) based on total As-
sets Under Management (AUM). The larger the Consequently, two opposing VC views started to
It is difficult for deep tech ventures
fund, the bigger the fees for GPs, with associat- to find suitable applications / markets.
16% prevail. Some, like Founders Fund (c.60 ventures
ed economies of scale. Moving away from their in-portfolio for a c.$5 billion fund size), stood for

uncovering four traditional investments could limit their ability

to attract capital from Limited Partners.
Source: BCG and Hello Tomorrow survey across 116 ventures and
investors, March 2021
selective investments in promising companies.
Others, like 500Startups (c.2,500 ventures for
• Unfortunately, most of these funds catego- c.$600 million), turned to the power of distributed

paradoxes rize deep tech as high-risk and uninvestable. If

a fund’s cycle, at ten years, is shorter than the
runway from laboratory to exit, some deep tech
“Deep tech specialized” funds have emerged over
the past years as deep tech became more in vogue.
However, they are on average relatively small: over
returns by betting on large numbers of promising
pitches and teams, hoping that at least one in ten
succeeds to compensate for the nine that don’t.
ventures can look uncommercial. According to 2010-2020, deep tech VC funds raised on average
our latest survey, 48% of deep tech ventures $96 million compared to $106 million for non-deep While performing well in SaaS / digital as a risk
agree that “there is limited interest from inves- tech funds, when including growth funds, the gap minimization approach (see chapter 5 on the prin­
tors regarding deep tech” (Exhibit 7). widens with $105 million on average for deep tech ciples for a new investor model), the “spraygun”

12 THE DEEP TECH INVESTMENT PARADOX: A CALL TO REDESIGN THE INVESTOR MODEL HELLO TOMORROW | BOSTON CONSULTING GROUP 13
investment strategy doesn’t work for deep tech, are reinventing manufacturing processes from con- therefore blocking deep tech funds growth, which arms need to be equipped to perform deep tech
where time and expert analysis are required to sumer products to industrial goods. Quantum tech- then have to rely on numerous smaller investors. due diligence and support ventures as a VC investor
complete proper due diligence and select the best nology will accelerate drug and protein discoveries (not just provide funding). Next, cooperation can
ventures based on evidence, science, technology, to treat and heal people, unlock complex network Nevertheless, not all LPs have the same approach fail if corporates do not have the appropriate talent
market potential and team composition. In addition, optimization problems such as those in mobility. towards deep tech investment: and structure to work with them and leverage
the standard mindset of maximizing quick returns What companies are ready for it? • Pension Funds, and more specially closed ones, their technologies. Successful integration can be
raises risks of constraining the venture towards are committed to paying benefits every month. difficult to achieve, due to cultural differences.
short-term potential thereby missing out on high Ultimately, there is only one thing riskier than With such responsibilities, they need to focus Incumbents need to overcome the R&D “Not
return opportunities that lie in the long term. investing in deep tech and that is, not being on selected assets classes (a few hundred Invented Here” syndrome, which isolates and
exposed to deep tech investment. million minimum ticket), with a majority of rejects disruptive acquisitions that challenge the
The second order risk of spread-betting and hoping low-risk liquid assets, and few higher-risk less- status quo. Corporate R&D activities are often
that unicorns will compensate for losses, is to fall
into the “too big to fail” spiral. As demonstrated
c) Limited Partners liquid assets (2-5 years), often with a thematic
investing angle (e.g., energy, autonomous
focused on incremental development rather than
major disruption. Incumbents are at the breakpoint
by cases such as Theranos or WeWork, the stakes Similarly, LPs are still reluctant to invest in deep vehicles) of the disruption wave. And finally, by waiting until
are so high that investors may be blind to endemic tech funds due to a perceived mismatch with their • Sovereign Wealth Funds, if not responsible for a venture is market-proven, corporates often pay a
weaknesses (especially uncontrolled cash burn- expected risk/reward profile. They are often neither pensions, balance state strategic priorities (e.g., hefty valuation premium.
rates or technology challenges) or adopt lax sufficiently qualified to understand the science innovation funding, ESG, strategic industries),
governance. behind deep tech nor, as a result, exposed to it.
In some cases, their network includes risk-averse
long-term capital support and liquidity (e.g.,
stock trading, private equity)
e) Governments and
b) Private Equity funds intermediaries such as banks that will dissuade LPs • Family Offices would be good candidates for Institutions
from deep tech investment, or just don’t have the patient capital (10-20 years) as long as they are
On the Private Equity (PE) side, deep tech often right narrative to convince them. guaranteed exit opportunities. Family Offices, Often underestimated as players in the funding
remains outside their investment profile, perceived especially in Europe, first think in terms of landscape, Governments and Institutions form the
as early-stage only and incompatible with their LPs tend to invest in the largest and best-known future generations and legacy, instead of a 10 + backbone of deep tech investment (but not only
skillset. funds and are conservative in their choices. 2-year timeline. However, each family office has deep tech). As conceptualized by Bill Janeway in his
According to Mountain Ventures, only 20% of LPs a different investment philosophy, not always book Doing Capitalism in the Innovation Economy,
At the risk of sounding like a prophet of doom, surveyed invested in a fund they had known for matching deep tech. innovation sits in the middle of a three-player game
history tells us to take heed. PE funds need to invest less than a year. The bias is backed by the fact between markets, speculators and the state. But
in deep tech to anticipate the inevitable disruption
in-play and to diversify their portfolio risk, by either
that the largest funds have proven to be safer: the
spread between top-quartile and median net IRRs
d) Corporates the state plays a specific two-sided role which
should not be forgotten: it facilitates innovation and
divesting condemned assets or investing in deep has steadily risen over the past decade3, explaining At the end of the investment chain sit corporates, it must cope with the consequences of innovation.
tech ventures. The option to simply “buy” this as a why less well-known funds have been chronically whose importance in the investment ecosystem More specifically on the facilitation side, it is
service on the market has two major disadvantages: undersubscribed. There is also a strong network has grown over the last five years. Post-WWII, the public capital that disburses grants to early-stage
first, the capabilities needed to understand and component where LPs tend to invest and reinvest in corporate labs of IBM, Bell or even Dupont, played a ventures, making government and institutions
apply deep tech are far from plentiful, and second, investment managers whom they are close to and crucial role in driving innovation and funding it. But, the highest risk-takers. Leading-edge research
such an approach would fail to capitalize on they trust. today few corporates have the necessary internal at the early stage is fraught with uncertainty, and
important knowledge by combining it with the R&D capabilities and agility to apply the deep tech off-putting to traditional VCs looking for a more
internal investment process. The dominance of the biggest players is reinforced approach. According to our latest survey, 47% of advantageous and efficient risk/reward profile. Bill
as LPs first look at a fund’s track record and founders’ deep tech ventures recognize that “corporates lack Janeway summarizes it as follows: “efficiency is the
PE funds would do well to remember the stress names, instead of its approach: according to agility to work with deep tech ventures”. There are enemy of innovation”.
caused by digital. Many of them saw their assets Mountain Ventures, 60% of LPs say that track record exceptions: for example IBM, Honeywell or Atos on
threatened by digital attackers who exploited their is the number one criterion. Harvard Business School quantum computers and hardware, Microsoft on That is not where it ends: public bodies often
hidden weaknesses, by reinventing customer jour- (HBS) has analyzed the impact of this on venture data storage and computing leveraging DNA and subsidize specific industry segments to provide
neys, improving performance with data analytics, capital as a whole: 5% of venture capital firms raised holographic technologies, Bayer launching Joyn benign market conditions, reducing price and cost;
and leveraging asset-light business models. The half of the total capital between 2014 and 2018. Bio, a joint venture with Ginkgo Bioworks aiming they provide university laboratories and other assets
dominating question was: “is my asset an Uber or at replacing fertilizers with genetically engineered to help researchers; they act both as regulators and
a taxi company? Will it be able to seize the bene- This trend is reinforced by the growing buyout fund microbes. Others compensate by targeted political facilitators for infrastructure and project
fits of digital?” Funds need to ask similar questions size: the average buyout fund size4 rose from $700 acquisitions (e.g., Amazon’s acquisition of Zoox in finance, bringing together stakeholders such as
about deep tech and its power to rewrite the rules. million in 2015 to $1.6 billion in 2019. These top funds 2020, Hyundai’s acquisition of Boston Dynamics for banks, companies, municipalities, associations and
An additional factor underscoring the de-risking are gatekeepers and market makers, relegating deep $920 million in 2020) or investments (e.g., BASF in private investors.
potential of deep tech is the breadth of its impact tech to smaller funds, less addressed by LPs. A vicious Zapata Computing in 2019, Tyson Foods in Memphis
– most deep tech ventures solve large and funda- circle occurs when deep tech funds raise capital but Meats in 2018, Danone in Nature’s Fynd in 2019, On the one hand, governments can ignite deep
mental issues which have applications across mul- lack critical scale for follow-ons, therefore failing Volkswagen in Quantumscape in 2018, Siemens tech ventures through grants and subsidies. On
tiple industries, therefore increasing its de-risking to build a critical positive track record. A second in Lanzatech in 2014). These examples show how the other hand, it can be hard to quit the grants
potential. Synthetic biology is revolutionizing the vicious circle emerges as the largest LPs will not companies can gain a leapfrog advantage by and subsidies world and deal with the VC world:
food we eat with cultivated meat, the clothes we take a significant share in a fund (typically not more investing in market-proven ventures. more than 50% of grant-funded deep tech ventures
wear with bio-produced silk, our petrochemical in- than 10%) due to regulation or risk management, require several grant rounds before they reach a
dustry with engineered microorganisms to produce Such strategies can work but only under specific success proof point and are ready to apply for VC
3. From 3.8 pts for vintage 2006 funds to 11 for vintage 2016
biofuels, and even our medicine with mRNA vac- according to Preqin conditions. First, corporate venture capital (CVC) funding. Governments and Institutions, too, lack
cines. Advanced materials and nanotechnologies 4. Preqin

14 THE DEEP TECH INVESTMENT PARADOX: A CALL TO REDESIGN THE INVESTOR MODEL HELLO TOMORROW | BOSTON CONSULTING GROUP 15
 Exhibit 8

an efficient network and vital bridges between the investor model for deep tech: a mindset paradox, Exhibit 8: four paradoxes emerge from the current deep tech investment model
academic world and the investment world, both in a risk paradox, a barrier paradox and a funding
terms of visibility and mutual understanding. This paradox (Exhibit 8). Hidden within each paradox is How to adopt a deep tech investment orientation
How to adopt a deep tech investment orientation
means grant-funding alone can be a dead end. The a way forward that helps us rethink the deep tech
Mindset paradox VC investors have a heritage that is aligned VCs have drifted away from that heritage,
Engine, a venture fund spun of the Massachusetts investor model: with deep tech, because of their to an ICT or biotech model of distributed
Institute of Technology observed that most US • Deep tech ideally matches the very origins of longstanding interest in advanced science returns: less aligned with deep tech and its
and breakthrough technology mindset
grant funding plans fail because governments the venture capital mindset focusing on science
do not have the same to privileged access to and breakthrough problem-solving with long-
HowHow to mitigate
to mitigate therisks
the risks in
in deep
deep tech
techand seize
and its opportunities
seize its opportunities
entrepreneurs as VCs and involve them with com­ term vision (risk mitigation approach) just when
Risk paradox Investors associate deep tech with high risk Investors and incumbents are at greatest
mercial opportunities. VCs have progressively shifted away from their because of a lack of experience in assessing risk if they ignore deep tech, miss the
roots mainly relying on the power of distributed its risk and reward accurately opportunity and thus become vulnerable to
disruption
Although a number of initiatives have been returns and well-established, narrow paths of
laun­­
ched (the European Innovation Fund; the ICT and biotech (risk minimization approach)
How to establish channels for funding deep tech
Intellectual Property Financing Scheme in Singa­ • Investors perceive deep tech as risky with both How to establish channels for funding deep tech
pore, France’s Quantum National Plan, the $1 billion technology and market risks colliding with long- Barrier paradox Barriers to fundraising are expanding, with Barriers to innovation are falling, which
National Quantum Initiative Act in the US), most term and high investments and yet it is riskier large legacy funds positioned as the default will enable more deep tech ventures and
governments have not yet developed a broader not to be exposed to deep tech investment option, drawing capital away from new deep thus more investment opportunities
tech funds
policy framework for deep tech. Such policies might at all. Rather deep tech threatens to disrupt
include tax incentives, prefential loan conditions incumbents and PE portfolios, destroying value How to prioritize investment in deep tech
How to prioritize investment in deep tech
and guarantees, investment in tech hubs, and IP •  The barriers to raise deep tech funds are
licensing, for example. increasing, consolidating most capital towards Funding paradox “Dry powder” has never been so high ($1.9T) Deep tech is increasingly recognized as the
and safe investment returns are declining, future of innovation, but has not yet been fully
the largest traditional funds and few deep leading investors to accept higher risk accepted as such by investors
As Steve Blank describes in the Secret History of tech funds which grow their unfair advantage
Silicon Valley, many breakthrough technologies that whereas the barriers to innovation and deep
Source: BCG and Hello Tomorrow analysis
have been the foundations of successful ventures tech venture building are falling (e.g., DBTL
– radar, Internet, nuclear technology, GPS – were cycle times decreasing, cost of prototyping and
launched in order to serve the state- (and world-) testing are falling)
missions of beating the Germans during WWII •  The investment dry powder has never been
and later the Soviets and Koreans during the Cold so high with depressed returns from cautious
War. The US government harnessed its universities investments in safe havens and bonds shifting
and their brightest minds to win the war; in the to higher risk-adjusted investments, while deep
UK, Alan Turing developed the first computer to tech ventures lack funding and are the next
break German codes. Today, deep tech is a unique wave of investment returns, with valuations not
opportunity for governments to address the UN’s yet sky-rocketing.
Sustainable Development Goals, especially the
climate change challenge. These paradoxes have persisted due to misunder-
standings and a lack of knowledge of how deep
While all these numerous frictions clearly penalize tech ventures succeed and how to fund them. It is
deep tech investment, four core paradoxes surface time to set the record straight.
from analyzing the inadequacy of the current

