Venture Capital

4 ways founders can get more value from working with deep tech investors

- February 22, 2023 2 MIN READ
Deep tech
Photo: AdobeStock
At Main Sequence, we back early-stage founders who are creating the future with cutting-edge science & frontier technologies.

But beyond having a focus on deep tech, there are a range of capabilities that set us apart when compared to generalist investors. Here are a few unique things that deep tech investors can bring to the table:

A deep tech company often starts out as exciting research in a university, but the pathway of spinning out to pursue a commercial opportunity can be challenging. Managing the IP, team build, business planning and infrastructure to support the spin-out can be all be tricky, but luckily, deep tech investors are well-versed in these challenges and can help companies to navigate this process with ease.

But it doesn’t just stop at spin-outs. Investors who are well connected in the R&D ecosystem can also help deep tech start-ups establish high value research connections to accelerate their progress, and further strengthen their competitive advantages.

Ask the investor: How many spin-outs have you done before? Have you spun anything out from my institution?

Deep tech investors will have a greater level of technical expertise on their teams, allowing them to have a deeper understanding of the science and engineering behind different technologies.

This is especially important for early stage investors such as ourselves, where we will invest in companies that are both pre-revenue and pre-product. This enables us to better evaluate and underwrite some of the technical and engineering risks, and be more comfortable saying yes earlier on.

Ask the investor: What’s your investment thesis for a given technology area? Do you have anyone on your team who has a technical background in the area I am building in?

Being a deep tech investor also requires an understanding of different types of business models, private and public sector customers, and complex markets that may face unique regulatory, economic and geopolitical risks.

Companies innovating in quantum have very different challenges compared to those scaling in synthetic biology. It means that having sector specific knowledge is crucial to successfully navigating the risks and uncertainties that are inherent in these markets.

Ask the investor: What experience does your team have in the sector that I am building in? What are relevant lessons learned you might be able to share?

A final point of differentiation is the guidance deep tech investors can provide when it comes to exploring alternate funding options. Beyond dilutive funding, there are often opportunities for deep tech companies to explore non-dilutive grants, and even project financing for more capital intensive infrastructure at scale. These can be stage, sector and/or even region specific opportunities, so they are definitely worth exploring as a way to help accelerate your business without incurring additional dilution.

Ask the investor: What are some grants that might be a good fit for my business? As I scale and my capital needs grow, what are other good project/debt financing options I should explore?

So if you’re a deep tech founder thinking about which investors might be the best fit for you, hopefully the above showcases a few reasons why working with a deep tech focused VC might be the best option.

  • As always, if you’re building something in the deep tech space I’d love to connect! You can reach me here or follow me for more at @JunQuG