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While each new business SaaS platform sees no end to increases in funding and valuation, some investors seem to be looking to the next frontier – or frontier technology – for new opportunities.
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“We were wondering who will invest in this business after us, when we started,” said Pierre Hébert, co-founder and managing partner of the New York-based company Luxembourg capital which specializes in deep technology. “Now there is a cornucopia of options after investing.”
Deep technology, also known as ‘frontier’ and ‘hard technology’, is the term used to refer to certain fields in industries like robotics, life sciences and space that rely heavily on advanced scientific knowledge and technology. engineering. Industry players say they believe a myriad of issues, including COVID, climate change and intensifying global competition, have raised the space in the eyes of many investors.
“I’m not sure it’s more competitive for investors,” said Chris Kim, Founder and Managing Partner of a San Francisco-based early stage deep-tech investor Union laboratories. “But there is definitely more attention being paid to the deep tech space.”
A quantum shift
Since advanced technology cuts across so many different and vast industries, it can be difficult to pinpoint a set of venture capital dollars to show trends in the field. However, a good indicator may be quantum computing, which has long been associated with investing in hard technologies.
According to figures from Crunchbase, investment in quantum computing – a level of computation much faster and on a higher level than conventional computers that examine quantum states to perform calculations – has already reached record levels this year as it looks set to surpass $ 1 billion. funding.
So far this calendar year, more than $ 728 million has been invested in the sector, already surpassing the $ 515 million that space saw last year. These figures include those based in Palo Alto PsiQuantum$ 450 million Series D in July that earned the company a valuation of $ 3.1 billion.
Investors seem optimistic about what the quantum might mean in areas such as financial services, security and life sciences.
“This is something that will be necessary,” said Peter Barrett, general partner at Palo Alto, based in California Global playground, one of the first investors in PsiQuantum. “We know that (the company) will have an influence on our company.”
While investment in quantum computing may show how much investment in advanced technology is increasing, other sectors associated with hard technology have attracted strong investor interest as private markets remain inundated with cash and everyone is looking for new opportunities, sometimes overlooked. Of the explosion of the space technology industry in therapeutics, dollars continue to flow into these areas.
Robotics is another good illustration. As the sector has grown far beyond its deep technological roots of a decade or two ago to become more mainstream, investment capital in the science and engineering sector continues to grow. flock. Already this year has seen more investment dollars – $ 8 billion – than in any previous year, according to data from Crunchbase.
Why now?
While it is easy to say that these different sectors of hard-tech are setting historic records due to the massive increase in venture capital funding everywhere, those who have invested in space for years say recent events have cast more light on the region.
Not surprisingly, the COVID pandemic is one of those turning points.
“Overall, COVID has had an interesting effect on what people want to invest in and do with their lives,” Barrett said.
The pandemic has sparked increased interest in investments in life sciences and therapeutic companies, said Barrett, whose company just completed its second investment in Cambridge, Massachusetts. Therapeutic Strand; a $ 52 million Series A in June for the company developing a platform for creating mRNA drugs.
Others in deep tech are also noting the increased interest in the life sciences. Lux has deployed around 40-50% of its most recent fund in companies Hebert describes as being at the intersection of IT and life sciences.
Matt Ocko, co-founder and co-manager of the San Francisco-based company DCVC, said his company, which has been investing in different aspects of deep technology for more than two decades, currently has around three-quarters of a billion dollars invested in computer biotechnology. DCVC was one of the first investors in the development of new generation therapeutic antibodies AbCellera, which was released to the public at the end of last year.
Areas related to COVID outside of health and life sciences, such as robotics and automation, have also shown their popularity.
“People were interested in this area before COVID because it was cool,” Kim said. “Over the past two years, people have seen the need for strict automation through robotics” due to the disruption of the workforce.
Other fields like climate technology have been popular for over a decade, but the deep tech strategies surrounding it have changed and sparked new interest. While electric cars were popular a few years ago, today advanced tech players – and many other industries – are considering other decarbonization technologies as the Next Frontier.
“You are also seeing a much broader interest here now,” said Thomas lee, Director of Innovation at Union Labs. “It’s not just an industrial interest, but the consumer and the retail business. “
A little risky
While venture capital was once associated with risk and a single vision, more and more money in the risk world seems to go to companies with a must-have SaaS model and an ever-expanding corporate market. . Investing in deep technologies is different, and those who invest in them freely recognize the risk involved.
“We are underwriting deep technical risk and deep clinical risk,” Barrett said.
“We have no idea of the market risk,” he laughed.
Barrett said he still sees large venture capitalists staying away from the early stages of most companies he plans to invest in, but that has no effect on the philosophy of the company to invest in relation to its technological roadmap.
“We look at things between the improbable and the impossible,” he added. “Why would I be working on a social media app when I could do something worthwhile? “
Likewise, Kim said he came to the Bay Area during the first dot-com bubble in the late 1990s, which featured a much more simplistic startup ecosystem built mostly around the consumer market.
“I am totally indifferent to this today,” he said. “Part of a VC’s job is to take a risk. You have the ability to influence the world.
Despite the risk, that doesn’t mean deep tech can’t provide feedback, Ocko points out.
“When you save millions of lives, you never run out of customers,” he said.
“It is entirely possible to be fair to society and very profitable for your investors,” he added.
Methodology
Robotics and Quantum Computing funding figures include pre-seed, seed, and all venture capital rounds.
Drawing: Dom guzman
Keep up to date with the latest rounds of fundraising, acquisitions and more with Crunchbase Daily.
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