16 THE DEEP TECH INVESTMENT PARADOX: A CALL TO REDESIGN THE INVESTOR MODEL HELLO TOMORROW | BOSTON CONSULTING GROUP 17
 Third, deep tech stories should cascade over the • M
 arket and science risks are overrated by
three investment levels: ventures, direct investors investors on average, while deep tech investors
(e.g., VCs), and LPs. The narrative is nurtured at disagree that “market risks are too high” at 69%
the venture level. Founders build a story to VCs (deep tech ventures typically offer a 10x better
highlighting the targeted problem and how their solution) and that “science / technology risks
technologies enable a breakthrough solution to it. are too high” also at 69% (deep tech investors
VCs also build their pitch to LPs, bringing together typically invest once the science risk has been
an investment thesis around the problems they left behind in the lab).
are willing to invest in, how they will assess the • 
Interestingly, deep tech investors are 47%
potential of ventures, through which mechanisms concerned by too high engineering risks and
money could be invested (see chapter 5). LPs are 48% by equity amount risks. Indeed, and as
the source of all funding to be unlocked for deep articulated below, investors should care about
tech ventures. LPs should also educate their peers how to mitigate these risks. Average investors
to activate funding and grow the deep tech network. are only 22% likely to anticipate these risks to be
too high, disregarded compared to market and
Our latest BCG and Hello Tomorrow survey of deep science risks.
tech investors and deep tech ventures highlights • 
Deep tech investors still confirm that “time
an asymmetry of perceptions between deep tech to market is too long” (59%) and that “there
investors and all investors on average (based on the is a lack of exit track record” (54%), despite
average investor feedback received by deep tech accelerating development cycle times and
ventures) (Exhibit 9). a growing investment track record detailed
hereafter

Exhibit 9: different risk perception between deep tech investors and the feedback
Exhibit 9
deep tech ventures receive from investors on average

D
Question to deep tech investors: what are your current perceptions about deep tech investment?

4. Create and eep tech was born in laboratories reserved

for privileged researchers operating within
a small community of experts. This breed of
I completely agree I mostly agree I mostly disagree I completely disagree

Question to deep tech ventures: based on your experience, what is the main feedback you received from investors on average?

spread an
Feedback received
deep tech pioneer is very different from Silicon Val-
ley’s entrepreneur kings. Deep tech entrepreneurs
are often scientists passionate about their technol- Market risks are Science / technology Engineering / scaling Overall equity needs Time to market There is a lack of

articulated
too high risks are too high risks are too high are too high is too long exit track record
ogy but sometimes less able to build a supporting
narrative. Among the many testimonies from sur- 100% 6% 2% 2%
12%
veyed deep tech ventures, it was acknowledged 14% 16%
that “the biggest challenge we faced was being

narrative for
38%
able to tell a story about what the tech means”. 48%
50%
30%
55% 57% 53%
First, deep tech faces a vocabulary problem, groun­ 45%

deep tech
39% 39%
ded in technicality. A pitch is very different from 44%
a thesis presentation and needs to excite even an 37% 22% 40% 22% 48%
uneducated audience. Pitching genetically-modi- 29% 25%

investment
fied nitrogen-fixing microorganisms may sound ab- 15%
6% 10% 8% 6%
struse, if not like wizardry, to investors. It becomes 0% 2%

even less engaging if it misses the end-applications Investors Ventures Investors Ventures Investors Ventures Investors Ventures Investors Ventures Investors Ventures

or the commercial opportunity and terminology.

Source: BCG and Hello Tomorrow survey across 116 ventures and investors, March 2021

Second, investors may need to read between

the lines of deep tech pitches, either beyond the
technology presentation or dig into the unsaid.
Indeed, scientists and engineers are usually very
conservative about data proofs and evidence:
they may keep additional opportunities which are
only 90% backed by evidence and experiment to
themselves. Investors need to adjust their evaluation
strategies accordingly.

18 THE DEEP TECH INVESTMENT PARADOX: A CALL TO REDESIGN THE INVESTOR MODEL HELLO TOMORROW | BOSTON CONSULTING GROUP 19
 Most investors know very little about deep tech by David Grimm, Investment Director for the II. Design-Build-Test-Learn (DBTL) III. Design to value and cost
and what they do know can be fraught with UCL Technology Fund. In deep tech, market and Despite the high risks, one deep tech entrepreneur Market and engineering risks are further mitigated
biases or clichés, putting them off. According to technology risks are often integrated, but so are stated that he and his colleagues were “not risk when manufacturing beyond the prototype is
Prime Movers Lab founder, Dakin Sloss, “There are the ways to mitigate them. tolerant but rather risk averse”. They navigate approached with a design to value and cost strategy.
three big myths about [...] deep tech: that it takes through uncertainty in a methodical way. Although It frontloads the cost analysis into the design
longer, that it’s more capital intensive, and that it’s I. P
 roblem-oriented mindset and deep tech investors fund breakthrough scientific phase, while making sure that the value (better
higher risk”. On top of the problem solved and the discoveries, they are unlikely to take science risks and possibly cheaper product) is delivered, rather
technologies leveraged in solutions, the narrative
problem/market-fit which are mainly mitigated during the laboratory than addressing them later. Practically, this means
to investors should clarify the de-risking approach Successful venture-backed, deep tech teams discovery phase, funded by governments and mapping the projected cost curve decrease to the
of deep tech, reassure on the control of its equity must address a real problem – a need, a market. philanthropists, and are IP-protected. CEO and specific applications or situations of the problem
needs and emphasize the existing track record This focus on the problem acts like a compass to Managing Partner at The Engine, Katie Rae clarifies where the highest value can be delivered. This
showing that deep tech investment is dynamic and guide the entrepreneur through the valley of death, further that “the frontier between science and way deep tech ventures can minimize the market
that exit opportunities are real. ensuring that there is market-fit at every stage engineering risks is blurry especially in the early adoption risk. SILA nanotechnologies, for example,
of development. To borrow from Seth Bannon, stages, so that deep tech (Tough Tech in the words was able to develop new battery technology using
founding partner at Fifty Years, every deep tech of The Engine) investors have to believe that they globally available components for piloting and bulk
a) D
 eep tech market and outcome should pass the “Mr Burns Test” – to are substantially only taking engineering risks and synthesis reactors that scale efficiently. Adoption
technology risks are high, “build a product that Mr Burns (the prototypic self-
absorbed, egoistic, greedy capitalist) would buy not
not pure scientific risks. Whenever science risks
inadvertently resurface, there are still opportunities
risk needs to be further anticipated when dealing
with corporate clients who could be slower to move
but they can be mitigated because it’s sustainable but because it’s the best/ for another grant funding". and adopt a new solution.
cheapest/most convenient.” Similarly, the example
Deep tech lives at the intersection of science and of climate change is too broad to be treated as a Then, the DBTL frames and accelerates the miti­ “Early win” applications can be identified upfront,
engineering: it usually involves several advanced problem; successful ventures drill down to specific gation of the engineering and scaling risks. The reaching first commercial revenues faster, proving
technologies and has a physical product as its problem roots with enough clients willing to pay DBTL approach in a deep tech context is the the value and financing the cost reduction.
outcome. It’s not an app. Successful deep tech for it, thus identifying the closest problem/market- adaptation of Lean startup methodology to deep Successful deep tech ventures improve the
ventures are not sitting in labs creating a hammer fit to tackle. As highlighted by Russell Tham, Joint tech, and brings together multi-disciplinary teams trajectory (shrinking the time) to profitability if
looking for nails, but rather focusing on the world’s Head, Enterprise Development Group & Strategic from science, engineering and design to maximize design to value and cost is embedded in the first
most intractable problems in domains such as Development at Temasek, investors need to problem solving and de-risking. commercial pilot.
hunger, climate change, pollution, sustainable prioritize ventures with a “strong focus on the go-
energy. Investors may well feel that, given the to-market stakes and the business model, not just Having targeted a problem, the team uses DBTL IV. Deep tech IP
complexity of the problems many deep tech the technology alone”. cycles to iterate and experiment fast. More
ventures address, and the immaturity of their importantly, deep tech teams prioritize in the cycle Because the barriers to entry for deep tech are set
emerging technologies, they are inherently risk- One key differentiator of deep tech ventures is their the most critical risks to secure MVP delivery. As much higher than for digital ventures (while barri-
laden, but these fears are overstated (Exhibit 10). ability to propose a ten-times-better product, not the DBTL cycle rejects sub-optimal pilots, activity ers to run DBTL cycles are falling), they offer a high
Yes, “deep tech is hard” as confirmed in Sifted just a 10% improvement. It is a strong de-risking and capital is directed constantly at mitigating the measure of protection from competition risk, lim-
lever for many ventures once the problem is well- most significant risks upfront, building an all-in-one iting the costs to outcompete rivals. Besides pat-
scoped, but scoping it requires a major effort. A “full-stack” solution, as Eclipse VC describes it. ent protection, scientific complexity and engineer-
Exhibit 10: market and technology risks 2020 HBS survey estimates that problem orientation ing difficulty together offer the investor insurance
Exhibit 10
of deep tech investment can be mitigated and market research are a top contributory factor On the one hand, DBTL cycles lead to continuous against a proliferation of me-too lookalikes that can
to high valuation ventures: “38% of low valuation learning and design adaptation to improve the steal the market. Closing the door behind patented
Market risk
Market risk startups completed at least six months of customer technology, de-risk the solutions, and accelerate deep tech and technology advantage is relatively
research before launching their products, compared time-to-market (and therefore earlier revenues) easy.
High
Prospective to 53% of high valuation counterparts.” Similarly, thanks to falling technology barriers and costs. On
deep tech
venture
(high risks)
“no market need” is the main reason why start-ups
fail5.
the other hand, they will improve the product to fit
customer needs.
b) Deep tech equity needs
can be controlled
Typical ICT
ventures Problem-orientation • Biofoundries like Ginkgo Bioworks or Doulix re-
Design to value and cost duce the time to synthetic biology DBTL cycles
Acceleration of DBTL1 cycles from months to weeks Some investors will argue that even if the market
Intellectual property protection •  Commonwealth Fusion Systems focused on and technology risks are mitigated, deep tech still
Deep tech the fastest and least expensive part to improve requires high initial investment. This is generally
ventures reactors, i.e. the magnets instead of the plasma true: compared to SaaS, for example, deep tech has
physics, and shortened the DBTL cycle from a higher capital needs at the early stages. However,
one-year average to one month. it is also true that the lifetime capital needs of a
Traditional • It is not only learning from failure that helped deep tech investment may be no higher than its
investor focus
Typical Biotech SpaceX but also failing early: the first SpaceX counterparts in other fields.
ventures launch failed in 2006. As a result of lessons
learned, SpaceX realized its first successful On the one hand, SaaS ventures typically have low
Low Technology risk
(science & engineering) launch in 2008, only six years after the startup’s early-stage equity needs but for some of them it
Low High
founding. can blitzscale due to high cash burn rate as they
go to market, acquire and retain customers below
1. Design Build Test Learn; Source: BCG and Hello Tomorrow analysis 5. according to CB Insights (2019)

