Deep Tech: Transforming the Technology Investment Landscape

Technology has invaded all fields of human activity; almost any startup is identified as a technology innovator. However, it is important to differentiate between businesses that work by applying technology and those that generate a genuine technological and scientific breakthrough with business implications, today identified as Deep Tech.

According to Swati Chaturvedi, who coined the term “Deep Tech”, they are "companies that are founded on a scientific discovery or genuine technological innovation" and aim to improve the world.

Focusing on fields such as advanced materials, biotechnology, and renewable energy, Deep Tech plays a crucial role in transforming key sectors and creating new opportunities for start-ups and entrepreneurs. In emerging economies worldwide, their role is becoming increasingly relevant as they have seen them as a unique opportunity to drive economic growth, innovation, and sustainable development.

The average Deep Tech investment has increased considerably, with many now reaching $100 million or more. According to a Boston Consulting Group (BCG) report, Deep Tech accounts for 20% of venture capital funding, up from 10% a decade ago, even though traditional and Deep Tech-focused funds offer similar unweighted internal rates of return (26% and 25%, respectively).

In Latin America and the Caribbean (LAC), the Deep Tech ecosystem is also experiencing remarkable growth. With 340 Deep Tech startups in the region, this sector is valued at $8 billion and has significant potential for further expansion. This growth not only represents an opportunity for entrepreneurs and investors but also has the potential to drive economic and social development in the region.

At the heart of this boom is a vibrant and diverse ecosystem of entrepreneurs, investors, academics, and industry leaders working together to drive innovation and technological progress. At a recent panel on Deep Tech at Mexico Tech Week, two prominent figures, Ana Laura Fernandez and Philipp Haugwitz, shared their insights and experiences on building and leveraging these ecosystems.

Ana, an experienced venture capitalist, highlighted the importance of generating significant impact through Deep Tech investment. "It's not only about financial returns but also about positively impacting society and the environment." He stresses the need to establish clear impact and sustainability metrics to evaluate the success of Deep Tech investments. He emphasizes the importance of "measuring impact from the beginning" to "evaluate not only the financial return but also the social and environmental value generated by technological innovations."

Phil, an expert in entrepreneurship and technology, highlighted the crucial role that collaborations and strategic alliances play in the development of Deep Tech companies: "It is essential that all players in the ecosystem work together, from startups and universities to governments and corporations". Phil also emphasized the importance of avoiding "impact washing" and "greenwashing", making sure that companies are actually generating a positive impact and not just using these labels as marketing strategies, as well as keeping in mind that "The Deep Tech ecosystem offers unique opportunities for growth and technological development, so it is crucial to foster specialized communities and support collaboration between diverse players to drive innovation in this promising field."

This reminds us of our incredible opportunity in emerging economies to lead the way in Deep Tech and innovation. With a large share of the world's population and abundant resources, we are uniquely positioned to drive technological development that benefits our communities and the world as a whole.

The phenomenon of reverse innovation demonstrates that we are already on the right track, with local talent returning home after training at the world's best universities. This, combined with the lower cost of developing basic science compared to G7 economies, gives us a unique opportunity to lead in crucial areas such as health, energy, and environmental sustainability.

The rise of Deep Tech is transforming the technology investment landscape, offering new opportunities for investors, entrepreneurs, and communities worldwide. Its future looks promising and full of possibilities for those who are willing to embark on this exciting journey into the future of technology.

It is time to harness this potential and work together to become global leaders in Deep Tech, leveraging our local talent and resources to create a brighter and more equitable future for all.

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