Pierrick Bouffaron, Operating Partner for Entropia Capital, a global investor in technology with offices in Hong Kong, Luxembourg and NYC.
Deep technology startups—rooted in cutting-edge fields such as biotechnology, robotics, quantum computing and advanced materials—represent the vanguard of innovation. They hold the potential to address some of humanity’s most pressing challenges, from combating climate change to revolutionizing healthcare.
Yet, despite their transformative promise, securing funding for deep tech ventures remains an uphill battle. I believe this paradox arises from a fundamental misalignment in the venture capital (VC) ecosystem: Investors naturally gravitate toward sectors where experimentation is low-cost and rewards are immediate rather than to areas with the most critical need for innovation. Deep tech, in contrast, challenges traditional financial models with high uncertainty and extended timelines.
But I believe finding sustainable funding solutions for these high-impact enterprises will be essential in the years to come. Let’s take a closer look at the current VC landscape and what options can help deep tech founders establish strong financial support for their startups.
The Venture Capital Paradox
While venture capital investment in deep technology has grown over the past 10 years, the allocation remains disproportionately minor; according to BCG, 20% of total VC funding is now going to deep tech. This imbalance is evident in sectors like climate tech: High-impact areas such as sustainable construction and energy transformation often struggle to attract sufficient funding, while low-impact sectors like e-commerce or ride-sharing secure disproportionately large investments. I believe addressing this disparity requires a fundamental shift in how capital flows toward innovation-rich but resource-intensive domains.
The VC model dominates startup funding and prioritizes businesses designed for hyper-growth and rapid acquisition. This approach works well for software startups or consumer-focused platforms but often needs to align better with the deep tech realities. Deep tech startups typically face high capital requirements upfront—whether for hardware, infrastructure or manufacturing—and longer timelines for profitability. For such ventures, VC funding, focusing on rapid returns and equity trade-offs, can be prohibitively expensive.
This is why I believe deep tech entrepreneurs need to look beyond traditional VC and embrace a broader spectrum of funding options. The choice of financing—whether dilutive or non-dilutive—could significantly shape your business strategy and your long-term growth trajectory.
Diversifying The Deep Tech Funding Landscape
A robust funding strategy for deep tech startups requires understanding the nuances of available capital sources. Here are some of the most common financing options:
• Philanthropic Foundations And Prizes (Non-Dilutive)
Foundations like the Gates Foundation offer grants and prizes to advance research and pilot projects in specific fields. Often tied to milestones or competitions, these funds can provide critical early-stage support.
• Government Grants (Non-Dilutive)
Public funding bodies provide grants for R&D and commercialization. However, government grants often involve lengthy application cycles and rigorous reporting requirements.
• Crowdfunding (Non-Dilutive)
Platforms like Kickstarter allow startups to raise capital directly from the public. While often effective for consumer-facing innovations, this approach requires significant outreach and marketing efforts.
• Angel Investors And Syndicates (Dilutive)
High-net-worth individuals or groups like Cambridge Angels can provide early-stage funding with relatively low diligence requirements. Their investments are often thesis-driven and network-based.
• Accelerators (Mostly Dilutive)
Programs like Y Combinator or deep-tech-specific initiatives such as Carbon13 offer funding and mentorship to help startups refine their business models. Accelerators can be instrumental in connecting founders with strategic partners and advisors.
• Catalytic Capital (Dilutive)
Funds like Breakthrough Energy Ventures prioritize societal impact over financial returns. These investors are typically more patient and mission-aligned, which can make them ideal for capital-intensive deep tech.
• Rolling Funds (Dilutive)
These quarterly raised funds, such as Climate Capital, provide flexible investment vehicles focused on thematic areas like sustainability or advanced technologies.
• Micro-VCs (Dilutive)
Smaller venture funds specializing in niche areas, such as Creative Ventures or Embark Ventures, often bring deep expertise and hands-on support to their portfolio companies.
Strategizing The Funding Journey
At early stages, deep tech entrepreneurs often gravitate toward non-dilutive sources like grants and prizes. These funds can provide a much-needed runway and validate your startup’s technological potential, signaling competence to later-stage investors.
As your startup progresses, you may want to incorporate angel syndicates or accelerator programs into your funding strategies, leveraging these networks to refine your business models. Moving into growth stages, the challenge often shifts to accessing catalytic capital or micro-VCs, which typically require navigating complex due diligence and trust-building processes.
The journey of securing capital for deep tech is often likened to navigating a Russian nesting doll: Each funding layer presents new challenges and opportunities. It’s important to be both strategic and creative, adapting to shifts in market dynamics, regulatory landscapes and investor appetites. Capital in deep tech should act as a positive feedback loop: Success stories can help validate your model and pave the way for innovative financial products and structures.
I believe that in order to accelerate innovation in deep tech, global tech business leaders need to evolve and seek out more equitable access to capital. This can include fostering public-private partnerships, developing hybrid funding models and encouraging institutional investors to allocate resources toward high-impact technologies. By aligning the right type of capital with your business strategies, you can unlock the transformative potential of your innovations.
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