20 THE DEEP TECH INVESTMENT PARADOX: A CALL TO REDESIGN THE INVESTOR MODEL HELLO TOMORROW | BOSTON CONSULTING GROUP 21
the cost of delivering services to them (e.g., Uber, Prime Movers Lab shared its experience in deep Exhibit
Exhibit 12: deep tech investment 12
experience Exhibit 12 larger seed rounds
recommends
WeWork, Palantir). On the other hand, successful tech investment (Exhibit 12): it would be more
deep tech ventures require higher early-stage equity advantageous to raise more in one seed round
funding but once their deep tech product has been (c.$5-$8 million) than two smaller seed rounds Seed 1 + Seed 2 strategy
Seed 1 + Seed 2 strategyLarger Seed StrategyLarger Seed Strategy
effectively de-risked and designed to value and (c.$2-$3 million). The investment sweet spot for
cost, equity needs on average are controlled over deep tech is earlier, but also higher: with equivalent (two rounds of $2-3mm(twoeach)
rounds of $2-3mm (one
each)round of $5-8mm)
(one round of $5-8mm)
time (Exhibit 11). As confirmed by several ventures dilution, this approach combines the opportunities
interviewed, “once running, the need for outside of dealing with fewer investors, condensing raising
capital will decrease”. Also, revenues from the first effort to free up time for execution and getting all
Dilution Dilution 15-25% each round, but adds
15-25%
up toeach
30-40%
round, but adds upExpect
to 30-40%
30-40% upfront dilution
Expect 30-40% upfront dilutio
commercialized product enable a shift to project resources for de-risking to Series A. By receiving altogether altogether
financing (see section 5. b) i. Adapt financing tools relatively high funding early, the venture can meet
to future needs). upfront research and infrastructure costs, and
accelerate its development. Earlier and Cap higher
Table Cap Table More distributed, more names
Moreofdistributed,
funds, more names of1-2funds,
larger names, Strategic1-2
angels
larger names, Strategic ang
In addition, deep tech ventures evolve in such a funding is a (necessary but not sufficient) condition more voices + differing incentives
more voices + differing incentives
complex and constrained environment that there to set the venture for faster success and revenues
is possibility of wasting capital. It forces them to from the first commercialized product, unlocking
build a de-risking plan which will prioritize most non-dilutive project financing. Structure Structure Often series of SAFEs/notes
Often series of SAFEs/notes Typically priced round Typically priced round
critical risks and minimize spending while finding
the closest pools of revenues.
Exhibit 11 Add another 4-6 months toAdd
raise
another
Seed 2:4-6 months to raise
More
Seed
planning
2: work / modeling
More required
planning work / modeling
Time Time
huge distraction when focus
huge
is needed
distraction
on when focus is upfront;
needed onbut then entrepreneur
upfront;
can but
focus
then entrepreneur
execution execution heads down on execution heads down on execution
Exhibit 11 - private investments in deep tech are higher than digital in the first years
but remaincumulated
Average controlled private
on average
investments
per year
Average for a venture
cumulated ($M)
private investments per year for a venture ($M) Series A Series A VC flag: founders couldn’t VC
reach
flag:
milestones
founders couldn’t reach milestones
Sets up well for Series A Sets up well for Series A
as planned with original round
as planned
(i.e. ‘didn’t
with original round (i.e. ‘didn’t
do what they said they would’)
do what they said they would’)
225

200 Digital
Note: SAFE stands for Simple Agreement for Future Equity
Source: Prime Movers Lab
175

150
Deep Tech
125 c) Deep tech investment billion, M&A is an important exit option for deep
tech: for corporate market leaders, acquisition
100
track record is growing opportunities in deep tech are strategic priorities
but it’s just the beginning to avoid suffering the same shocks that digital
75 inflicted. According to the Hardware Club, 47% of
Lastly deep tech suffers from a lack of information hardware ventures anticipate an acquisition as an
50 and communication. Obviously, we are just at the exit versus only 17% that anticipate an IPO.
beginning of the fourth wave of innovation and its
25 track record is only now starting to build. As Exhibits Beyond dynamic deep tech funding and corporate
Years since 13, 14 and 15 show, while all eyes have been focused M&A, deep tech investment is gaining credibility
0 first private on the next Uber or Deliveroo, hundreds of millions and becoming more mature (Exhibit 14): Sovereign
Years since
investment
first private of dollars in smart money has been pouring into Wealth Funds and Pension Funds trust deep tech
1 2 3 4 5 6 7 8 9 investment in venture
in venture deep tech, and quietly creating unicorns, successful by investing directly in ventures or in venture capital
corporate and IPO / SPAC exits. According to the firms (Rhode Island public pension fund broke
VC Fifty Years, for example, they have increased the with precedent and invested directly $20 million
Ventures per year with disclosed transactions
Ventures per year with disclosed transactions equity value of their portfolio by at least $3 billion, in DCVC in 2020), M&A is starting between deep
with at least eight companies enjoying valuations tech ventures themselves and VCs demonstrate
over $100 million. It’s not that there are no success successful exits. MIG is the most recent exit with
28725 10217 8217 5871 4040 2715 1712 1106 712 stories in deep tech: it’s that the stories are not meaningful returns, distributing €600 million in
being told. dividends to LPs after selling 5% out of its 6% of
2346 674 656 473 331 238 136 103 66 BioNTech shares (with the share price gaining
While between 2015 and 2019, the aggregated IPO 650% since IPO).
exit value6 decreased from $466 billion to $308
Note: the number of ventures per year does not represent a funnel analysis as ventures do not raise every year; Sources: Capital IQ,
Preqin, Crunchbase, BCG and Hello Tomorrow analysis 6. Preqin

22 THE DEEP TECH INVESTMENT PARADOX: A CALL TO REDESIGN THE INVESTOR MODEL HELLO TOMORROW | BOSTON CONSULTING GROUP 23
Exhibit 13: deep tech investment track record gathers billions in funding and unicorn
valuations

Note: selected examples, not exhaustive

Source: Crunchbase, Capital IQ, press search, BCG and Hello Tomorrow analysis

24 THE DEEP TECH INVESTMENT PARADOX: A CALL TO REDESIGN THE INVESTOR MODEL HELLO TOMORROW | BOSTON CONSULTING GROUP 25
Exhibit 14: illustration of investment journey of deep tech ventures
with selected examples

Note: selected examples, not exhaustive; the exit activity of deep tech ventures accelerated over the course of the research
Source: Crunchbase, Capital IQ, press search, BCG and Hello Tomorrow analysis

26 THE DEEP TECH INVESTMENT PARADOX: A CALL TO REDESIGN THE INVESTOR MODEL 27
 Exhibit 15

Exhibit 15: deep tech ventures also made it to the IPO with share price performances
from x3 to x20 + since IPO date

Deep Tech venture share price ($)

Deep Tech venture share price ($)
April 12 2021
IPO date

+1.950%
+387%

~205
~190
+509%
+829%
+700%
+667%
~140
~130
+312% ~115 ~120
+1.025%
~70

~39 ~45
Note: selected examples, not exhaustive
~17 ~23
Source: Crunchbase, press search, BCG and Hello Tomorrow analysis ~15 ~15 ~14 ~10
~4

A different tale from the valley, from Peter Platzer, CEO of Spire Global

NASA or SpaceX do not hold the monopoly for But even better, is this story told in the words of its
putting satellite constellations in orbit. Spire was CEO, Peter Platzer (The Three Little Pigs fable takes
founded in 2012 with the ambition to build the on a new flavor once told by a deep tech founder).
largest constellation of multifunction satellites. They “Once upon a time, three little pigs were each
started raising from small VCs and angels, balanced building their house. The first pig quickly builds
with venture debt, but there were pitfalls along the a simple house made of straw, like a SaaS MVP,
way. As for many deep tech ventures, many were minimizing risk. Everybody loves it and wants to
the investors telling them “if someone else leads, invest in it, while they laugh at the third pig taking
I invest”, so that substantial funding was available more time to build a brick house, like a deep tech
but with no lead, and Spire did face some difficult product, focusing on mitigating its risk. As the first
years. Moreover, leading space experts challenged pig becomes well-known, more wolves lurk around
that their satellites could overcome the laws of his house ready to blow it away, and fencing costs
physics. By 2017-18 Spire proved them wrong, with increase desperately. In the meantime, the third
established annual recurring revenues reaching $38 piggy finished his house and has been able to
million (unaudited) in 2020, and growing, at 63% monetize it with a massive rent, as it could not be
gross margin, following the same $1 million to $100 blown away.”
million revenue path of top SaaS companies. Their
latest achievement has been their SPAC merger
valued at $1.6B in March 2021.

28 THE DEEP TECH INVESTMENT PARADOX: A CALL TO REDESIGN THE INVESTOR MODEL HELLO TOMORROW | BOSTON CONSULTING GROUP 29
 a) Adopt a new approach
Deep tech investor expertise also lies in the active
I. G
 row in-house deep tech support and clear understanding of the stakes and
opportunities of its ventures. It takes shape in the
knowledge and build an ecosystem customization of development / progress mile-
As with any successful relationship between stones to emerging technologies and problem/
investor and investee, deep tech ventures benefit market-fit. They are very different from well-bench-
from shared expertise, active support, contacts and marked SaaS ventures or well-defined biotech
experience. Investee teams need help in making the phase gates in clinical trials. Investors mastering
right decisions early to avoid wasting precious time. bespoke deep tech milestones or even developing
Speaking the same technical language helps build a new framework adapted to deep tech (or specific
trust and cooperation between the venture and the deep tech sectors) are one step ahead. This active
fund, and this may mean funds will need to grow role is crucial in making many deep tech ventures
in-house expertise by including both post-doctoral successful.
scientists, engineers, former operators as well as an
active network to draw on for on-demand needs. Ultimately, a whole deep tech ecosystem is manda-
According to our latest survey, of investors that tory to foster innovation: corporates help ventures
have invested in deep tech, 79% leverage external to scale, institutions improve regulation, universi-
expertise, 42% have hired PhDs and 37% have hired ties provide technology expertise and transfer, etc.
people with MSc or engineer profiles to assess deep More specifically, the ecosystem building creates
tech potential. additional opportunities as it connects several in-
• Ahren Innovation Capital team includes cutting- dustries and technologies, across value chains. As
edge experts such as two Chemistry Nobel an example, Polyera’s corporate ecosystem was
Prize-winners, the IRIS eye recognition inventor complex (Polyera produced semiconductor mate-
and Illumina founder (global gene sequencing rials for flexible smartphones or tablets). It involved
platform) specialty chemistry manufacturers, specialty glass
•  Fifty Years fund works on the activation of manufacturers, display panel manufacturers, elec-
the PhD community in deep tech with several tronics integrators, and consumer product com-

5. The deep initiatives: PHDVC (a campaign to onboard panies. Investors play an important role in making

I
n order to remove the frictions that are holding PhDs into venture capital), Translation Podcast these connections, sourcing ventures and exper-
back deep tech investment, and seize the full (a podcast series on scientists’ discoveries tise, thus creating more value for everyone, aka

tech investment
potential of deep tech returns, a whole new in labs) and Fifty 50 (a community of top 50 growing the deep tech pie. The ecosystem symbio­
investment approach is required. One deep tech North American researchers interested in sis is especially critical between investors and re-
investor surveyed stated that deep tech investment entrepreneurship) search institutes, as shown by Blue Bear Ventures
“is not for the faint-hearted and best practices • Commonwealth Fusion Systems’ (CFS) investors (BBV). BBV is an early-stage investment institution

model requires are still emerging”. As observed by SOSV partner

Benjamin Joffe, “deep tech also faces a financing
include hardware and energy veterans from the
Clean Tech era like Khosla Ventures
that spun out of UC Berkeley, to support found-
ers from leading research universities, addressing
risk if the investment ecosystem is not ripe for it • As an LP, Temasek is building the team with the some of the world’s most pressing challenges in

a new approach and to support ventures throughout their funding

journey”. Beyond creating and spreading an
articulated narrative about deep tech, investors •
technical skills and competences to assess and
support deep tech ventures and VCs
Almost half of Breakthrough Energy Ventures
health and climate. They back cutting-edge innova-
tions including CRISPR technology, an antiviral for
COVID-19, cell therapy, battery technology or air

and new
should adopt three major principles to make the staff, another CFS investor, has a PhD background quality sensors.
shift happen:
a) Adopt a new approach leveraging deep tech Founder and CEO of C4 Ventures and Chairman of II. Become problem-oriented
knowledge and its ecosystem, anchoring prob- Business France, Pascal Cagni clearly highlights this

principles lem-orientation and reshaping the distribution of

returns
issue: "Due to the rapid cycles of innovations and the
increasing complexity of deep technologies, there
In order to align fund and venture goals, funds need
to change their approach to become problem-
b) Embrace new investment models including is a sizeable ‘knowledge gap’ between innovators focused and help ventures in that approach too.
adapted financing tools, possibly longer time- and investors. This represents a major bottleneck “Think forward 500 years: what is the inevitable
lines, and new investment structures in terms of accessing funding for the majority of endpoint that no one will debate?” asked Steve
c) Emphasize and capitalize on the profound impact Europe’s deep tech companies. To bridge the gap, Jurvetson, VC investor in SpaceX, Tesla, or Memphis
deep tech ventures can have on society at a time investors need to boost their in-house knowledge Meats. The underlying principle of the inevitable is
when SDG and climate concerns are becoming and develop strong ties with the right research and to assess risks upfront instead of nurturing investor
ever more central innovation ecosystems. dreams in the equity story. Listen to IndieBio
Founder and Venture Advisor, Arvind Gupta: “I
"In summary, investors should not look into deep invest in problems, not in solutions”. It can be a
tech if they do not understand the science behind it blocker for ventures as a founder testified: “it has
or are unwilling to invest in the necessary scientific taken us a long time because we are attacking a
knowledge. Only then will funds help frame the problem that no one wanted to think about.”
venture strategy. One investor surveyed clarified that
“deep tech investment is about tech, not investment”.

