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Most of the innovations that will define the 2020s are already in development. Of course, many will still face a long and uncertain path before they are ready for implementation. A common way to categorize these kinds of industry-defining complex new innovations is deeptech. BCG and Hello Tomorrow define deeptech as tech that will have a big impact, take a long time to reach market-level maturity, and require substantial capital.

The European success stories of the past decade have mostly come from companies making incremental improvements within everyday problems, rather than those producing complicated, potentially revolutionary innovation. According to our analysis, among the 60 European unicorns founded since 2008, the most common industries are mobile, software, fintech, and healthcare. With the exception of healthcare, these industries don’t inherently lend themselves towards complex, meaningful technological advances.

This shows that we’re far from unlocking the full potential of the ecosystem to produce revolutionary technologies.

“People are going to become a lot more interested in frontier science than finding another wearable.”

– Investor

At Slush 2019, deeptech companies comprised 30% of all startups.

To recognize these, we used a combination of industry, technology, and keyword analysis, as well as manual scanning. Our aim was to find companies that leverage a novel, scalable, complex technology, or a significant innovation within an existing technology, as a core aspect of their offering. Additionally, this innovation needed to be the company’s own, and sold primarily as a product, rather than a service.

Arguably, the deeptech taxonomy is in and of itself a byproduct of the era of digitalization that we’ve been living through. When the infrastructure for our current, connected world was being built in the 70s, 80s and 90s, all tech was deeptech. Now, as opportunities and returns in the digital space are diminishing, more technically complex innovation is poised for a comeback.

This is important, because humankind desperately needs these kinds of technologies to address the existential threats that it faces. With the return to deep innovation, we need a world of effortless collaboration within and across different factions of society, where all lines of human ingenuity are exploited to the utmost.

“If startups want to tackle the big, complex challenges that the world faces, like climate change, urbanisation and health, they can’t work on their own anymore. These problems require us to collaborate closely with corporations, governments and cities.”

– Operator


Venture capital is a quintessential component of the innovation ecosystem. It goes where other types of private capital won’t, paving the way for undemonstrated technologies to be put through their paces, and if all goes well, brought to market.

“Increasingly, a lot of value accrues to exponential, non-linear things. There is a need for capital that is willing to endure risk to unlock the potential in such ideas.”

 – Investor

To this end, it’s very hopeful that European investment into deeptech has exploded over the last five years, increasing nearly three-fold to $8.4 billion between 2015 and 2019. This equates to 24% of all capital invested in European tech last year.

However, this headline figure doesn’t reveal the full picture. At the seed stage — where the initial number of ideas tested is determined — capital invested has stagnated and the number of rounds has turned into a steep decline.

So, why are investors not funding profound innovation to the extent they should be?

Deeptech investments are inherently hard. Firstly, they carry with them immense technological risk. To complicate matters further, investors may not be able to fully assess the magnitude of that risk until very late in the startup’s journey. The nature of this risk may also be more binary than in other areas of innovation. If a new drug doesn’t work on humans after years of promising development, it might be worthless.

Secondly, deeptech is expensive; startups working on complex technologies require high capital commitments early on in their journeys. This is reflected in our startup application data from Slush 2019. Deeptech startups founded in 2018 and 2019 were more likely to have raised a round of funding than other companies. What’s more, where they had raised funding, it was bigger on average than that of their counterparts.

Thirdly, deeptech is slow to market. This is inherently problematic for VCs that need to produce returns within the lifecycle of their fund—usually 10 years. Startup data from Slush 2019 evidences this point. Despite being of the same age on average (2.6 years), only 27% of deeptech startups had reached the Growth & Scale phase, compared to 44% of other startups.

“There’s a 10-year journey from taking a company to a startup to a unicorn. But equally, there’s a 10-year journey from taking fundamental science to something that’s suitable for a startup.”

– Investor

On a similar note, looking at the revenues of hardware startups at Slush 2019 reveals that they take much longer to take off than those focused on software, but 5 years into development, overtake their counterparts.

Note that while deeptech and hardware are not synonymous, they are inextricably linked. Complicated technologies typically involve producing something physical, and conversely, hardware innovations are typically more complicated in nature. 59% of deeptech startups at Slush 2019 were leveraging hardware, compared to 16% of other companies.

