It all began with Thomas Edison, an inventor known for his relentless drive and countless innovations. Edison had just perfected the incandescent light bulb, but his dream was bigger than just lighting a few homes. He envisioned an entire city illuminated by electricity. However, building the infrastructure for such a system would require enormous capital, far beyond what Edison had. Enter J.P. Morgan, a shrewd and influential banker who saw potential in Edison’s invention. He wasn’t just financing a light bulb; he was investing in the future of energy. With Morgan’s backing, Edison built the first power station in New York City in 1882, lighting up Wall Street and forever changing the skyline.
Yet, as Edison’s direct current (DC) systems began to spread, another brilliant inventor named Nikola Tesla was quietly working on something that would challenge Edison’s dominance. Tesla believed that alternating current (AC) was the key to distributing electricity more efficiently over long distances. But Tesla had no means to bring his vision to life. That was until George Westinghouse, an industrialist known for his innovations in railroads, took notice. Westinghouse saw in Tesla’s AC system not just a competing technology but a superior one that could power entire nations.
With Westinghouse’s investment, Tesla’s alternating current began to flourish. It wasn’t long before the War of Currents erupted, pitting Edison’s DC against Tesla and Westinghouse’s AC. The stakes were high: whoever won would control the future of electricity. The turning point came in 1893 at the World’s Columbian Exposition in Chicago, where Westinghouse’s AC system powered the entire event. It was a spectacular success, proving that AC was the future.
Soon after, the Niagara Falls power project, one of the largest industrial undertakings of the time, sealed the fate of the AC system. The falls were harnessed to generate electricity using Tesla’s technology, sending power to Buffalo, New York, and marking the dawn of a new age of electrical distribution.
Through these first investments, the world shifted. Streets, factories, and homes across America were electrified, accelerating the rise of industries and reshaping cities. Edison’s and Tesla’s inventions, fueled by Morgan’s and Westinghouse’s capital, ignited the flame of the industrial revolution. It was a partnership between genius and wealth that lit up the world, laying the foundation for the modern era.
The story of Thomas Edison, Nikola Tesla, J.P. Morgan, and George Westinghouse provides a powerful parallel to today’s landscape of deep tech investments, where breakthrough technologies are reshaping industries but require significant early-stage capital to move from concept to reality.
Let's understand what is current deep tech meaning and what is current investment status in deep tech.
Deep Tech, driven by scientific and engineering breakthroughs, is not only transforming industries but also addressing some of the world’s most pressing challenges, from climate change to public health crises. Unlike traditional tech companies that focus on digital platforms or software solutions, Deep Tech innovations are rooted in complex, groundbreaking technologies, including quantum computing, artificial intelligence (AI), biotechnology, and advanced materials. Europe, with its robust research institutions, educated workforce, and government-backed initiatives, is positioning itself as a hub for Deep Tech development.
The importance of Deep Tech for Europe cannot be overstated. With the potential to drive sustainable economic growth, create high-value jobs, and secure Europe’s technological sovereignty, fostering its development is now a priority across industries and government. This article will explore the significance of Deep Tech, strategies for financing these ventures, the role of the public sector, challenges and opportunities for university spin-offs, and how to overcome scaling and exit difficulties to build a competitive European Deep Tech ecosystem.
The Importance of Developing Deep Tech in Europe
Addressing Societal Challenges
Deep Tech plays a pivotal role in solving the world’s most intractable challenges. Technologies emerging from Deep Tech sectors can provide innovative solutions to problems such as climate change, food security, public health, and sustainable energy. For instance, AI-enabled drug discovery platforms are revolutionizing healthcare by speeding up the development of new therapies, while quantum computing promises to unlock breakthroughs in materials science, cryptography, and beyond .
In Europe, where sustainability is a core principle of economic and political strategy, Deep Tech innovations offer tangible pathways to achieving climate goals. Technologies such as green hydrogen production, carbon capture, and advanced energy storage are crucial to Europe’s transition to a low-carbon economy . The European Green Deal, with its ambitious decarbonization targets, aligns directly with the research and development efforts of many Deep Tech startups.