30 THE DEEP TECH INVESTMENT PARADOX: A CALL TO REDESIGN THE INVESTOR MODEL HELLO TOMORROW | BOSTON CONSULTING GROUP 31
 Exhibit 16
Being problem-oriented also means being focused. companies will win and which will lose in the beauty Exhibit 16: deep tech shapes investment towards risk mitigation, leveraging an unfair
Deep tech addresses highly complex problems and contest that stock markets have become”. A parallel advantage
cannot have several irons in the fire to navigate distinction can be made about the investor mindset.
successfully through uncertainty. As Arvind Gupta Paradoxically, to reap the benefits of deep tech,
says, “if you have a problem, you have a company. If one must not invest first in a reward-first mindset.
Deep Tech
you have two problems, you’re dead”. Reward just becomes the consequence. One bias of investment
being reward-focused in the first place is inverting
Since its launch in 2000, Flagship Pioneering has risk minimization with risk mitigation (Exhibit 16).
applied hypothesis-driven innovation processes Risk minimization encourages the mainstream Reward focus mindset first Problem focus mindset first
based on existing technologies to imagine products reflexes (e.g., focus on low entry barriers) which
or reimagine value chains, thus originating and drove the boom of SaaS and digital ventures for
fostering more than 100 scientific ventures, resulting example. Problem-first mindset fits with deep
Risk minimization Risk mitigation
in over $34 billion in aggregate value. Its founder tech with a risk mitigation perspective. Although
(technology or market only) to solve a problem
Noubar Afeyan also co-founded Moderna, now investors balance risk management between
hitting the headlines. Benchmark, one of the most mitigation and minimization, deep tech investors
successful VC firms in history, investing in eBay and have an unfair advantage to invest and de-risk what Prioritization of low entry barriers, early Problem/market-fit, DBTL cycles,
Twitter, defined problem-oriented approaches as other investors do not see as an opportunity. Unlike cashflows, challengeable market fit design to value and cost, IP
“seeing the present clearly”, not investing in trends. machine-learning algorithms, investors should defensibility
not apply data derived from SaaS investment to
Problem-orientation for ventures should be trig- analyze deep tech: the recipe does not work. As Investor "blindness" to deep tech relying Deep tech investor (unfair)
gered by having a purpose. It is a fundamental Bill Janeway says, frontier innovation investment on mainstream models (digital/SaaS) advantage
frame within which ventures can define their mind- should be led by contrarian investors (e.g., Warren
set, their objective and shoot at a north star. The Buffet) not followers.
first welcome sessions for new ventures at IndieBio
are about thinking and defining their purpose. Deep Herding effect (invest fast, exit fast) Selective and larger initial investment
III. R
 ethink the portfolio strategy and in a "spray and pray" approach but controlled returns / rewards
tech investors should play a coaching role in the
ecosystem to help founders structure and polish
the value of distributed returns
their narratives for fundraising, making their ven- The added-value of a VC should be to outperform
ture accessible to many with well-identified prob- and not reproduce the standard landscape of Source: BCG and Hello Tomorrow analysis
lems to solve and their solutions. returns, naturally power law-distributed. In deep
tech, successful investors are the ones to uncover Exhibit 17 Exhibit 17
Being problem-oriented also aligns the ecosystem the most promising teams and ventures before
to a clear goal, bringing together all stakeholders others, but are also problem-focused de-riskers, Exhibit 17: illustration of return profiles with flattened distribution curves increasing
able to solve the problem. It is especially important who understand what is inevitable and where the
in deep tech where markets are not always mature, risks lie. Through an active and problem-oriented
from x2 to x3-5 average return
Distribution (%)
Distribution
of VC outcomes
(%) of VC outcomes Illustrated average
Illustrated
fund return
average
multiple
fund return multiple
and underlying ecosystems not well connected. thought-process, the investment return profile can
by number of investments
by number(%)
Distribution of investments
of VC outcomes by scenarioaverage
Illustrated by scenario
fund return
be reshaped to include a higher share of successful
by number of investments multiple by scenario
At its origin, Benchmark was a field-based fund, ventures.
which means spending more time out in the field in 80 80
laboratories, in entrepreneurs’ garages, seeking out A different distribution of returns would have a
quality investments, not waiting for the deal flow positive impact on the profitability of funds. It can
to come to them. They did not try to predict the be illustrated with three deep tech distribution
60 60 Standard VC Standard VC x 2 x2
future (which involves too much complexity); deep profiles (low / base / high) (Exhibit 17). The low
tech ventures address by nature complex adaptive case is a first derivative from the standard VC
systems which are too difficult to predict. It is not by distribution, whereas the high case is an ideal Deep tech - lowDeep x 3case
casetech - low x3
chance that Benchmark and Lux Capital have ties situation in which full implementation of deep tech 40 40
with the Santa Fe Institute whose work on complex investor model principles such as problem focus, Deep tech - base
Deep
case x 4 case
tech - base x4
adaptive systems is widely recognized. “Seeing the active support, DBTL and new funding schemes is
present clearly” refers to a deep understanding of applied. Leveraging Collaborative data, we built an 20 20 Deep tech - high
Deep x 5 case
casetech - high x5
existing and emerging technologies and inevitable example of a standard VC distribution curve with an
endpoints, and their impacts across markets and average x2 return multiple on investments. Taking
value chains. this case as a starting point, deep tech investment
profiles illustrate a x3 multiple for the low case, x4 0 0
<1 1-3 <1 3-5 1-3 5-10 3-5 10-20 5-10 >20 10-20 >20
As noted by Silicon Valley’s iconic figure Tim for the base case and x5 for the high case. For every
O’Reilly, “there are two economies, often confused: $100 invested in deep tech, compared to more Return multiples
Return
the operating economy, in which companies make traditional VC areas, the additional return would be Returnmultiples
multiples
and sell products and services, and the betting an estimated $200 in the base case illustration.
economy, in which wealthy people bet on which Note: each curve sums to 100%; Source: Collaborative data, Different Funds, BCG and Hello Tomorrow analysis

32 THE DEEP TECH INVESTMENT PARADOX: A CALL TO REDESIGN THE INVESTOR MODEL HELLO TOMORROW | BOSTON CONSULTING GROUP 33
 b) Embrace new strategy on the venture’s most promising projects Another non-dilutive financing solution involves Family Offices and Sovereign Wealth Funds are
investment models while the venture is de-risked by only paying back advance payments from customers for a specific perhaps best placed to invest over long-term hori-
once it has revenues from them, categorized in the contract or exclusivity to help ventures accelerate zons and align solutions with the world’s most
In order to deliver a flattened curve of returns and cost base. An example of this non-dilutive financing development. For example, Moderna received an fundamental challenges. Some specific principles
best support deep tech ventures, the investment for SaaS ventures is Pipe. A Pipe-equivalent for upfront payment of $240 million from AstraZeneca could apply to funds planning for longer timelines
model needs reimagining in terms of: financing deep tech would be highly valued. Ventures could for a 5-year, exclusive partnership in 2013. in a deep-tech context
tools, fund lifetime, and investment structure. bypass equity funding issues, without asking for • Set up periodic reviews of fund budgets and
debt or a loan. It also provides a safety net for From the investor’s perspective, convertible debt fees vs. fixed percentage of AUM, as pioneered
I. Adapt financing tools to future investors securing returns when revenues come can be used to balance risk management: if the ven- by Draper and Gaither & Anderson
sooner than a potentially too distant realization for ture’s success grows, the lender can swap to higher • Set up mechanisms for LPs to enter or exit (see
needs them. What are the odds of having an exit before equity risks but also higher potential returns. It suits secondary markets, hereafter). Trades would be
On top of traditional dilutive equity and grants, your portfolio company makes any revenues? Deep investors looking for risk optionality. Similarly con- based on regular assessment of the net asset
deep tech investors can explore a wider set of tech platform businesses (e.g., Ginkgo Bioworks) vertible equity balances risk the opposite way. value of closed-end vintages.
asset classes to adapt to ventures’ needs, such as could see the incentive alignment in providing
non-dilutive financing, long-term horizon of returns revenue-based financing to the deep tech ventures II. Invest for longer III. Adopt new investment structures
aligned with the venture’s performance (revenues using their platform: by financing the revenues of
or profits). Our latest survey (Exhibit 18) highlights their ecosystem ventures, they secure their future Although not true of all deep tech ventures, many In order to catch up on non-deep tech fund sizes
that a majority of deep tech ventures would “very revenues, plus returns on the financing. may require longer investment timelines to leave (on average $105 million for deep tech funds versus
likely” and “most likely” use different financing tools time for R&D to be de-risked and the first product $146 million), deep tech funds would benefit from
on top of traditional equity (78%): revenue-based Earnings sharing also provides non-dilutive financ- to be launched. This does not imply that all deep larger sizes both to better fund ventures early and
financing (60%), client advance payments (59%), ing with returns activated only once the venture tech ventures require much longer investment hori- develop more investment vehicles in the growth
and convertible equity / debt (58%). makes profits. For example, Earnest Capital propos- zons but more that new funds would fit better if stages.
es shared earnings agreements according to which they were flexible on individual investments’ times-
First, as described earlier, debt or venture debt investors receive a percentage of “shared earnings” to-exit. Investment timeline becomes less of an is- Feedback from deep tech ventures suggests that
(provided by non-banking lenders) can be activated (including founder salaries, dividends and retained sue if the returns are shown and reassure LPs to some would indeed be willing to have a mixed
once a venture has generated its first sustainable earnings). It acts like preferred dividends without stay longer. shareholding structure: mix of VCs for exper­
revenues. It is a cheaper non-dilutive solution than the condition of giving away equity and typically tise, corporates providing a platform to scale,
traditional equity. Total venture debt is growing returning later than first revenues. Some deep tech funds have already set up longer government and institutions for strategic support.
faster than the broader VC market, reaching $28 lifetimes: Future Ventures is 15-years; The Engine is This is different from the traditional investment
billion in 20197. For climate fighting ventures with commercial 12-years extendable up to 18-years; Ahren Innovation scheme where PE & VC tend to remain separate
revenues, carbon credits can be an option to attract Capital is up to 15-years. Breakthrough Energy Ven- from most corporates and governments. The
Ventures can explore revenue-based / royalty capital from companies penalized by their carbon tures is a 20-year fund and it has the advantage of interconnected nature of deep tech ventures and
financing for a specific product or project. The emissions, while the European CO2 pricing hit a being founded by Bill Gates and supported by many their ecosystem is a logical reason for this mixed
same way movie producers finance the filming record-high €34 per ton in January 2021. It aligns a of the world’s billionaires. A relevant longer lifetime shareholding structure.
phase, investors could pay for development of a venture’s financing with its carbon footprint impact for a deep tech fund could be 15 years, broken down
Exhibit 18
product and get paid back on a share of its revenues in a non-dilutive way. into: 2-5 years of de-risking research and business, Deep tech co-investments are already happening
(capped or not). Investors can focus their investment 2-5 years of business growth and scale before di- with leading funds such as a16z, DCVC, Founders
vesting (in line with average PE holding period), 2-5 Fund, Khosla, Prime Movers Lab or Lux Capital all
Exhibit
What would18:bebeyond traditional
the main financing equity,
tools you would most other
likely usefinancing tools are also envisaged years buffer of investment screening. Extensions of involved in them. Co-investments validate the in-
after reaching your first commercial revenues from a final product ? 2-3 years could be included to leave space to cap- vestment thesis, but leading deep tech funds still
by(%deep tech
of ventures) ventures
ture more opportunities and value. According to our behave independently, far from the typical herding
What would be the main financing tools you would most likely use after reaching your first latest survey to investors, the ideal mechanisms to effect. The graph network below (Exhibit 19) illus-
commercial revenues from a final product ? (% of ventures) support long term investment vary: 44% would pre- trates this interconnection with the co-sharehold-
100% fer an evergreen fund, 37% would opt for a 15-20- ing relationships between top deep tech funds in
12%
20% 17%
11%
17% year fund and 35% for successive 10-year funds. deep tech ventures.
6%
3% 22%
17% 19% 22% In addition to providing long-term support to deep Traditionally, funds raise consecutive closed-end
3% 6% 8% tech ventures, longer fund lifetime has two advan- funds, to grow progressively in size, build track re-
48%
19%
tages for funds. On the one hand it avoids rushing cord, and possibly repurchase portfolio companies
31% 31% into ill-considered investments and it enables a bet- from the first funds. New investment vehicles could
47%
Very unlikely
ter selection of top-performing assets. On the oth- also be looked at to broaden the pallet of funding
Most unlikely
33% I don’t know
er hand, it leaves more time to capture more val- and exit sources and find a balance in the deep tech
30% 29% Most likely ue from growing ventures rather than exiting early investment model:
28%
11% Very likely due to fund close. This approach is crystallized in • Rolling funds such as AngelList allow their
8%
0% the Ahren Innovation Capital philosophy of “patient managers to share deal flows with fund investors
Traditional equity Advanced payments Revenue-based Convertible Earnings sharing active” capital which has invested in Graphcore on a quarterly subscription basis, structured
with clients financing equity / debt
(semiconductors for machine learning), Nu Quan- as a series of limited partnerships where LPs
Note: only deep tech ventures with no commercial revenues yet in 2020
Source: BCG and Hello Tomorrow survey across 116 ventures and investors, March 2021 tum (quantum hardware) and Mogrify (cell trans- can modify or cancel their subscription. The
formation). minimum quarterly subscription can be as low
7. Pitchbook

