What We Look for in Deep Tech: 6 Key Criteria
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Our Partner Paavo Räisänen explains our deep tech investment approach.
Maki.vc invests across industries, but we have a sweet spot for deep tech upstarts making scientific advances. Why? We believe that industrial deep tech solutions can play a major role in solving the world’s most important and challenging problems. We’ve seen this first-hand working with companies like IQM, Spinnova, Volare, Onego Bio, Everdye, IXI, Upheat, Lightsonic, ONiO, and more.
The concept of deep tech is becoming conventional, but what we’re after runs deeper than just ‘tech’. So, I want to outline our expectations for founders in the deep tech space. Here’s what we’re looking for.
1. Radical breakthroughs
The world is full of technology-enabled efficiency improvement opportunities and every step towards long-term targets counts, such as a carbon-neutral world. Novel technologies providing only incremental improvements can be however difficult to push through because they’ll never get top management’s attention and middle management in industrial settings are usually risk-averse.
We’re after ventures planning to shake up and overhaul entire industries, especially those averse to change. That’s why we are searching for cases that can radically change the way things are done by rethinking the whole industrial logic. One great example is Volare, who takes food industry side streams and (instead of biogasification) upcycles them to valuable proteins, lipids, and fertilizers. The result: protein production where CO2 equivalent emissions per ton are only 1/45 that of soy.
2. A strong technical foundation
A common challenge of the deep tech cases is their time-to-market, which is not always aligned with the traditional 10-year lifecycle of a VC fund. Problems can occur if a company’s R&D is more R and less D at the time of the VC investment – especially because the time required for research is even harder to estimate than the time required for development.
We’re looking for teams who have a strong technical foundation: teams with solid tech experience and/or access to novel IP that is based on several years of research. So, even though we invest in deep techs in a very early phase, we do expect a credible background from the technological problem you are solving. As an example, some members of the team behind our quantum computing case, IQM, had more than ten years of experience in quantum research and access to IP that had been developed at Aalto University at the time of our initial investment.
3. Combination of technical & commercial expertise
Often deep tech startups focus on technical expertise and are sure to onboard a strong CTO very early on. This is perfectly fine, but having equally strong in-house, commercial know-how is extremely important too. And if you haven’t yet found your commercial talent(s), we’re happy to help you get there, we just want to see that you understand the importance of commercial expertise. Since too often we have seen research-based teams that are world-class in technology but haven’t kept the bar high enough for their first commercial recruit.
So, the ideal startup team would have a sound commercial profile, someone who is business savvy and knows the industry and customer base inside out. Onego Bio is a spot on example of a founding team where CEO Maija Itkonen (creator of pulled oats) combines her consumer product experience with CTO Christopher Landowski’s precision fermentation expertise to take on the last frontier of entirely animal-free foods.
4. A solid position in the value chain
We’re looking for entrepreneurs who want to keep their destiny in their own hands and build a solid position in the value chain: selling and delivering a full product or solution to their customers. If you’re redesigning an industrial process (like Spinnova, Volare and Onego Bio are doing), then you probably need to ramp up at least the first factory yourself.
Many deep tech cases are planning to use business models where they’re selling their technology via licensing business models. Sometimes it might make sense, but when you’re licensing your technology out, you’re not in the driver’s seat anymore and your destiny depends on the activities the licensing counterparty does and they might just drop their interest at any point to push your technology to the market.
5. Deep customer and market understanding
You might be on the verge of a scientific breakthrough but if you’re unsure about what it will be utilized for or who it will help, the next steps will get difficult. To build a solution that can stand out from the competition, drive revenue and make a real impact, you need a clear and deep understanding of your customers and their needs.
Too often we’ve seen cases where a new technology is looking for customer problems it could solve while it should be the other way around. Upheat is a great example of starting with a clear understanding of what industry actually needs: a way to reuse vast amounts of waste heat while replacing fossil fuels used to generate high-temperature process heat and steam. Its technology delivers the higher temperature uplift needed to turn waste heat into valuable 100–200°C heat and steam – beyond the reach of conventional heat pumps.
6. A distinctive brand
At Maki, we see a strong connection between deep tech and brand, because in the long run, a strong brand and reputation are at least as important for customers as your technological advantage that brought the company to life in the first place. That’s why, on top of your technical capabilities, we expect you to understand why your brand exists, be able to explain it to others, and show you are ready to invest in it – simply put, be brand-driven.
This is how we know you have the potential to be category-defining and future-proof. IXI is a great example: it’s bringing deep tech into an everyday product with a clear, consumer-friendly proposition – eyeglasses with autofocus. By turning complex adaptive optics into something intuitive and easy to understand, IXI is building a distinctive brand around an entirely new way of seeing.
We’re constantly looking for new additions to our existing clusters and keeping our eyes open for opportunities in industries where we haven’t invested yet. If you feel you tick these boxes, I’d be happy to hear from you: paavo@maki.vc.