Economic Impact
Deep Tech is not just a driver of innovation; it is also a significant economic engine. According to McKinsey, European Deep Tech sectors are positioned to deliver billions of euros in value across industries ranging from healthcare and energy to defense and agriculture . Unlike traditional technology startups, which may scale quickly but often focus on digital solutions with shorter-term gains, Deep Tech ventures often build the foundational technologies of entire industries.
As of 2023, Deep Tech accounts for an increasing share of venture capital investment in Europe, representing 20-30% of European VC funding. This demonstrates investor confidence in the sector’s long-term growth potential . Moreover, Deep Tech startups in fields such as AI, robotics, and quantum computing are already reaching high valuations, creating the potential for Europe to foster its next wave of technology unicorns.
Strategic Sovereignty
The concept of strategic autonomy is crucial to understanding Europe’s approach to Deep Tech. The European Union is increasingly focused on reducing its dependence on foreign technologies, particularly in critical fields such as semiconductors, artificial intelligence, and quantum computing . Deep Tech innovations are not only essential for economic growth but also for safeguarding Europe’s technological sovereignty, ensuring that the region remains competitive in the global tech landscape.
Strategic sovereignty is especially important in areas like AI and quantum computing, where global competition is fierce. Europe’s share of global Deep Tech funding has grown from approximately 10% in 2019 to 19% in 2023, signaling the region’s determination to secure leadership in critical technology domains . Public-sector initiatives and private investments are being aligned to ensure that Europe becomes a global hub for Deep Tech innovation, reducing reliance on non-European players, particularly from the United States and China.
Deep Tech Startups and the Spin-off Model
The Role of University Spin-offs
European universities are among the world’s leading institutions in fields such as computer science, materials science, and biotechnology. Many groundbreaking Deep Tech startups originate from university spin-offs, where academic research is commercialized and developed into market-ready solutions . Institutions such as the University of Oxford, ETH Zurich, and the Technical University of Munich have been at the forefront of this process, nurturing some of Europe’s most promising Deep Tech startups.
University spin-offs are crucial because they provide a bridge between cutting-edge research and real-world application. Startups in fields like AI drug discovery, quantum computing, and advanced materials often require years of development before reaching commercialization, and academic institutions are well-placed to support these ventures through their early stages.
Challenges in University Spin-offs
Despite these successes, several challenges hamper the commercialization of university-driven Deep Tech ventures. One major hurdle is the variation in technology transfer policies across Europe. Different countries, and even different universities, have diverse approaches to intellectual property (IP) ownership and equity stakes in spin-offs. This lack of harmonization can complicate the process of scaling and securing investment for early-stage companies .
For example, some universities take large equity stakes in their spin-offs in exchange for providing access to research facilities, while others adopt a more hands-off approach. As a result, many promising technologies fail to make it to market due to misaligned incentives or bureaucratic hurdles . Harmonizing these spin-out processes and simplifying IP management across European universities would significantly enhance the ecosystem’s ability to nurture and scale Deep Tech companies.
Academic Institutions as Catalysts
Universities and research institutions play a pivotal role in the early development stages of Deep Tech companies. Technology transfer offices (TTOs) and research parks are essential components of this ecosystem, providing early-stage support, access to state-of-the-art laboratories, and funding . Moreover, TTOs are increasingly focusing on bridging the gap between academic research and commercialization by providing mentorship, access to industry networks, and advice on securing patents and funding.
Public research institutions like Germany’s Fraunhofer Society and France’s CNRS have also been instrumental in driving Deep Tech innovation through partnerships with private companies and by fostering startup ecosystems around their campuses. These institutions not only produce world-class research but also serve as incubators for the next generation of Deep Tech entrepreneurs.
Financing Strategies for Deep Tech
Early-Stage Financing: Public and University Support
Early-stage financing is one of the most critical—and challenging—aspects of developing a Deep Tech startup. Unlike traditional tech companies, which can often generate revenue quickly, Deep Tech ventures may take years to develop a viable product due to the capital-intensive nature of their R&D processes. Early-stage Deep Tech startups thus rely heavily on non-dilutive funding sources, such as government grants, university-affiliated programs, and research funding .
University Support: Many Deep Tech companies originate in academic settings, where researchers rely on grants and public funding to push their technologies forward. University-affiliated programs, such as technology transfer offices, help guide the commercialization process by offering access to lab infrastructure, mentorship, and early-stage capital .