34 THE DEEP TECH INVESTMENT PARADOX: A CALL TO REDESIGN THE INVESTOR MODEL HELLO TOMORROW | BOSTON CONSULTING GROUP 35
 Exhibit 19: deep tech investors operate Exhibit
in a tight
19 network of co-investors
to liquefy secondary trades like digital market- Energy Ventures, OGCI Climate Investments, Low-
Energy Impact Novo Holdings places. erCarbon Capital or Generation Investment Man-
Blue
Horizon
Lowercarbon
•O
 pportunity funds (or follow-on funds) would agement.
Collaborative Fund
step in as side funds of a VC to double down
Purple Orange SOSV Pangaea
and provide longer term funding to top-perform- Instead of chasing unicorns, investors would do
Elaia Starlight Ventures ing portfolio companies. It supports the portfo- better to chase quality impact ventures. These single-
The Engine Prime Movers lio strategy with diversified LP risk exposure and horned magical creatures are often positioned in a
Fifty Years Lab
Baleine & Bjorn
protects selected pro-rata agreements. Silicon densely competitive landscape, meaning that the
Atlantic Bridge
Future Ventures Breakthrough
Energy Ventures
Valley-inspired hybrid funds, like €60 million Bar- core strategy is to battle and eat competitors for
Khosla
Lemnos Labs celonian fund aldeA Ventures, balance their strat- breakfast – usually a capital-intensive strategy. One
IP Group
Temasek Breakout Labs egy between tickets in specialized deep tech mi- just needs to look at the Uber/Lyft/Didi case that
cro-funds and series A direct co-investments. It has raged long and hard, burning cash for all the
Cambridge Breakout Ventures builds a bridge between seed and later stages, combatants.
Innovation
Atomico Sequoia DCVC while keeping a preferred access to pre-selected
a16z
Martlet Amadeus deep tech ventures. A parallel to Fifty Years can be set with Mayfield’s
Obvious Eight VC
Ahren Innovation C4 Ventures
Ventures Lux
The Mills Fabrica
•N
 on-profit companies, such as Time for the Planet, concept of Conscious Capital based on five pillars:
Seraphim Founders Fund are an early sign of responsible and purpose-driv- conscious leadership, philanthropy and diversity,
Isomer NFX
en investments available to all (e.g., citizens, com- rise of the individual, powering human and planetary
Draper Esprit
DBL
Partners Bessemer panies, associations, banks, etc.). Anyone can evolution, and rehumanizing social media. The
IQ Capital
become a shareholder by purchasing a share of objective is to make meaningful investments for
Earlybird the company, whose value cannot be traded on humankind and not just profits, but paradoxically
Presight
public markets. Instead of distributing dividends by doing so, higher profits tend to accrue.
Note: selected list of deep tech investors, not exhaustive; the width of the links shows the number of deep tech co-investments to investors, the company invests in innovations
between two investors and the size of the nodes shows the number of deep tech co-investments for a given investor and creates corporations pursuing goals in accor- A deep tech investor should not lower its ambition.
Source: S&P CapitalIQ, BCG and Hello Tomorrow analysis dance with the investment company’s purpose. The key for a sustainable model is to start looking
All profits are reinvested in either the investment at the potential for future development of deep
as $1,000 per quarter for some funds. More •S
 pecial Purpose Acquisition Companies (SPACs), company’s or its “subsidiary” companies’ devel- tech ventures and to translate their SDG outcomes
typically, this minimum quarterly subscription raise money through a SPAC IPO to merge with a opment. into interesting investment opportunities via higher
ranges from $6,250 to $25,000 per quarter. The private company and thereby provide for funding exit multiples (which would more than compensate
advantage is to raise capital more progressively and immediate listing. This investment vehicle In an ecosystem play, sharing carry will dynamize for high entry prices). The lesson from Conscious
and have a broader set of available investors if has been a growing trend especially for clean collaboration with stakeholders commonly incenti­ Capital is to start pricing in SDG contributions into
they are publicly marketable on online platforms. tech, SDG companies and other high growth vized towards the success of the fund. With this valuations – the underlying rationale being that
• Publicly-quoted funds such as IP Group or sectors. SPACs offer a secure listing opportunity mindset, Kindred Capital deploys equitable venture: these companies will thrive precisely because they
Draper Esprit provide an even wider access to (mostly in the US) as shown by Desktop Metal’s 20% of the carry is distributed to portfolio founders make substantive contributions toward meeting
capital with lower entry cost. They also offer the announcement regarding Trine at a $2.5 billion to incentivize them to the success of the fund, SDGs. Such an approach could help better align the
fastest way to raise capital with, for example, valuation (December 2020), or NavSight taking activating their network for quality deal flow or interests of shareholders and society.
Draper Esprit taking just three days (plus Spire Global public valuing the company at $1.6 joining forces with ventures to succeed. Collective
one month of upfront preparation for market billion (March 2021). SPACs also boomed during Equity Ownership offers founders to cash-out part The global call to climate action and more broadly
assessment) to raise £110 million in 2020, instead the pandemic crisis thanks to increased available of their equity and pool them. First exits pay back SDG concerns are starting to shake up PE and LPs
of the more normal fund process of one to two capital pools, the fact that SPAC transactions are cash partners and follow-on benefits are distributed with dedicated initiatives: 370+ investors from
years. Augmentum VC, which went public in basically M&A deals in essence, and attractive between founders and cash partners; founders Climate Action 100+ “ensure the world’s largest
March 2018, sees it as an opportunity to keep valuation levels. However, it is still unclear whether become incentivized towards the success of other corporate greenhouse gas emitters take necessary
companies as long as needed in their portfolio. SPACs will be sustainable, as an alternative to ventures. action on climate change”, Vanguard began offering
Publicly-quoted funds also catalyze IPO exits traditional IPOs, or an epiphenomenon, depending funds that invest solely in companies screened for
by exposing their companies to public markets on the investors’ ability to understand their specific social, human rights, and environmental
early. The side-effect is that the fund market benefits and limitations8. c) Emphasize the profound criteria. As SDGs are prioritized to meet LP
capitalization is subject to market speculation
and volatility. This can be counterbalanced by
•S
 econdary funds or trading platforms offer
the possibility for LPs to trade their interests in
and societal impact requirements, deep tech ventures addressing these
issues are an obvious answer for funds seeking a
portfolio mix and successful track record. a fund. The secondary market is emerging as of deep tech sustainable home.
• VC-as-a-service could fill a white space in the some LPs are looking for liquidity tools or asset
deep tech investment chain and act as a catalyzer rebalancing, and others are seeking stakes in de- Fifty Years pledges to “back founders using tech- Finally, in the deep tech context, SDG and impact
to compensate for the lack of knowledge and risked / known portfolios at a discounted value. nology to solve the world’s biggest problems.” At investing does not throw out profit; rather it
understanding of deep tech in the investment 500Startups founder Dave McClure launched its core, deep tech lives by this mission statement, integrates profit into a broader ambition. Profits
market as a whole. Venture-capital-as-a-Service PracticalVC, a VC secondary fund claiming to making “problem-orientation” live. Along with LPs’ for ventures means profits for investors. It paves
(VCaaS) can provide ventures with more flexible “skip the J-Curve” and cut by half the typical 10- and society’s SDG concerns, deep tech investment the way for successful deep tech ventures solving
check sizes and offer LPs a broader deal flow 15-year VC holding period. Platforms like Palico, follows the same longer trajectory as Impact invest- problems in the sustainability field, supported by
than that only accessible by their funds. emerged over the past years as an attempt ment. Some deep tech investors can be identified new consumer habits and regulatory incentives.
as Climate Tech funds: these include Breakthrough

8. h
 ttps://www.linkedin.com/pulse/pulling-back-curtain-spacs-
dr-jens-kengelbach/

36 THE DEEP TECH INVESTMENT PARADOX: A CALL TO REDESIGN THE INVESTOR MODEL HELLO TOMORROW | BOSTON CONSULTING GROUP 37
 Exhibit 20: four deep tech investment archetypes
Exhibit 20 as stronger participants
in the deep tech investment funnel

Today: Relatively
Today: Relatively few participants caught
few participants Target:
Target: Deep
Deep techtech investment
investment vehicles
vehicles to togap
bridge the bridge the gap
caught
in in an empty
an empty andand static
static ecosystem
ecosystem

Deep Tech Private Equity

Corporate

Investment stages/rounds

Investment stages/rounds
Pension / Corporate Pension / Governments
investors Sovereign investors Sovereign & institutions
(M&A, joint Wealth (M&A, joint Wealth (equity,
ventures, funds ventures, funds blended
etc.) etc.) finance,
grants and
subsidies)

Deep Tech Deep Tech

Governments Adaptive Capital VC funds
& institutions
(grants &
subsidies)
Deep Tech VC funds

Deep Tech Venture Building Capital (venture studio)

Deep tech investment archetypes

Note: simplified representation as investment relationships between stakeholders are more complex and intertwined (e.g., corporates
or pension funds can be limited partners of funds)
Source: BCG and Hello Tomorrow analysis

ereign Wealth Funds, Family Offices, Pension • An active and well-connected network of niche
Funds or strategic corporate investors looking deep tech experts, and an ecosystem of univer-
to augment their innovation approach. It may be sities, facilitators, corporates and institutions
open to new investment vehicles such as public both to keep an up-to-date and informed view

6. New A
s education of investors in deep tech prop- funding with lowered entry tickets to facilitate of the deep tech field and provide relevant sup-
agates and the new investor model is imple- more capital raises (e.g., publicly-traded funds, port to ventures and due diligence
mented, we can begin to delineate a new in- rolling funds) or to facilitate an exit (e.g., SPAC) • A research and publication engine to trigger

investment
vestment ecosystem in which LPs, VC and PE funds, • A multi-disciplinary fund team (entrepreneurs, technology knowledge sharing and consoli-
corporates and governments and institutions each scientists, consultants, engineers) all aligned dation, dynamize market watch and raise fund
play a mutually supportive role. Today’s investment with the problem-oriented approach, acknowl- profile for stronger deal flow. It might include

archetypes
chain is broken, both because of the frictions we edging that appropriate compensation, working data science and analytics use cases with prod-
discussed in Chapter 3, but also because there is environment and research environment will be Exhibituct/market-fit
21 recommendations, as Tribe Capi-
a gap in the investing landscape. It can be bridged offered to attract rare talent. tal does.
by four main archetypes (Exhibit 20): deep tech VC

required in an funds, deep tech adaptive capital, deep tech ven-

ture building capital, and deep tech PE funds.
Exhibit 21: what does a successful deep tech VC fund look like?