Driven by this, we are seeing an emergence of some much-needed backend innovation in venture capital. For example, US-based Future Ventures raised their first, $200M fund early last year, focusing on deeptech coupled with a strong sense of purpose. Their first fund has a 15-year lifespan. Speaking at Slush 2019, one of the founding partners, Maryanna Saenko, emphasized the importance of that additional time: “If you look at a company like SpaceX — year nine is really when you start to add fuel to that fire, quite literally, and continue to support the company and not thinking about winding down your position. So with a 15-year fund we are able to give our founders more runway, and more commitment.” This phenomenon is yet to make landfall in Europe at scale.

Lastly, it’s worth noting that, when successful, deeptech startups are defensible and thus attractive investments. They produce solutions that are hard for competitors to replicate and often protected by intellectual property. According to our 2019 startup data, 54% of deeptech startups have patented some aspect of their product, compared to 19% of other startups.

Clearly then, in order to fully reconcile the realities of deeptech with venture capital, we’re in for some overdue back-end innovation and diversification in what funds look like.


Because traditional VCs remain insufficient to fund the revolutionary innovations that we need, young deeptech ventures often have to look to alternative means of funding for a path to market.

Early on, far more deeptech ventures than other types of startups leverage grants. Deeptech startups represent 17% of Europe’s under three-year old companies, yet have raised 25% of the continent’s grant funding since 2018, and 28% of grant rounds.

“We need the government to fund frontier science for the betterment of mankind. The VC model isn’t compatible with ideas that don’t materialize within the next few years. So governments play an important role in that vacuum.”

– Founder

However, this alone is inadequate. The European Investment Bank has noted that companies developing Key Enabling Technologies (KETs) run into trouble after their initial grant funding has been depleted. This is the point at which young companies have to turn to the private markets. In EIB’s view, those markets aren’t there. Due to grants being modest in size (the average European deeptech grant is €642k), this need usually arises early on in the development process, when companies remain dependent on external financing.

“A lot of investors are much more risk-averse now. They’d rather invest in something that has a proven trajectory. In a way, that stifles innovation. There needs to be money available for companies that are willing to take bigger risks and push things in new directions. There seems to be a gap in prototype funding.”

– Founder

EIB also came to establish the same point that we touched on previously; underinvestment in frontier science is driven by VC’s lack of knowledge on the topic. Their interviews indicated that investors suffered from a lack of understanding of the technical and economic viability of deeptech innovations.

“You need techies in the mix in VCs. We have proper deeptechies involved, which they typically have in California. European VCs tend not to.”

– Investor

The role of Corporate Venture Capital is emphasized in this equation. Due to the absence of external capital, corporate funds aren’t subjected to the same level of pressure to produce quick returns. What’s more, many make strategic investments within the same vertical as the parent company, which substantially increases their ability to make intelligent judgements about the technical risk incurred.

47% of CVCs at Slush 2019 stated that they prioritize investments connected to their own product or line of business.

The importance of CVCs for Europe’s deeptech ecosystem is reflected in the continent’s funding numbers. According to Dealroom’s data, CVCs participated in 25% of all deeptech seed rounds in 2019. That compares to 17% of other types of seed rounds.

This is backed up by investor data from Slush 2019. 69% of CVCs reported that they invest in hardware startups, compared to 54% of VCs. As elaborated on earlier, hardware and deeptech are not synonymous, but closely related.

This funding gap is particularly concerning due to the fact that inventions on the frontier of science are often necessary for tackling mankind’s most pressing problems. At Slush 2019, hardware companies were twice as likely as software startups to also tackle one of the UN SDGs as a core cadence of their product.

“Currently, many big problems need hardware-based solutions, which are harder to scale and offer longer return cycles. So the way VCs operate will have to change somehow to facilitate this.”

– Founder

The bottom line is that traditional VCs still overlook deeptech. Alternative funding paths are important, but insufficient. As a result, Europe runs the risk of missing out on revolutionary, meaningful technologies. We simply can’t afford that for much longer.


The potential role of corporations in the deeptech ecosystem extends far beyond investments. Many established companies have the expertise, technical capabilities and market access to unlock the potential in startups that are developing revolutionary technologies.

However, corporate-startup collaborations are still held back by a lack of knowledge about best practices, and in some cases, by prejudice. Companies on both sides of the chasm aren’t sufficiently aware of the potential that collaboration poses, and poorly executed projects may have led to suboptimal experiences. What’s more, the disruptive nature of startups causes occasional tension. Young companies may be worried that corporations are out to leverage their IP in a predatory manner, whereas corporates may be reluctant to give emerging competitors access to their customers.

Moreover, in their whitepaper, WEF states that startup reservations include a fear of losing funding in case of changes to the corporate’s strategy, and a concern about top-down treatment. Corporates, in turn, struggle with trust without references and the ‘not-invented-here’ problem. Clearly then, mistrust takes many forms and hinders fruitful collaboration.