Government Grants: Government programs like the European Innovation Council (EIC) provide substantial early-stage financing to Deep Tech startups. For instance, the EIC’s Accelerator program provides up to €2.5 million in grants and equity investments up to €15 million . These funds help startups bridge the gap between research and commercial viability, enabling them to attract private capital in later stages.
Non-dilutive funding mechanisms, which do not require entrepreneurs to give up equity, are especially valuable in Deep Tech. Given the extended timelines and high capital requirements associated with bringing Deep Tech innovations to market, avoiding early equity dilution ensures that founders retain control over their ventures during the critical stages of development.
Growth-Stage Financing: Blended Finance and Private Capital
Once Deep Tech startups reach the stage where their technologies have been validated through research and pilot projects, they must transition to growth-stage financing. This phase is often referred to as the “valley of death,” as companies require substantial capital to scale but may not yet have proven their market potential.
Blended Finance: A combination of public and private financing, blended finance models are designed to de-risk investments in high-potential but capital-intensive technologies. Public funds from programs like Horizon Europe or national initiatives in France and Germany can be matched with private investments from venture capital (VC) firms or corporate venture capital (CVC) units . This approach allows public-sector money to de-risk early-stage investments, making it easier for private investors to commit capital.
Private Venture Capital: Traditional venture capital funds have historically been cautious about investing in Deep Tech due to the long timelines and technological risks involved. However, specialized VC funds focusing on Deep Tech have emerged to fill this gap. Funds such as Lakestar, Walden Catalyst, and Breakthrough Energy Ventures are designed specifically to support the scaling of Deep Tech ventures . These funds offer patient capital and understand the unique risks associated with the sector, allowing companies to focus on long-term development rather than short-term returns.
Based on Preqin DataBase DeepTech Fund are able to generate higher net IRR vs traditional technology funds.
Corporate Venture Capital (CVC): CVC has become an increasingly important source of funding for Deep Tech startups. Large corporations, particularly in industries such as healthcare, energy, and telecommunications, are keen to invest in disruptive technologies to gain a competitive edge . For instance, Toyota’s investment in Pony.ai, a self-driving car startup, exemplifies how corporations are partnering with Deep Tech ventures to co-develop innovative solutions.
Late-Stage Financing and Exit Strategies
Once Deep Tech startups enter the growth stage, they require significant capital injections to scale their operations and commercialize their innovations. At this stage, public and private capital must align to support these companies through their most critical phases of development. However, Europe has struggled with maintaining consistent late-stage funding, leading to reliance on foreign capital and the risk of technological outflows.
Late-Stage Venture Capital: The availability of late-stage venture capital is crucial for ensuring that European Deep Tech companies can scale domestically. However, late-stage investment in Europe is often lacking compared to the U.S. and Asia. As a result, many promising Deep Tech companies turn to foreign investors for growth capital, which can lead to acquisitions by non-European entities .
To address this challenge, initiatives such as the European Tech Champions Initiative have been launched. This fund-of-funds model aims to mobilize €10 billion in late-stage capital by investing in large venture capital funds that specialize in Deep Tech . By focusing on growth-stage companies, the initiative seeks to retain valuable European technologies within the region and help them reach IPO or exit through domestic channels.
Mergers and Acquisitions (M&A): The majority of successful exits for Deep Tech startups occur through mergers and acquisitions, often by larger corporations looking to acquire breakthrough technologies. Corporations in sectors such as automotive, energy, and healthcare frequently target Deep Tech companies for their innovations in AI, robotics, quantum computing, and biotechnology .
An example of this is InstaDeep, a European AI-driven drug discovery platform that was acquired by BioNTech for $562 million . Similarly, ARM Holdings, one of the most prominent European Deep Tech firms, was acquired for $54 billion in one of the largest tech M&A deals . However, the concern remains that too many European Deep Tech firms are acquired by non-European entities, diminishing Europe’s technological sovereignty.
Initial Public Offerings (IPOs): While IPOs remain less common for Deep Tech startups in Europe compared to the U.S., they are an important pathway to liquidity for more mature companies. Creating favorable conditions for IPOs in European stock exchanges is essential for retaining the value created by these startups within the region. Increasing the depth and liquidity of European capital markets, along with regulatory reforms to simplify the IPO process, can make this an attractive exit route for Deep Tech companies .