10-15 years lifetime with possible 2-year Hundreds million dollars fund

ecosystem of
10+ $150-
a) D
 eep Tech Venture extensions, support ventures across
multi-stage investments
years 300m
to support large Deep Tech
investment tickets

Capital funds
dynamized The ideal deep tech fund will have a deep bench of
scientists and engineers, an appropriate alignment Back to the core nature of VC, an ambitious
Deep Tech Venture
1-3 major investors as sponsors
with a problem-oriented approach, and a larg- vision focused on transformational businesses (e.g., SWF, pension, funds, family offices)

players
Capital Fund
er pool of capital to deploy. Specifically, the ideal
deep tech fund (Exhibit 21) will look like this:
• An ambitious vision focused on impact (includ-
ing SDGs) and transformational rather than in- Research and publication engine Cross-cultural investment management team
cremental businesses, relying on conscious cap- to dynamize market watch and raise profile (entrepreneurs, VCs, PhDs, engineers…)
for stronger deal flow
ital principles
• A long-term lifetime of minimum 10 years or
more with two-year extensions, ideally 15 years
• A fund size of hundreds of millions of dollars
backed by deep tech savvy LPs, “deep pock-
eted” and long-term sponsors such as Sov- Network of resident experts and an ecosystem
of accessible universities, corporates, facilitators
Source: BCG and Hello Tomorrow analysis and institutions to support venture scale

38 THE DEEP TECH INVESTMENT PARADOX: A CALL TO REDESIGN THE INVESTOR MODEL HELLO TOMORROW | BOSTON CONSULTING GROUP 39
This deep tech VC fund archetype fits seed phases This customized framework sets the stage to Some larger funds are garnering attention in the
and bridges the gap with growth phases (and PE define progress milestones and KPIs and calibrate deep tech space by adopting some if not all of
world) as it has the funding capacity to provide valuation assessments and follow-on strategies. This these features already:
trusted support for its ventures. Such a fund would detailed and adapted approach would reassure LPs
be a pivotal element in bridging the gap in the on hands-on management and de-risking steps. In Lux Capital is a $2.5 billion fund making “long-
investment chain. a context where a deep tech venture has mitigated term bets on contrarians and outsiders”. To quote
market risks with problem-orientation and secured them further, “Lux Capital invests in emerging sci-
Successful deep tech investors will demonstrate a adoption through problem market-fit and design Flagship Pioneering is a circa $4.4 bil­lion fund ence and technology ventures at the outermost
unique approach to venture support beyond ele- to value and cost, the de-risking milestones are founded by Noubar Afeyan, focusing on “break- edges of what is possible. We partner with icono-
mentary funding and team selection. They need a focused on the engineering side which are more throughs in human health and sustainability”. To clastic inventors challenging the status quo and the
framework to navigate through the deep tech uni- easily measurable than market risks. Deep tech date “$1.9 billion has been deployed toward the laws of nature to bring their futuristic ideas to life.”
verse. As discussed in Deep Tech: The Great Wave VC teams should play an active support role to founding and growth” of more than 30 current port-
of Innovation, deep tech ventures can be staged ventures leveraging this framework, helping them folio ventures, especially in life sciences companies,
into four moments: what is probable (Copernicus remain problem focused and encouraging them complemented by more than $10 billion from other
moment), possible (Newton moment), real (Arm- through the DBTL cycles. institutions. Among its most prominent successes
strong moment), and profitable (Asimov moment). are Moderna, Indigo Agriculture, Incredible Foods.
Deep tech investors can extrapolate the questions In addition, during the deal process, the investment Compared to the total $1.9 billion deployed, Flag- DCVC is a more than $2 billion fund which backs
that arise from these moments to their ventures: team can build terms and conditions taking into ship’s stake in Moderna alone was worth $5.6 bil- entrepreneurs using Deep Tech to pragmatically
• How to be problem-oriented and derive the best consideration the specificities of the deep tech lion in February 2021 according to Bloomberg. and cost-effectively tackle trillion-dollar problems,
strategy to address the ultimate goal? venture target. General Partners should build an Flagship has formalized an approach based on four helping to multiply the benefits of capitalism for ev-
• How to bring emerging technologies together investment pitch to LPs about problems chased by funnel steps (Explorations, ProtoCos, NewCos, and eryone while reducing its associated costs. DCVC
and identify key assumptions to be tested first the fund, translating this into the investment thesis, GrowthCos), which are animated through its ven- has more than 48 exits, including four multi-billion
to reduce risk upfront? in line with problem-orientation (and not invest in ture studio, Flagship Labs. The four moments of dollar public companies where it was part of the
• How to move quickly to a working prototype? deep tech for the sake of deep tech). truth of deep tech ventures mirror these four steps, seed or first institutional round (Elastic, AbCel-
• How to always keep the economics in mind by showing the way to a methodical and systematic lera, Zymergen and Recursion Pharmaceuticals).
following a design to value and cost approach? approach for investors to venture de-risking and DCVC’s portfolio companies use their Deep Tech
problem-orientation. advantage to address our climate crisis, create new
breakthroughs in human life sciences and trans-
form industries. Some notable examples include
Pivot Bio (replacing harmful synthetic fertilizer
with naturally occurring soil microbes), Opus 12
(transforming CO2 emissions into cost-competitive
Breakthrough Energy Ventures is a 20-year-hori- chemicals and fuels), Planet (operating the largest
zon and circa $2 billion fund backed by Bill Gates fleet of earth observation satellites), Capella Space
and notable LPs (e.g., Xavier Niel, Jeff Bezos, Jack (building SAR satellites for Earth observation even
Ma, Masayoshi Son, Richard Branson, Michael through smoke and clouds), Atomwise (AI for small
Bloomberg, Vinod Khosla). Its portfolio compris- molecule drug discovery), Caption Health (AI-guid-
es deep tech ventures aimed at fighting climate ed ultrasound software) and Gro Intelligence (an
change or sustainability goals. AI-powered insights platform addressing the food,
agriculture and climate economies), among others.

SOSV is a global venture capital firm with about

$900 million AUM that operates startup accel-
erator investment programs, such as hardware- Prime Movers Lab is a billion dollar deep tech
oriented HAX and life-science-driven IndieBio. fund. Prime Movers Lab invests in breakthrough
SOSV invests in over 100 new companies each scientific startups founded by Prime Movers, the in-
year, many of which target human and plane- ventors who transform billions of lives. They have
imec.xpand exemplifies the symbiotic relationship or clients for ventures, but also as potential co- tary health, and provides lab space, in-house ex- already invested in 28 ventures at the convergence
with its ecosystem. imec.xpand is a circa €120 investors or exits. It is stage agnostic as long as perts and a network of mentors and over 2,000 of technologies and fundamental problems: Covaxx
million VC fund partnering and colocalized with the imec can add value to the venture. At seed rounds, alumni. develops a vaccine for the Covid pandemic, Upward
technology and research hub of imec (including it invests tickets of €2-€3 million and puts together Farms cultivates aquaponic farms for sustainable
some 4,500 researchers in nanoelectronics and stronger syndicates in order to sufficiently back agriculture, Boom builds the next supersonic air-
digital solutions). imec.xpand is not the corporate ventures and get them to a meaningfully de-risked liner, Space Perspective lays the ground for space
venture arm of imec, but leverages imec as a inflexion point. imec.xpand identifies the most travel, CFS builds a fusion energy reactor, Carbon
catalyzer with R&D facilities and tech expertise to promising ventures, prioritized according to the Capture removes CO2 from our atmosphere. In or-
advise and support ventures, including imec spin- most critical tech risks in their mitigation plan. It der to get the most out of deep tech, they also in-
outs. Downstream, imec.xpand is well connected syndicates its ecosystem of partners in follow-ons vested in the Idealab venture studio.
to the semiconductor industry both as partners to carry the ventures on.

40 THE DEEP TECH INVESTMENT PARADOX: A CALL TO REDESIGN THE INVESTOR MODEL HELLO TOMORROW | BOSTON CONSULTING GROUP 41
 challenges the classical approach of financing Very few PE funds have started to enter the deep
rounds (seed, series A, B, C …) as each venture re- tech space. Reynir Indahl, Managing Partner at Sum-
quires a specific operational and financing road- ma Equity, has highlighted the importance of the
LowerCarbon Capital is an impact investment fund The Engine is a firm with approximatively $500 map. Ventures should ask for and receive what they investor mindset in deep tech private equity; the
launched by Lowercase Capital founder, Chris Sacca. million in assets under management that was spun need, how they need it and when they need it. importance of focusing on problems especially sus-
It “backs kickass companies that make real money out of the Massachusetts Institute of Technology in tainability challenges first, and the need to leverage
slashing CO2 emissions, sucking carbon out of the
sky, and buying us time to unf**k the planet”. The
2017, providing long-term capital support to “Tough
Tech” companies - currently 31 in portfolio between
c) Deep Tech Venture the appropriate technology expertise in due dili-
gence as happens in research institutes. Summa Eq-
fund has backed around 40 ventures mainly in deep its two funds. The Engine has an ambition to bring Building Capital uity also confirms the opportunity to move up the
tech such as Commonwealth Fusion Systems (fusion breakthrough technologies from the lab to com- funnel in deep tech growth phases. Deep tech PE
reactors), Lilac (ion exchange technology for lithium mercialization across a broad spectrum: advanced Deep tech venture building capital focuses on the funds should follow the approach of Private Equity
extraction), Solugen (enzyme-based specialty materials, advanced manufacturing, artificial intel- foundation and acceleration of ventures, earlier funds like General Atlantic which provide operation-
chemicals production) or Mosa Meat (non-GMO ligence, energy, food and agriculture, life sciences, than investors and with very active support. The al support with operational partners to their portfo-
lab-grown meat), but also non-profit research such robotics, space, quantum and next generation com- studio or accelerator provides a de-risking enabler lio companies. Private Equity funds turning to deep
as the planet-cooling research and policy initiative, puting, and semiconductors. Beyond the Fund, it as part of the operations and development in a tech may be structurally fit for efficient support by
SilverLining, or carbon removal studies, CarbonPlan. also offers infrastructure services including access problem-focused approach. A start-up studio is a merging their core business capabilities with addi-
to specialized labs and equipment. natural consequence of a strong problem-orienta- tional understanding of science and technology.
tion and the reluctance of many scientists to be-
IndieVC’s story should be regarded as a word of caution for many GPs. Although not specifically focused come entrepreneurs: it is a way to create the deal As with deep tech adaptive capital funds, Family Of-
on deep tech, this brand from O’Reilly AlphaTech Ventures had implemented many of the principles pro- flow and also a lever to deliver value fast or fail fices and Sovereign Wealth Funds should intensify
posed in this report. They provided an active support from the investor side flattening the distribution fast. This can typically deliver 30% higher success their presence with more deep tech-colored port-
curve, lowering the mortality rate down to 12%. They partnered to offer a diversified capital stack of debt, rates and 50% faster progress from zero to series folios. By investing directly in deep tech ventures,
equity and more. IndieVC sponsored community-based pilots to activate the ecosystem. According to its A according to the Global Startup Studio Network. they would reassure other investors to join and pro-
co-founder, it was his decision to end this activity as it did not align with their LPs’ orientations. The learn- It provides a methodical way of working with rap- vide the longer timescales of support that some
ings from Indie show the consequences of a lack of proper narrative to LPs to ensure the alignment. One id and low-cost learning. Although there is no rule ventures would need to succeed. Temasek is leading
should not forget this lesson when raising a deep tech fund. that guarantees whether scientists or PhDs will be the way with focused thematic investment. Deep
great founders, such a structure can improve their tech investing supports the long-term orientation of
odds. Deep tech venture studios could also be an such funds and can have huge societal, climate and
b) Deep Tech Adaptive Capital AUM and 50% of the carry will be reinvested in stra-
additional arm within a deep tech VC fund, an adap-
tive capital fund or even a corporate. The examples
market impact if backed by such investors.