“There is lots of mistrust between startups and corporations, as startups are worried that corporations could be trying to steal their IP instead of working with them.”

– Founder

However, overwhelmingly, the demand for corporate collaboration seems to be there on the startup side. At Slush 2019, 63% of all startups mentioned that finding partners was one of their main expectations for the event. A similar number; roughly two thirds, filled out a separate application about the way in which they wish to engage with corporates at Slush. That data holds some interesting insights.

While software startups are primarily looking for market access, hardware companies actually prioritize co-development and expertise alongside the access to corporate funding.

The help that hardware startups look to corporations for changes radically once they’ve overcome the early valley of death. While working on their product, startups overwhelmingly need corporations for funding and co-development. Once they are ready to hit the market, those needs fade, and access to customers becomes the priority.

To some extent then, our data suggests that it will be up to corporations to unlock the potential that startup collaborations pose.

Working with Founders Intelligence and Startup Europe, Nesta, a UK-based innovation foundation, noted three key findings about corporate-startup collaboration in their Winning Together guide: corporates from all sectors can greatly benefit from startup collaboration, startup programs are not reserved for the world’s largest corporates, and most startup programs started small and expanded over time. Their case studies also shed light on examples of European corporates successfully achieving diverse goals through startup collaboration programs. These range from driving a cultural change and creating an innovative brand to solving core business problems and expanding into new markets.

Collaborative innovation is a positive sum game. However, we need a change in attitudes on both sides of the table, and education about best practices. If done right, corporate-startup collaborations will unlock an incredible amount of potential in our most promising young companies, and allow corporations to take part in the benefits.


It’s evident that revolutionary innovation doesn’t come about in silos. Alongside young ventures, governments and universities are quintessential to the efficient creation of complex technologies.

“Thinking about the big energy issues, nuclear fusion for example, it’s not something that you’re going to make happen in your garage. Universities are still the place where the groundwork for solving the problems of humankind happens.”

– Founder

Startups are a great vehicle for taking revolutionary innovation to market, but need to leverage the technology and talent that reside in universities. What’s more, the incredible pace at which young ventures disrupt our lives leaves insufficient room for introspection and ethical considerations. Without good regulation put in place by legislators, startups run the risk of wreaking havoc in society.

“I’m very worried about a world in which some mobile companies and platforms are more powerful than governments.” 

– Founder

WEF provides an example of a deeptech company; Quintessence Labs, that was born out of founder Vikram Sharma’s idea to explore the commercialization of the quantum sciences. The research was conducted in university labs with government funding as the market matured, while the search for corporate partners began in the early phases of the company’s journey. Looking back, Sharma acknowledges the essential roles of academia, government and private industry in his company’s success.

This exemplifies how each actor in the trichotomy holds mutually exclusive capabilities and responsibilities. Because of this, the deeptech ecosystem relies on efficient models of collaboration between young ventures and surrounding society.

Today, innovation efforts remain all too fragmented between the three.

“Startups need to partner with industry to address the range of problems we face. Then, the government needs to decide where to place their bets, which kinds of innovation incentives to create? How about project funding or tax incentives for projects with high technical risk?”

– Founder

With that, let’s dive deeper into the ways in which startups should collaborate with academia and government.

Universities – research, IP & talent. Much of mankind’s best knowledge resides in universities. When it comes to frontier science in particular, universities have unparallelled research, IP, and human resources.

“A time is going to come when universities and startups work together to push frontier research and solve complex problems. Universities are going to be the most central actor in developing the ecosystem in the right direction.”

– Founder

However, academia alone rarely turns science into products that benefit humankind, and even more rarely takes those products to a material scale. This has led to various structures for spinning off promising technologies into startups, with varying success.

According to Global University Venturing, university spinouts globally saw 886 investments totaling $13B in 2019, and led to 67 exits worth a combined $20.8B.

In the US, there’s a longer history of collaboration between universities and the startup ecosystem. According to an article in WSJ, while US research institutions began spinning out tech companies three decades ago, European universities have been slower to exploit commercialization. Silicon Valley was formed around the campus of Stanford University, and according to research by Ideas 2 Impact and Octopus Ventures, MIT has been the genesis for more than 26,000 companies. Today, those companies account for 3.3 million jobs and a combined annual revenue of $2 trillion.

Europe has recently started catching up in this department. Notably, Global University Venturing named ETH Zurich the world’s most consistent spinout university for producing over 20 companies annually since 2007. However, their data, as referenced in State of European Tech 2019, also shows that spinout activity is minimal outside of Switzerland and the UK.