Overcoming Financing Gaps
The financing landscape for Deep Tech is fragmented, with significant gaps between early-stage and late-stage funding. Addressing these gaps requires a more integrated approach, combining public and private resources to provide continuous support for startups as they scale. The following are some of the key strategies for overcoming financing gaps:
Blended Finance Solutions: By combining government grants, venture capital, and corporate investments, blended finance models help de-risk early-stage Deep Tech investments, making them more attractive to private investors. Public sector initiatives, such as those led by the European Innovation Council (EIC) and Bpifrance, are crucial in providing the necessary capital to support growth-stage companies .
Public-Private Partnerships (PPPs): Collaborations between governments and private companies are critical for enabling large-scale innovation in sectors such as energy, quantum computing, and advanced manufacturing. Governments can help de-risk large investments by offering subsidies, matching funds, or tax incentives, while private investors bring operational expertise and market access .
Scaling Domestic Late-Stage Capital: European governments need to focus on creating larger, more sophisticated venture capital funds that can support Deep Tech companies throughout their lifecycle. Programs like the European Tech Champions Initiative are a step in the right direction, but more needs to be done to scale up the availability of late-stage funding .
The Role of the Public Sector in Boosting Deep Tech Innovation
Government as a Catalyst for Deep Tech Innovation
The public sector plays an indispensable role in the development of Deep Tech, particularly in early-stage financing, infrastructure support, and fostering collaborations between academia and industry. Governments across Europe have recognized the strategic importance of Deep Tech for economic and technological sovereignty, leading to the launch of numerous public funding programs and innovation initiatives.
European Innovation Council (EIC): The EIC, part of the Horizon Europe program, has committed over €10 billion (2021–2027) to supporting breakthrough innovations. The EIC’s Accelerator program, for instance, offers a mix of grants and equity investments to help early-stage Deep Tech startups bring their innovations to market . The EIC also runs specialized incubators and accelerators focused on high-impact sectors like AI, quantum computing, and green energy.
Bpifrance and Plan Deeptech: France’s Bpifrance, through its Plan Deeptech, has allocated over €2.5 billion to support the growth of Deep Tech startups. The initiative focuses on sectors such as Greentech, Healthtech, and Industry 4.0, providing both financial resources and access to a network of mentors and industry partners . In 2020 alone, 400 Deep Tech startups benefited from this program, demonstrating the impact that well-targeted public sector support can have on early-stage companies.
Public-Private Partnerships (PPPs)
Public-private partnerships are increasingly becoming a driving force behind the commercialization of Deep Tech innovations. These collaborations bring together the financial and operational expertise of the private sector with the de-risking capacity of government programs.
Corporate Venture Capital (CVC): Large corporations, particularly those in sectors that are being transformed by Deep Tech, such as automotive, aerospace, and healthcare, are playing a more active role in supporting Deep Tech ventures. By partnering with startups, corporations can co-develop cutting-edge technologies, while the startups benefit from operational expertise and market access .
An example of such a partnership is BP’s Launchpad, which supports early-stage Deep Tech ventures working on energy innovations. BP provides funding, mentorship, and access to its global infrastructure, helping startups to scale faster than they would independently.
National and European-Level Initiatives: In addition to corporate partnerships, governments are also working together with private entities to support the development of Deep Tech ecosystems. The European Innovation Council, Bpifrance, and Germany’s SPRIND (Federal Agency for Disruptive Innovation) all actively engage in PPPs that focus on specific Deep Tech sectors such as quantum computing, advanced materials, and sustainable energy .
Infrastructure and Talent Development
Building a thriving Deep Tech ecosystem also requires investments in infrastructure, particularly in specialized labs, research facilities, and incubators that cater to the needs of highly technical startups. The public sector is crucial in developing and maintaining these infrastructures, which provide essential support to early-stage companies.
Research and Innovation Hubs: Across Europe, research parks and innovation hubs, such as Munich’s Quantum Valley or Paris-Saclay, serve as vital ecosystems where academic researchers, startups, and corporate partners can collaborate. These hubs often receive government funding and serve as incubators for the next generation of Deep Tech innovations .