Two illustrations make the case for new ways of

fi­nan­cing ventures.
tegic commons (e.g., shared knowledge, shared re-
search, shared infrastructure) which would benefit
of Flagship and SOSV show the potential power of
studios and accelerators.
e) Deep Tech-Savvy
the whole ecosystem, including their portfolio. At Corporates
Since its launch in 2014, Closed Loop Partners have each portfolio value assessment (e.g., twice a year),
invested in 45 portfolio companies with the objec- LPs would be able to enter (with a 5-year invest- d) Deep Tech Private Equity The first action that corporates should take is to
tive of building circular economies to address the
climate emergency. They aligned on this mission
ment lock-in period) and exit, trading their shares
on a private secondary market platform.
funds and institutional rethink their innovation model by synchronizing
it with their deep tech investment. Just as it took
with their LPs: large retailers (e.g., Amazon, Pep- investors time for Pharma and ICT companies, corporates will
siCo), large financial institutions, family offices and Inspired by 2050 and Closed Loop Partners, deep need to restructure their organizations, skills and
foundations. LPs pick and choose four asset class- tech “adaptive capital” would offer a different val- Even if deep tech VC funds move up the funding culture to be ready for this wave of innovation. Cor-
es according to their risk profile: VC, credit, Growth ue proposition to long-term LP investors willing ladder closer to the Private Equity space, ventures porates must become deep tech-savvy in order to
and PE. Their strategy is long-term and adapted to to maximize the impact of deep tech investment would still need Private Equity funds. They would be aware of the changes around them, understand
venture financing needs, inspired by Unilever ap- above financial returns. It would blend VC and be their larger cousins but with different missions. them and decide when to partner, acquire, fit with,
proach to sustainability, breaking the compromise Growth activities, taking the role of a multistage in- PE funds would participate in the growth phases or incorporate external innovation from deep tech
between impact9 and profitability - their ventures vestor (focusing on seed/series A for entries and of deep tech ventures and in project finance needs ventures. Most importantly, they need to embrace
are already profitable. They look at investing with ad-hoc later stage opportunities) and would ex- with even greater firepower. problem orientation together with re-imagination,
an ecosystem perspective and collaborate not only plore other assets like venture debt, convertibles, and scan the deep tech landscape for fundamen-
with corporates but also with municipalities, and or revenue-based financing. According to our latest PE funds could seize the opportunity for a vertical tal and not incremental answers to big problems,
have their own innovation lab. survey, 41% of investors expect their LPs to be in- integration strategy or diversified project financing. often combining different technologies. Or, alterna-
terested in adaptive capital while 30% see it as un- Today’s deep tech venture deals are the deep tech tively, they need to understand their core strengths,
On the other side of the Atlantic, in 2020, Ma- likely (29% do not know). Like Sequoia, these funds assets of their future portfolio or M&A targets for and how these can be best combined with those of
rie Ekeland announced “2050” a “Tech for Good” would only select a few deep tech deals per year their portfolio companies. Deep tech ventures can deep tech ventures.
French evergreen fund. The structure is 100% held since they would have no timeline constraints. also be supported by PE project financing at a later
by a non-profit trust fund (fonds de pérennité), able stage after de-risking their technology and market: Companies, too, need to strategically rethink and
to remain as long as needed as a shareholder of Such funds would also need to be equipped with revenues from the first commercialized product redefine their build-or-buy strategy and their place
its ventures. The objective would be to raise a first the skillset to take ventures across multiple stages will enable the venture to shift from equity-based in the deep tech ecosystem. Strategic deep tech
fund of €100-€150 million (first from Family Offic- as they need different kinds of investor expertise financing to debt or project-based financing, where investments are also key for corporates to keep
es) and have up to €1 billion AUM by 2025. 10% of at different stages: seed derisking, growth, inter- PE can provide greater firepower at lower risks. competition under control as disruptors arise or
national expansion, acquisitions. Adaptive capital, to acquire strategic knowledge and capabilities, as
9. They track impact of asset classes with tons diverted from together with the lack of standardized milestones,
landfill, GHG reduction and job creation

42 THE DEEP TECH INVESTMENT PARADOX: A CALL TO REDESIGN THE INVESTOR MODEL HELLO TOMORROW | BOSTON CONSULTING GROUP 43
the recent investments by Volkswagen in Quantum- in 2015. It is a good way of attracting top start-ups Europe should “rediscover the appetite for risk and Governments and institutions could offer instru-
scape and by Mercedes in Sila Nanotechnologies and assuring high integration rates quickly and at investment” for future scientific and technologic ments such as blended finance levers, where pri-
show. low fixed costs. Early venture clients not only gain ambitions, and second, Europe “needs to simplify vate investors can lower their risk exposure with
strategic insights into new technologies, but they its responses” which are “too slow, too complex”. state co-investments or even have mechanisms cov-
As strategic investors, corporates could join as also benefit from customization, pricing, and time- ering part of their losses. The public agenda can be
LPs of deep tech VC funds if they lack exposure to-market advantages. To answer these concerns, governments and institu- long-term and thus fit deep tech investment. As the
to the innovation ecosystem or their CVC is not tions must upgrade their procedures and align their General Director of Research and Innovation of the
well-equipped for deep tech. One example is The next step is to convert corporate-venture part- mindsets to deep tech in grant awards by reduc- European Commission, Jean-Eric Paquet, recently
Sofinnova Partners which raised funds from Total, nerships into stronger cooperation, by leveraging ing bureaucracy and reporting, defining new KPIs stated, their latest 2020 pilot confirmed the need
Michelin, Avril, and Cristal Union. They could also corporate assets to help venture scale fast. In April adapted to deep tech. They should follow the DAR- for mixed grants and equity for venture success
amplify their corporate VC arms (such as the $800 2019, Sumitomo Chemical and Zymergen signed a PA model of high freedom and stage-gating based and scale-up. Institutions are the most immediate
million TRI-AD fund for Toyota’s mobility strategy multi-year partnership to bring new specialty ma- on adapted KPIs. Governments should also invest in entry point that may lead to equity financing for
or Bayer Leaps for Bayer’s Health and Agriculture terials to the market. Zymergen will leverage Sumi- the development of new academic curricula which deep tech, where traditional VCs do not have the
investments like CRISPR or JoynBio in a joint tomo’s access to key markets as well as industry in- would provide a pipeline of deep tech talents pow- capacity to assess science potential. Institutional
venture with Ginkgo Bioworks), while transforming sight to ensure that materials meet requirements to ering the whole ecosystem. Just as programmers, equity if deployed properly can be a guarantee for
themselves in parallel with capabilities to work with drive the next generation of electronics products. software engineers and data scientists were the future investors. It can take the form of direct inves-
deep tech ventures and serve their strategy. In any In December 2020, Sanofi partnered with in-silico gold miners of our data era, so the scientists and tor or LP, providing a guarantee as a trusted stake-
case, all the arguments made in this paper for VC drug discovery venture Aqemia, to accelerate the engineers working on emerging technologies will holder for other investors. In an ecosystem play,
funds apply to CVC aiming to operate in deep tech. development of two of its Covid treatment candi- be the most scarce and valuable resources in the governments should team up with deep tech VCs
dates. It can involve a broader ecosystem like Lan- upcoming wave. to coordinate efforts on most promising ventures
Corporates can also leverage deep tech investment zatech (biologically converting carbon emissions and better balance funding needs between grants,
to foster climate innovation and strengthen their into ethanol) partnering with Total (polymerizing As deep tech is by definition enabled by a deep government equity and private equity, without an
SDG and climate change policies with a deep tech ethanol into polyethylene) and L’Oréal (producing interconnected ecosystem, it is worth envisaging excess of non-dilutive funding. This leverages the
approach. While targeting fundamental issues, polyethylene-based packaging). more concentrated (physical or virtual) hubs and strengths of deep tech VCs to identify ventures and
corporates can repurpose their R&D capabilities, clusters of researchers, investors and corporates those of governments to bring strategic national
and with that ensure their survival. All industries face
the challenge of reinvention. The aircraft industry,
f) G
 overnments and to foster innovation and relationships between
these stakeholders; what The Engine refers to
funding in state-mission priorities. As Mariana Maz-
zucato has proposed, a better way for states to col-
for example, is in the midst of climate change Institutions as innovation-dense areas, with a critical mass lect the fruits from their public funding on research
challenges: Airbus has set itself a deadline of 2035 of entrepreneurs and talent. We would do well would be to stand as shareholders of some of their
to put a carbon-free commercial aircraft into service, Governments play a pivotal role, as they should to remember Frederick Terman’s involvement in promising deep tech ventures. Institutions can ben-
leveraging new technology breakthroughs such as provide the necessary funding for the fundamental Stanford’s successful ecosystem in the 1940s and efit from tech transfer opportunities like Stanford
“green” liquid hydrogen combustion reactors. research that is too risky or far out for commercial 1950s which resonates with deep tech: Terman made University exclusively licensing the search engine
relevance and also act as supervisors of active Stanford a focal point for defense budget funding technology to Google in exchange for company
Designed as an engine of the deep tech investment R&D funding and create incentives to stimulate a on scientific research; he created an ecosystem of stocks, however they should not ask for excessive
chain, corporates are acceleration platforms for continuous drumbeat of investment. There are two partners making Stanford attractive for students, ownership, since this might scare away other inves-
ventures’ go-to-market. This will only be possible main ways for governments to invest: either as an defense companies, engineers and investors; tors. Looking at the breadth of impact of deep tech,
with an understanding of this role and a step change active facilitator of the ecosystem with a dedicated and he shifted laboratories towards a customer- government investment (including project finance
in companies’ strategy and ambition towards deep portfolio of incentives (e.g., norms and regulations, driven mindset and entrepreneurial culture by initiatives) is also a way to remain close to these
tech, driven by C-level commitment cascading approval of new investment vehicles, labels, private/ listening to military customers and understanding strategic assets.
across the organization. One example of a bold public partnershwips in line with the venture client their problems, rather than technologies pushed
corporate ambition is Toshiba’s target of $3 billion model) or be fully hands-on in an Apollo-like by researchers to the market. Governments and Incentives could be provided through several
revenues in quantum cryptography by 2030, while program backed by massive government funding. institutions have a role in sharing an educated and means, such as the public purchase of deep tech
relying on partnerships such as Quantum Xchange. The state-mission and strategic investments could articulated narrative of deep tech in this ecosystem products, financial instruments complementing
Deep tech ventures can leapfrog the understanding target national security, economic growth or a meta- towards LPs, investment firms and ventures. grants and subsidies (such as zero rate deep
of customer expectations by working closely with cause / purpose (e.g., climate change), if not the tech loans as in the case of In-Q-Tel, the not-for-
corporates which consolidate all this knowledge, three simultaneously. Kennedy’s Moonshot program Beyond hubs or clusters, it is fundamental to profit VC fund of the Central Intelligence Agency),
just as Bolt Threads worked with fashion brands inspired the global Earthshot prize rewarding best facilitate technology transfer in university spin- models inspired from impact-linked finance (e.g.,
to appropriately define the textile needs of end- initiatives to achieve five simple goals by 2030. offs and the conversion from laboratory research carbon credit incentives to influence behaviors) or
customers. In our latest survey, 56% of deep tech Successful investment at government level is based to venture IP. As MonteCarlo Capital puts it, the investments via Sovereign Wealth funds (leveraging
ventures emphasize that “corporates bring a unique on long-term state vision and policy, just as China basic option of transforming a laboratory PhD into the emergence of new investment models to play
expertise of the industry and its pain points. decided to be the global leader in batteries for a successful entrepreneur is more easily said than an increasingly active role as shown by Temasek).
electric vehicles. In March 2021, in the midst of the done. Universities could partner with venture firms However, governments should ensure they keep
Corporates can diversify their deep tech investment coronavirus vaccine campaign, President Macron to source and match entrepreneurs with PhDs, these incentives at a fair level, in order to avoid
strategy into a venture client model, aka be the acknowledged10 “We didn’t shoot for the stars” either as with the Entrepreneur First program or market distortion and prevent destructive economic
first big client of a venture. The objective is to buy contrasting Europe’s response to the pandemic with as with entrepreneurship courses for students consequences.
a sample of the startup’s solution as a “minimum that of the US. “We were wrong to lack ambition, to willing to launch a business. Universities should
viable purchase” for validation in a real pilot project lack the madness.” His takeaway was two-fold: first, have structured a standard process (forms, terms & Let’s not forget that states can also be customers
conducted by the business unit. By mid-2019, BMW’s 10. E
 U's vaccine failure is because it didn't 'shoot for the stars,' conditions, partners, lawyers) to smooth and speed of deep tech ventures. Recommendations for cor­
Startup Garage had applied this model, with >1500 Macron says up license approvals or patents and equity fund- porates for “deep tech” procurement could also
startups evaluated since the launch of the program Emmanuel Macron - Conseil européen du 25 mars 2021 raising. apply to governments and institutions.

