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This article analyzes the challenges faced by deep tech startups that develop disruptive technologies. These companies require significant investments due to the lengthy and uncertain research and development cycle. Entrepreneurs must demonstrate their ability to position innovative technology in lucrative markets to attract daring investors. Reindustrialization presents an opportunity for deep tech startups to strengthen a country’s industrial and technological sovereignty. In this context, public support for innovation, from basic research to commercialization, plays a key role in the success of these startups.
Adapted from [Krieger E. (2023), « Deep Tech : 4 défis pour l’entrepreneuriat », Les Echos Solutions, 06/07/2023 : https://solutions.lesechos.fr/tech/c/deep-tech-4-defis-pour-lentrepreneuriat-39953/
Like Ulysses, who took ten years to defeat Troy with a large wooden horse adorned with gold, deep tech entrepreneurs must deploy engineering and ingenuity to conquer new markets through disruptive technologies.
For these capital-intensive startups, the economic and financial equation is often complicated. These difficulties are mainly related to the duration and uncertainties of the R&D cycle. These timelines and uncertainties are significantly more significant than those of more traditional startups.
The genesis and development of deep tech startups are in many ways a contemporary avatar of the Iliad and the Odyssey, with its heroes and bards, allies, and opponents.
Financial prospects commensurate with the risks involved
If a deep tech company presents considerable financial prospects, it can be funded by daring investors who are very different from the « followers » riding more conventional waves.
The quality of the founding team is the primary investment criterion, as everything else follows from it, starting with the ability to develop, protect, and position a disruptive technology in multi-billion-dollar markets.
This brings us back to the logic of derisking and profiling a company, which will be valued even more if it is both attractive and threatening to industry leaders.
Massive and patient investors to support deep tech startups
Among the most emblematic startups in recent years, we can mention flagship companies such as SpaceX (spacecraft), OpenAI (artificial intelligence), Boston Dynamics (robotics), Carbon 3D (3D printing), BioNTech (biotechnology), and Impossible Foods (plant-based meat substitutes). Each of these companies has raised several hundred million dollars to develop, often for more than ten years, and then commercialize products based on disruptive technologies.
The same trajectory is followed by the French startup Quandela, founded in 2017 by Pascale Senellart, Valerian Giesz, and Niccolo Somaschi, who have surrounded themselves with high-level associates, employees, and advisors, such as Alain Aspect, the 2022 Nobel laureate in physics. This company initially aimed to commercialize single-photon sources based on research conducted at C2N (Center for Nanoscience and Nanotechnology) but evolved towards the development and commercialization of a complete optical quantum computer.
This strategic pivot was made possible with the support of BPI (French Public Investment Bank) and the Ministry of Higher Education and Research, which are two essential pillars of innovation financing in France.
Several financial instruments have been implemented to accelerate Quandela’s development, including:
- A capital injection of €15 million made in 2021 by BPI and several « deep tech » investment funds.
- The financing of a quantum computer production and assembly site inaugurated in 2023, still with the support of BPI and its public and private partners.
These various financings have accompanied several pre-orders mainly made by multinational companies. These companies want to position themselves in the global race for applications opened up by quantum computers: cybersecurity, logistics, automotive, aerospace, chemistry, pharmaceuticals, energy, and finance.
Reindustrialization, an opportunity for strategic players
The increasing geopolitical risks have led to a wave of reshoring and reindustrialization in countries where industrial GDP had plummeted to very low levels as the « fabless » paradigm of companies without factories prospered. That era is now over, and the current wave of reindustrialization presents an opportunity for deep tech startups whose solutions enhance a country’s industrial and technological sovereignty.
In an internationally tense context regarding startup financing, public support for innovations deemed strategic is a significant asset for startups that, like Quandela, develop innovations considered crucial by the government.
Patient capital and talent: the winning combination for Marathon Sumos
These developments illustrate the importance of public support for innovation, with gradual programs ranging from support for fundamental research to assistance in commercializing innovative solutions based on disruptive technologies. This public support anticipates or accompanies private initiatives and helps overcome the industrial and commercial stages that allow a handful of fortunate ones to transition from startup status to that of an intermediate-sized company that combines added value, impact, and highly skilled jobs.
In this scenario, the alliance of patient capital and talent is the key to the success of these fascinating yet risky enterprises.
This paradigm of « marathon Sumos » seems to characterize deep tech startups: growing rapidly, derisking technically and commercially, and becoming both a considerable opportunity and an existential risk for current leaders who will have no choice but to acquire them at a high price.
Etienne Krieger