STEM Education and Talent Development: Deep Tech industries are heavily reliant on a skilled workforce with expertise in science, technology, engineering, and mathematics (STEM). Governments play a key role in ensuring that the education system produces enough graduates with the right skills. Additionally, initiatives such as the European Innovation Council’s talent programs focus on developing entrepreneurial skills among scientists and engineers, ensuring that Europe can sustain its pipeline of Deep Tech founders .
Overcoming Challenges to Scaling Deep Tech Ventures
Scaling Barriers for Deep Tech Startups
Scaling a Deep Tech company is significantly more challenging than scaling a traditional tech startup due to longer R&D timelines, higher capital requirements, and the need for highly specialized talent. Despite Europe’s strengths in research and early-stage innovation, many promising Deep Tech startups struggle to scale to the point of commercialization.
Capital Intensity and Development Timelines: Deep Tech companies often face longer development timelines compared to traditional startups, particularly in sectors like quantum computing, biotechnology, and aerospace . Unlike software-based startups, which can iterate and scale relatively quickly, Deep Tech firms must invest heavily in R&D infrastructure and equipment. As a result, they require more capital upfront and more time to achieve product-market fit.
Talent Gaps: While Europe has a strong pipeline of STEM graduates, there is often a mismatch between technical expertise and business acumen in Deep Tech startups . Founders with academic backgrounds may excel in R&D but lack the entrepreneurial skills needed to scale a business. Bridging this gap by integrating more business-oriented training into STEM education and encouraging interdisciplinary collaboration is critical for scaling Deep Tech ventures.
Scaling Strategies: Building Ecosystems and Clusters
Creating thriving Deep Tech ecosystems and innovation clusters can mitigate many challenges faced by scaling startups. These clusters offer proximity to research institutions, access to talent, and collaboration opportunities with established corporations. European cities like Zurich, Oxford/Cambridge, Munich, Paris, Stockholm, and Grenoble have emerged as key hubs for Deep Tech innovation. These regions offer dense ecosystems where companies can benefit from shared infrastructure, mentorship, and a robust network of investors and technical experts.
Zurich, particularly through ETH Zurich (Swiss Federal Institute of Technology), has established itself as a leading global hub for Deep Tech innovation. ETH Zurich’s strong emphasis on interdisciplinary research, combined with a focus on AI, quantum computing, robotics, and biotechnology, has produced numerous successful spin-offs. Companies such as Climeworks (carbon capture technology) and Scandit (computer vision) highlight ETH Zurich’s role in commercializing groundbreaking technologies. ETH Zurich’s proximity to industry giants like Siemens and Google fosters collaboration and accelerates technology transfer from lab to market.
Climeworks: A spin-off from ETH Zurich, Climeworks has pioneered the development of carbon capture technologies, directly addressing climate change by removing CO2 from the atmosphere and storing it.
Swiss Data Science Center: ETH Zurich also collaborates with the Swiss Data Science Center, which focuses on AI and data-driven innovation, fostering connections between academia and industry.
ETH Zurich’s robust funding ecosystem, supported by both private and public sector investments, including venture capital firms and government grants, ensures that promising startups have the financial resources they need to scale. The university’s TTO (technology transfer office) also plays a vital role in supporting early-stage Deep Tech ventures, helping them navigate the complexities of intellectual property and commercial development.
Oxford and Cambridge, often collectively referred to as “Oxbridge,” are two of the most prestigious universities in the world and have long been leaders in research-driven innovation. Both universities play pivotal roles in the UK’s Deep Tech landscape, particularly in sectors such as biotechnology, AI, and quantum computing.
Oxford has fostered a thriving Deep Tech ecosystem, particularly in life sciences and AI. Companies like Oxford Nanopore Technologies, which specializes in DNA sequencing technology, have become global leaders in their fields. Oxford Nanopore is an excellent example of the successful commercialization of university research and one of the highest-valued Deep Tech spin-offs in the UK.
Oxford Nanopore Technologies: A spin-off from Oxford, it revolutionized DNA and RNA sequencing, offering accessible, scalable solutions for real-time genetic analysis, with applications ranging from healthcare to environmental monitoring.
