Cicada Innovations finds partnerships are as important to deep tech as funding when it comes to success

- January 4, 2024 3 MIN READ
Sally-Ann Williams
Cicada Innovations CEO Sally-Ann Williams
The biggest impediment to Australia shifting from a services-based industry to one based on science and engineering is a longstanding deep tech “scaleup problem” according to a new report from incubator Cicada Innovations.

The inaugural “Cicada x Tech23 2023 Insights” report is based on data from 128 deep tech applicants to Cicada x Tech23 2023, as well as insights from Cicada’s 23-year tenure as a deep tech incubator.

It covers a broad cross-section of deep tech founders, sectors and business stages; offers insights into founder and company demographics, funding stages, and IP status; and outlines the systems and solutions required to transform current challenges into opportunities for Australia.

It also counters some of the sector’s myths. For example of the 128 startups that applied to Cicada x Tech23, more than three quarters (76%) were founded independently, rather than being spun out of universities or research institutes (11%), which runs contrary to the popular belief that science-based deep tech startups and CEOs originate from academia.

Cicada CEO Sally-Ann Williams said that figure reveals that some of our nation’s greatest talent is emerging from unexpected places, so national support and commitment needs to focus on more diverse talent pool.

“The world’s leading nations and regions are building resilient science-backed economies of the future through integrated policies and systems across government, industry, and academia that catalyse billions in public and private investment into deep tech,” she said.

“These initiatives are not siloed into individual industries or technologies either, with a great example being the US Inflation Reduction Act, which offers deep levels of funding, programs, and other incentives to significantly accelerate the climate transition across multiple industries and technologies.”

The report also revealed that founders cited partnerships as an important growth tool (62%), just behind funding (67%). Respondents were engaging in an average of 2.8 active partnerships to validate and build their solutions with partner support.

And that’s where academia plays its starring role, with 41% of all 358 cited partnerships occurring with universities or research institutions – only slightly lower than the 44% occurring with industry where we normally assume these partnerships occur.

Despite the small sample size, 40% of the deep tech startups from the Tech23 applicants had over 5 staff, which is significantly higher than the figure for all Australian businesses (23%), as stated in the Industry Innovation and Science Australia (IISA) report.

While this still lags behind 62% in Germany and 64% in Canada, it highlights the opportunity the deep tech sector specifically brings to Australia if we were to address the “scale-up problem, not a startup problem” as described in the same IISA report.

Williams said that has an negative impact on the Australian economy and the nation’s potential success.

“When Australian deep tech companies are ready to transition from startup to scaleup, they are being lured offshore – and taking their valuable IP, jobs, contribution to GDP, and future tax revenue with them,” she said.

“So we should be looking to programs like the $15 billion National Reconstruction which is now investing in Australia’s industrial capabilities, and create a similar, systems-based environment here. This is the only way to stem this exodus of Australia’s most promising value-creating deep tech companies.”

Other findings in the Cicada X Tech23 2023 Insights report include: more than 45% of respondents are working on innovations in software and 41% in artificial intelligence (often to power the hardware component of their component), compared to just 24% developing hardware and robotics.

Another 31% are working in biotechnology, 30% in advanced materials, 19% in photonics, 5% in blockchain, and 2% in quantum computing.

Environmental and sustainability concerns were the primary motivator for starting a company (26%), followed by personal passion and experience (23%), market gaps and business opportunities (17%), technological and research advancements (13%), and health, well-being and societal benefits 21%).

Key industries of focus for the startups included health and medTech (39%); clean tech, climate and energy (24%); advanced industry and infrastructure (10%); defence, aerospace, and space (9%); and food and agriculture (7%).

Around 35% of applicants had raised over $1 million to date despite a majority being pre-revenue, and with some raising well over $20 million.

Williams said those figures are indicative of the greater capital requirements and longer runways of deep tech startups, which become significantly greater at the point of shifting from startup to scaleup.