The shortcomings are well-recognized on both sides of the table. Across the board, respondents to the State of European Tech 2019 survey took a rather negative view of the commercialization efforts of European universities. Researchers themselves were actually more critical than founders and startup employees.

“Academia really needs to be involved in the startup innovation process. The problem is that universities don’t have people who understand business”.

– Founder

However, when asked to elaborate on their reservations about founding or joining a company, European researchers overwhelmingly pointed to the lack of funding. This, once again, unmasks the shortcomings of our funding ecosystem in pulling out the brightest ideas from academic institutions.

This is a worrying fact. State of European Tech pointed to the importance of the talent pipeline that universities offer, establishing a correlation between the density of researchers and developers, and the volume of deeptech investment across European countries.

During the next decade, we need to find efficient models for spinning out companies from universities across the European continent. What’s more, both sides of the table need to work exceptionally hard to bridge the gap for researchers to found and join startups.

“You will see even more close collaborations between startups and universities; in some cases, the distinctions may become harder to determine.”

– Operator

Government – regulation, investments in R&D, funding. Governments enable much of our deepest innovation. They identify national and continental priorities, match them with capabilities and provide funding for projects that aim to solve our most pressing problems. Once those projects hit the market, it’s essential for them to ensure that regulatory choices keep up with the pace of innovation.

“On the NASA Technology Readiness scale, governments are able to push through levels 1-4. After that, you need a company.”

– Investor

In the past, the US and China have been leading the way in aggressive investments into basic research and startup collaboration.

In Europe, there’s still room for improvement. According to a report by BusinessEurope, one of the EU’s most influential corporate lobbying groups, anything below the EU’s proposed R&D spending target of 3% of GDP would not be enough to address the EU’s innovation deficit and to compete with China.

“The UK, the EU and the EU nations individually massively underinvest in science compared to China, and actually still compared to the US. They’re pretty much putting money into farmers, and not putting money into fundamental science and tech, and that needs to be sorted at the Brussels level.” 

– Founder

Now, pan-European policy seems to have come to the rescue. Namely, the EU is planning to address the innovation deficit through the European Investment Council; currently in its pilot phase. Once rolled out in full, the council will look to invest €3.5 billion into startups working on revolutionary innovations. The European Commission’s Director General for Research and Innovation, Jean-Eric Paquet, spoke about the initiative at Slush 2019. He specifically mentioned that the fund would seek to fill the void left by traditional VC firms who tend to avoid the costly and risky research needed to turn a scientific breakthrough into a viable product and thus help startups through “the famous innovation valley of death”.

However, the role of government in the ecosystem should not just be expansionary. Revolutionary innovations have revolutionary implications for all of society. If those consequences aren’t addressed, our technological utopia runs the risk of turning into a dystopia.

The next wave of revolutionary innovations will have an impact across factions of society, including elections, the military, national security, and healthcare. Additionally, new biotechnologies like CRISPR place us at the brink of human enhancement, calling to question the very nature of humanity.

Regulating emerging technologies has always been challenging. However, the vector of innovation points towards complexity, rendering each consecutive generation of discoveries more ungraspable than the previous.

“Governments have a really hard time, because technology is moving so fast. So it’s hard to even understand what’s going on, and even more difficult to regulate it.”

– Founder

What’s more, the pace at which innovations take over markets has accelerated exponentially. According to an article in Visualcapitalist, Airlines took 68 years to reach 50 million users, the telephone took 50 years, computers took 14 years and the internet 7 years. Recently, WeChat reached this same milestone in just one year. As Deloitte put it, “the assumption that regulations can be crafted slowly and deliberately, and then remain in place, unchanged, for long periods of time, has been upended in today’s environment.”

To get the best of both worlds, governments should create regulation that encourages innovation while considering ethics. The respondents to the State of the European Tech survey in 2019 considered Disinformation, AI, and Data Privacy the areas that most urgently require increased regulatory attention.

“I absolutely believe that private sector private companies are going to have to be driving our deepest technological innovation. Governments can do a lot, but this should mostly be through good, transparent regulation and clear signals in the market.”

– Investor

In many ways, startups are at the centre of the deeptech innovation ecosystem. They push other actors forward at a speed that might otherwise remain unachieved, and thus accelerate innovation. At the same time, startups alone are far from enough. Academia and governments have plenty to offer, from knowledge and funding to human resources and regulation.

Above all, one thing is clear. Through an interlinked, multidisciplinary and collaborative world, human progress can reach a previously unseen pace during the next decade.