Oxford’s Oxford Sciences Innovation (OSI) fund is dedicated to supporting Deep Tech ventures emerging from university research, providing seed capital and helping bridge the gap between academic research and commercial success. OSI has invested in over 100 companies across various sectors, including AI, healthcare, and quantum computing.
Cambridge, home to the world-renowned Cambridge Cluster or “Silicon Fen,” is one of the largest and most dynamic technology ecosystems globally. The university has produced some of the UK’s most successful Deep Tech companies, particularly in semiconductors, AI, and advanced materials.
ARM Holdings, originally a spin-off from Cambridge, is one of the most famous Deep Tech companies to emerge from the university’s ecosystem. ARM’s semiconductor designs power the majority of smartphones worldwide, and the company’s acquisition for $54 billion underscored Cambridge’s influence on global Deep Tech.
Cambridge Quantum Computing (CQC): Cambridge is also at the forefront of quantum computing development, with CQC pioneering quantum software and algorithms for real-world applications in industries such as pharmaceuticals and finance.
Cambridge’s Enterprise Fund and Accelerate Cambridge program provide crucial early-stage support to startups, helping them navigate the funding landscape and scale their technologies. Cambridge University’s proximity to major R&D centers and its partnership with global tech giants like Microsoft and Amazon have cemented its position as a powerhouse of Deep Tech innovation.
Munich’s Quantum Valley is one example of a successful Deep Tech cluster, bringing together academic researchers, startups, and large corporations such as Siemens and BMW to foster innovation in quantum computing . Similarly, Paris-Saclay is an innovation hub focused on AI, biotech, and space technology, supported by both public and private sector investment . These ecosystems provide startups with access to state-of-the-art labs, technical expertise, and funding opportunities.
Below you will find universities which have created the most deep tech companies. (source: dealroom.co).
Policy Interventions to Support Scaling
Governments across Europe are implementing policies to improve the scaling potential of Deep Tech startups. These policies focus on reducing barriers to growth by providing access to financing, talent, and regulatory support.
Simplifying Regulatory Frameworks: Deep Tech startups often struggle with navigating complex regulatory environments, particularly in sectors like healthcare, energy, and aerospace. Simplifying and harmonizing regulations across Europe can reduce friction for startups looking to scale across borders. The European Union has been working on initiatives to standardize regulatory frameworks, making it easier for Deep Tech startups to expand within the single market .
Encouraging Institutional Investment: While venture capital is critical for Deep Tech growth, institutional investors such as pension funds and sovereign wealth funds also play a vital role. Encouraging these investors to allocate more capital to Deep Tech can help startups access the large-scale funding they need to scale . The European Investment Fund (EIF) has been a key player in mobilizing institutional capital, but more needs to be done to encourage broader participation from private institutions.
Enhancing Entrepreneurial Education: Europe has a strong base of STEM graduates, but many Deep Tech founders lack the business acumen required to scale their companies. Integrating entrepreneurial education into university curricula, particularly in technical fields, can equip founders with the skills needed to raise capital, manage teams, and scale operations . Initiatives like Bpifrance’s Deep Tech Acceleration Programs offer tailored mentorship and training to help founders develop both technical and business expertise.
Valuation and Exits in Deep Tech
Valuation Challenges for Deep Tech Startups
Valuing Deep Tech companies is inherently more complex than valuing traditional tech startups. Unlike software-based ventures that can quickly generate revenue, Deep Tech companies may require years of research and substantial capital investments before reaching commercialization. This longer development cycle, combined with higher capital intensity, makes traditional valuation methods like revenue multiples less effective.
IP and Technological Edge: The valuation of Deep Tech startups is often tied to their intellectual property (IP) portfolio and technological edge rather than immediate revenue potential . Investors in Deep Tech tend to focus on the long-term potential of the technology and its ability to create new markets or disrupt existing ones. For instance, quantum computing and AI-enabled drug discovery ventures attract significant attention due to their transformative potential, even though they may not generate revenue for several years.
Capital Efficiency: Deep Tech companies often require multiple rounds of funding, which can lead to higher dilution for early investors. However, once a Deep Tech company reaches a technological breakthrough or product-market fit, its valuation can skyrocket due to the potential scale of its market impact .