44 THE DEEP TECH INVESTMENT PARADOX: A CALL TO REDESIGN THE INVESTOR MODEL HELLO TOMORROW | BOSTON CONSULTING GROUP 45
 Exhibit 22
Exhibit 22: deep tech investments to triple by 2025 if the new investor model is
unlocked
x2-3
Actuals and estimated forecasts
Actuals and estimated forecasts of
of deep tech investments in
deep tech investments in start-ups
start-ups and scale-ups ($B) 209
and scale-ups ($B)
High case
If new investor
168 70 model is unlocked
to fund deep tech

134 49

33 139
106
20 119
83
62 11 101 Base
Base case
case

51 56 86
72
30
15

2016 2017 2018 2019 2020 2021f 2022f 2023f 2024f 2025f

Note: investments include private investments, minority stakes, initial public offerings and M&A
Source: Capital IQ; Crunchbase; Quid; BCG Center for Growth and Innovation Analytics; BCG and Hello Tomorrow analysis

fusion power plants and barges or Desktop Metal capital and a more dynamic investor landscape
on local additive manufacturing systems. (and increasing exit opportunities attracting
investors)
There is a first-investor (unfair) advantage in deep • A higher share of ventures graduating towards
tech, but investors willing to “buy” their early-bird larger-size funding rounds thanks to the active
tickets need to hurry. Innovation waves occur at support of investors and the ecosystem

7. Now is
exponential speed, as evidenced by the onrush

W
hile most investors have yet to see the of digital. Development time is reducing fast: the We are reaching an epochal shift, and are, at the
light with deep tech, the wake-up alarms ETA for the quantum computer continues to shrink, same time, also at a crossroads for humankind:
are getting louder. DeepMind’s AlphaFold2 solved the 50-year-old while we walk on the edge of the climate cliff, deep

the time for The size of the prize is massive. In spite of needing
high investment, deep tech can unlock even higher
3D protein folding challenge far earlier than most
expected. Knowledgeable early investors will reap
the benefits of understanding deep tech’s potential
tech can propel our societies to a new dimension of
unthinkable but tangible ‘bits and atom’ solutions,
fostering the shift of our industrial and economic

investors to
returns by creating new markets (e.g., $50 billion before others and will be protected by entry tissue from the “exploitative” to the “generative”
quantum computing market by 2030) or attacking barriers such as higher initial funding, technology paradigm. But the cards are still to be dealt:
established markets (e.g., $30 trillion market IP and continuous improvement by learning. everything is still to be built and no-one quite knows

seize the deep

disrupted by Nature Co-Design). The disruptive the scale and shape of the disruption wave about
potential of deep tech both offers a carrot in the Deep tech investment offers a sweet spot and to impact almost every area of the economy. It is
form of new market opportunities and a stick in the mid-hanging fruit: deep tech valuations are still a moral imperative to remove the frictions in the
consequent destruction of some existing market “affordable” compared to the potential upside investment funnel and debunk the misperceptions

tech investing verticals.

The deep tech ‘tax’11 is lower than ever. Firstly,

(more in Europe than in the US where valuations
are picking up and deal flow is stretching). Overall
deep tech has not yet climbed the hype curve of
to unlock the real power of deep tech.

The current climate crisis and the coronavirus

advantage
research and development costs (e.g., gene the unicorn-heavy digital space. emergency have shown that it is necessary, and
sequencing, prototyping, simulation) are falling in some instances also possible. Unprecedented
exponentially, as is the cost to reach out to The opportunity is huge and we are awaiting in- investments have been unlocked to protect people
consumers (e.g., the Shopify platform). Secondly, vestors to play their part. We estimate that current both financially and in terms of their health,
for infrastructure-related ventures, “descaling” trends, all things being equal, would make deep improve infrastructure and behaviors, as well as
opportunities rely on new economics with faster tech investments grow to circa $140 billion. By set- accelerate innovation and cooperation. There is
time-to-market because of smaller plant setup, ting up the new investment model and ecosystem no doubt that deep tech will play a major role in
progressive capital deployment, customized on- described in this paper, we estimate that invest- developing the solutions to meet the ambitious
time production and optimized maintenance ments could surpass $200 billion by 2025 (Exhibit objectives of humankind to eradicate Covid-19 (or
efficiency. The vast ecosystem of stakeholders 22). Such a scenario would be facilitated by: future pandemics) and of NetZero (if not negative)
involved in traditional large infrastructure projects • An increased funnel with smoother technology gas emissions to limit the damages of climate
(such as energy production) usually complicates transfer from universities (or venture studio- change. These joint crises of our time present a
building and maintenance activities. Building created) and enlightened funding earlier in the major opportunity for deep tech to benefit from
smaller, distributed plants, “descaling”, is illustrated life of deep tech ventures this momentum and initiate a global change in its
by ventures like Seaborg Technologies with floating • More and robust investment vehicles, adaptive investment ecosystem.
11. Additional costs specific to deep tech

46 THE DEEP TECH INVESTMENT PARADOX: A CALL TO REDESIGN THE INVESTOR MODEL HELLO TOMORROW | BOSTON CONSULTING GROUP 47
There can be no doubt that deep tech funding will a set of predictions in his essay Fifty Years Hence Context of the report Elements of methodology for deep tech
come. The real question is what will be the scale where he envisaged nuclear energy use, satellite This report is the third of a series of Hello Tomorrow investment estimates
of this funding and the speed at which it will grow. communication, synthetic food, biology, or even and BCG reports on deep tech. The objective is ‘Deep tech’ is not yet a standard criteria in transaction
Many PhD scientists viewed 2020 as beset with gene editing. Without naming deep tech, Churchill to provide an overview of the current investment data providers. The investment estimates of this
uncertainties and are still reluctant to leave their imagined a future that is here now or very close. It dynamics in deep tech, while highlighting which report are based on a pre-selection of ventures
laboratories and launch their venture. A call to action is now our turn to imagine a new future and make opportunities could be unlocked and how. The founded after 2005 and who own patents in specific
and a greater awakening of investors are required it happen. While Alan Kay taught us that “the best report relies on multiple inputs and sources: press, technology fields (including Artificial Intelligence,
to seize the opportunity of deep tech innovation way to predict the future is to invent it”, we would market reports on venture capital, private equity Synthetic Biology, Advanced Materials, Photonics
and make it happen. The size of the prize is too dare to say that “the best way to predict the future and investment in deep tech, interviews of deep and Electronics, Drones and Robotics, Quantum
huge not to be taken more seriously in the months is to invest in it”. tech founders, deep tech investors and experts, Computing…) or whose key team members (e.g.
and years to come. In 1932, Winston Churchill wrote a Hello Tomorrow and BCG survey to deep tech founders, CEO, CTO, VP of Research…) are patent
ventures and investors. Over the course of the study, inventors in these specific technology fields. This
deep tech investment gained momentum and the pre-selection is manually curated and enriched
content continuously got enriched. In fact, the deep by BCG and Hello Tomorrow market research and
tech investment ecosystem is emerging and moving analysis.
fast, so that the content of this report is only the
start of the discussion this important topic. Also Capital IQ and Crunchbase are the data sources of
because, as of today, deep tech still encompasses investment events; their analysis is performed in
a wide range of very different technology fields for Quid. The investment events are equity-based: pri-
which the recommendations will need over time vate investments, minority stakes, public offerings
to be declined, to reflect the specific needs and and mergers & acquisitions. These events repre-
characteristics of the field. sent the investment period of a venture until it goes
public (including Initial Public Offerings and trans-
actions with Specialty Purpose Acquisition Com-
panies). Grants are excluded from the estimates to
avoid inconsistencies across data sources..

48 THE DEEP TECH INVESTMENT PARADOX: A CALL TO REDESIGN THE INVESTOR MODEL HELLO TOMORROW | BOSTON CONSULTING GROUP 49
About the Authors (Breakout Labs), Ann Mettler, Philippe Offenberg and
Allegra Kowalewski-Ferreira (Breakthrough Energy
Ventures), Frank Naylor (British Telecommunication
Massimo Portincaso is chairman of Hello Tomorrow Pension Scheme), Pascal Cagni, Michel Sassano, Philippe
and a former managing director and partner in the Berlin Dewost, and Philippe Gillet (C4 Ventures), Archimede
office of Boston Consulting Group. You may contact him Mulas (Collective Equity Ownership), Jesko Frommeyer
by email at [email protected] (Canada Pension Plan Investment Board), Kelly Chen
(DCVC), Seth Bannon (Fifty Years), Xavier Lazarus and
Antoine Gourévitch is a managing director and senior Louisa Mesnard (Elaia), Faÿçal Hafied (French Treasury),
partner in BCG’s Paris office. You may contact him by Cyril Vančura (imec.xpand), Gayathri Radhakrishnan and
email at [email protected]. Karthee Madasamy (Kauffman Fellows), Anne Wade
(Leaders Quest), Mario Branciforti (Lunar Ventures),
Arnaud de la Tour is the cofounder and CEO of Hello Peter Hebert (Lux Capital), Stephan Beyer (nFrontier), © 2021 Hello Tomorrow. All Rights Reserved. This document is based on a primary qualitative
Tomorrow. You may contact him by email at arnaud. Tim O’Reilly (O’Reilly Media), Bryce Roberts (OATV), and quantitative research executed by BCG and
[email protected] Brian Pallas (Opportunity Network), Marianne Hyltoft This document has been prepared in good faith Hello Tomorrow. BCG and Hello Tomorrow do not
(PreSeed Ventures), Dakin Sloss and Kenny Lauer on the basis of information available at the date provide legal, accounting, or tax advice. Parties re-
Arnaud Legris is a consultant in BCG’s Paris office. You (Prime Movers Lab), Jean-Gabriel Boinot-Tramoni of publication without any independent verifica- sponsible for obtaining independent advice con-
may contact him by email at [email protected] (Quantonation), Stefano Gurciullo (Redstone VC), Jamie tion. BCG and Hello Tomorrow do not guarantee cerning these matters. This advice may affect the
Arbib (RethinkX), Mike Dybbs (Samsara Capital), Jean- or make any representation or warranty as to the guidance in the document. Further, BCG and Hello
Thomas Salzgeber is the Startup & Investor Ecosystem Michel Deligny (Silverpeak), Johannes Rabini (Sobera accuracy, reliability, completeness, or currency of Tomorrow have made no undertaking to update
Manager of Hello Tomorrow. You may contact him by Capital), Michael Krel (Sofinnova Partners), Reynir Indhal the information in this document nor its usefulness the document after the date hereof, notwithstand-
email at [email protected] and Sebastian Sunde (Summa Equity), Benjamin Joffe, in achieving any purpose. Recipients are respon- ing that such information may become outdated
Jun Axup and Ned Desmond (SOSV), Peter Platzer sible for assessing the relevance and accuracy of or inaccurate. BCG and Hello Tomorrow do not
Tawfik Hammoud is a managing director and senior (Spire Global), Russell Tham (Temasek), Paul Reynolds the content of this document. It is unreasonable provide fairness opinions or valuations of market
partner in BCG’s Toronto office. He is global leader of (Thamesis Limited), Katie Rae and Tyson White (The for any party to rely on this document for any transactions, and this document should not be re-
the firm’s Principal Investors & Private Equity practice Engine), Nicolas Colin (The Family), Denis Galha Garcia purpose and BCG and Hello Tomorrow will not be lied on or construed as such. Further, any financial
and member of the firm’s Executive Committee. You may (Time for the Planet), Amos Benaroch (VisVires Capital), liable for any loss, damage, cost, or expense in- evaluations, projected market and financial infor-
contact him by email at [email protected]. Bill Janeway (Warburg Pincus), Matt Stack (XLP Capital) curred or arising by reason of any person using mation, and conclusions contained in this docu-
for their input and insights. They warmly thank all survey or relying on information in this document. To the ment are based upon standard valuation method-
Acknowledgments respondents from Kauffman Fellows and Hello Tomorrow fullest extent permitted by law, BCG and Hello To- ologies, are not definitive forecasts, and are not
The Authors are grateful to Mickey McManus, Jérôme network. morrow shall have no liability whatsoever to any guaranteed by BCG and Hello Tomorrow. BCG
Moreau, Michael Brigl, Helene Scheer, Nicolas Eid, Laura party, and any person using this document hereby and Hello Tomorrow have used data from various
Bogaert, Silvia Gelonch, Thibaut Willeman, Anne-Douce waives any rights and claims it may have at any sources and assumptions provided to BCG and
Coulin Kuhlmey, Yannick Vesters, Juha Toivanen, Jean- For Further Contact time against BCG or Hello Tomorrow with regard Hello Tomorrow from other sources.
Francois Bobier, Marco Duso, Flora Muniz-Lovas, André If you would like to discuss this report, please con- to the document. Review of this document shall
Pietri, Pierre Samec, Jens Kengelbach, Thomas Endter tact one of the authors.  be deemed agreement with and consideration for This document does not purport to represent the
and from Hello Tomorrow, Christophe Tallec, Nicolas the foregoing. views of the companies mentioned in the docu-
Goeldel, Sarah Pedroza, for the development of the Arnaud de la Tour  ment. Reference herein to any specific commercial
content and the analyses. They thank Wendi Backler, Cofounder and CEO Hello Tomorrow  product, process, or service by trade name, trade-
Usman Chaudhry and the BCG Center for Innovation [email protected]  mark, manufacturer, or otherwise, does not neces-
Analytics for the help in developing and analyzing the sarily constitute or imply its endorsement, recom-
data. They are grateful to Liz Bolshaw (Kite Insights) Massimo Portincaso  mendation, or favoring by BCG or Hello Tomorrow.
for the writing support, and Bettina Boon Falleur and Chairman of Hello Tomorrow 
Martin Saive (CartoonBase) for design and production [email protected] Apart from any use as permitted under the copy-
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50 THE DEEP TECH INVESTMENT PARADOX: A CALL TO REDESIGN THE INVESTOR MODEL HELLO TOMORROW | BOSTON CONSULTING GROUP 51