Deep tech startups usually spin out from new technologies developed within universities, CRI’s and within private companies. These startups often have protectable IP (patents or trade secrets), extensive datasets (barrier to entry), or research expertise (difficult to copy). Startups commercialising complex IP are often capital intensive, requiring substantial up-front investment to develop their product and business. Once established, however, their value can be significant – think RocketLab or Soul Machines.
In the last few weeks I’ve heard various definitions of what deep tech, exactly, is. I quite like this one from Matū Group’s Ken Erskine. “Deep tech is a startup which is investing in a technology involving some form of R&D which relates to and leads into patents being able to be issued – there is a deep research element of the startup. This is important to us because we look for that core value of a company that is growing IP whilst meeting global challenges and opportunities, and is able to make the world a better place”.
Ecosystem in Aotearoa
Good ideas need a healthy ecosystem that bring together a diverse mix of skilled people, capital, and resources. The government’s Commercialisation Partner Network (CPN) builds the capability to turn science innovation into commercial products and services with a Commercial Centre led by KiwiNet and Auckland Uniservices programmes Momentum and Return on Science Investment Committees.
Funding through Callaghan’s Technology Incubator Programme also provides an avenue for deep tech startups to access pre-incubation grants and non-dilutive repayable loans for commercialisation activity. These tech incubators WNT Ventures, Bridgewest Ventures, Brandon Capital Partners and Sprout specialise in different sectors, offering business incubation and investment
The pipeline is certainly strong within the University of Canterbury, with the Research and Innovation team supporting researchers to spin out a range of innovative companies. Founding teams tend to be technically strong with business capabilities needing to be developed along the commercialisation journey. Local innovation ecosystem support includes that of economic development agency ChristchurchNZ for capability development through programmes and sector challenges – such as the recent Food, Fibre and AgriTech Challenge delivered by UC Centre for Entrepreneurship. The upcoming Showcase and Awards Ceremony (21 June in Ōtautahi, Christchurch – register here!) includes both research and enterprise ventures.
Deep tech investment has a longer-term investment horizon for professional and wholesale investors in a relatively illiquid asset-class. Matū Group’s IPO last November of the Matū Iramoe ‘feeder fund’ on the Catalist platform provided a mechanism for retail ‘mum and dad’ investors to invest in an established deep-tech VC fund with a minimum investment amount of $1,000. Matū Karihi is the fund that Matu Iramoe invests into, with a strong portfolio of companies.
Catalist itself is a licensed and regulated stock exchange designed for small and medium-sized businesses. The Catalist platform enables liquidity due to the mechanism of periodic auctions, with investors able to realise capital gains in the medium term. Matū Iramoe has indicated a quarterly auction frequency, alternating capital raise and secondary trading.
Taking research to the world
Back to Soul Machines. I’ve followed the journey from Mark Sagar’s ‘BabyX’ research with the Laboratory for Animate Technologies at the University of Auckland, through to CEO Greg Cross’s announcement last week of the launch of their new Entertainment Division. Getting the right people and capital on board has enabled the company to re-imagine how real & virtual humans can connect in today’s digital worlds and the metaverse. Making the world a better place, indeed.