Exit Strategies for Deep Tech Ventures
Exit strategies for Deep Tech companies typically involve mergers and acquisitions (M&A) or initial public offerings (IPOs). However, the longer timeframes and higher risks associated with Deep Tech mean that these companies often take longer to reach exit compared to traditional tech startups.
Mergers and Acquisitions (M&A): M&A remains the most common exit route for Deep Tech startups, particularly as large corporations look to acquire innovative technologies to stay competitive . For instance, the acquisition of InstaDeep by BioNTech for over $560 million highlights the significant value that Deep Tech companies can offer to industry leaders . However, a challenge for Europe is that many Deep Tech startups are acquired by non-European companies, leading to concerns about the outflow of valuable technology.
Initial Public Offerings (IPOs): While less common than M&A, IPOs are a viable exit strategy for mature Deep Tech companies that have reached a sufficient level of commercial success. ARM Holdings, for example, achieved a successful IPO valued at $54 billion . Encouraging more Deep Tech startups to pursue IPOs in European markets requires improving the liquidity of European stock exchanges and creating favorable conditions for public offerings .
Below selected exit valuations (based on dealroom.co)
Strengthening the Exit Environment in Europe
To create a more vibrant exit environment for Deep Tech companies, Europe must focus on strengthening late-stage funding and building robust exit channels that keep innovation within the region.
Increasing Late-Stage Capital Availability: Initiatives like the European Tech Champions Initiative, which aims to mobilize €10 billion in late-stage capital, are critical for ensuring that Deep Tech startups have the resources they need to scale without relying on foreign capital . By increasing the availability of domestic growth-stage funding, Europe can retain control over its most valuable innovations.
Fostering Domestic Acquisitions: Encouraging European corporations to engage in more M&A activity with domestic Deep Tech startups can help keep valuable intellectual property within the region . This requires creating a more robust ecosystem where corporations actively collaborate with startups to identify acquisition opportunities.
Improving the IPO Market: To increase the number of successful IPOs in Europe, governments and financial institutions must work together to enhance the liquidity and depth of European capital markets. This can be achieved by implementing regulatory reforms that simplify the IPO process and by providing incentives for institutional investors to participate in Deep Tech IPOs .
Why Deep Tech Matters
Tackling Global Challenges
Deep Tech is uniquely positioned to address some of the most critical challenges facing the world today. From climate change and energy sustainability to healthcare innovation, Deep Tech offers groundbreaking solutions that have the potential to transform industries and improve lives. For example, technologies such as green hydrogen, carbon capture, and AI-enabled drug discovery are already being used to combat climate change and improve health outcomes.
Climate Change: As the world grapples with the effects of climate change, Deep Tech innovations are driving the development of cleaner energy sources and more efficient resource management. Innovations in energy storage, carbon capture, and green hydrogen production are crucial to Europe’s decarbonization goals.
Healthcare: AI-driven drug discovery platforms, gene editing technologies, and advanced diagnostics are revolutionizing healthcare by enabling more precise and effective treatments for a range of diseases. These innovations are particularly relevant in Europe, where aging populations are increasing the demand for advanced healthcare solutions.
Market Overview and Growth Projections
The European Deep Tech market has grown significantly in recent years, with a marked increase in venture capital investment and public-sector support. In 2023, the European Deep Tech market was valued at approximately €100 billion. This market is expected to grow at a compound annual growth rate (CAGR) of 25% over the next decade, reaching an estimated size of €950 billion by 2033.
This impressive growth is driven by increasing demand for advanced technologies across industries and the growing recognition of Deep Tech’s potential to create new markets and disrupt existing ones.
The Economic and Strategic Importance of Deep Tech
Deep Tech is not just about solving problems—it’s about creating new economic opportunities. By developing cutting-edge technologies, Europe can position itself as a leader in key sectors such as AI, quantum computing, and green energy. Moreover, fostering a vibrant Deep Tech ecosystem is crucial for maintaining Europe’s strategic sovereignty, ensuring that the region does not become overly reliant on foreign technologies.
Conclusion: The Path Forward for European Deep Tech
Deep Tech offers Europe the opportunity to lead the world in solving some of the most pressing global challenges. However, realizing this potential requires a concerted effort from all stakeholders—governments, universities, corporations, and investors. By addressing the current gaps in financing, fostering a more collaborative ecosystem, and improving exit strategies.
Comments