5 Deep Tech Trends Which Founders Need to Know About

The European Innovation Council, a body which supports high-impact, super-disruptive technologies in the EU, recently announced a massive €331 million investment windfall for an eclectic range of startups. What they have in common is that they’re all deep tech companies, and the announcement underscores how much interest deep tech is generating in 2023.

Deep tech startups are those whose business model is based on revolutionary technological innovation, rather than simply delivering their own versions of pre-existing technologies.

Research and development is a core component of deep tech companies, and they often require substantial capital investment before making it to the monetisation stage. Therefore, there tends to be a significantly higher level of risk attached to deep tech investments. But, if and when the hard work pays off, deep techs can potentially invent whole new markets and make incredible social and environmental impacts.

A report published by Dealroom, Lakestar and Walden Catalyst Ventures in early 2023 revealed that the deep tech sector was a strong magnet for investment last year, raising $17.7 billion. That’s an impressive 60% increase on 2020. So what are some of the key trends within deep tech that anyone working in tech should be aware of?

According to the 2023 report, one of the most significant emerging verticals within deep tech is what’s classified as “future computing”. It’s ushering in the most transformative period since the advent of the microchip, with quantum computing startups continuing to making headlines in the tech media.

One of these is ORCA Computing, which last year closed a $15 million Series A round and sold its first quantum system to the Ministry of Defence. Similar British startups will soon be benefitting from backing courtesy of a £2.5 billion investment programme that’s being launched by the UK government.

The future computing category also includes the lesser-known, but incredibly exciting, world of DNA computing, where scientists and engineers are researching ways to incorporate biological molecules within computing devices. While this sounds like the stuff of science fiction, it’s a standout example of the radical reach of deep tech today.

The challenges of recruiting the right staff have been well documented in the post-pandemic, post-Great Reshuffle era. Deep tech is heralding a new age of automation when it comes to onboarding talent, with comprehensive machine learning tools promising key benefits like speeding up the process of sifting through CVs and removing unintentional bias from the decision-making process.

Indeed, a recent survey of HR professionals found that 79% believe that AI will soon be advanced enough to make both hiring and firing decisions, which would represent a sea change in how companies function. (Other recent trends in HRTech can be found in our recently published M&A report into the sector.)

With the rapid acceleration in demand for electric vehicles, not to mention an energy crisis that’s had such a huge impact on industries, economies and ordinary people’s lives, it’s not surprising that deep tech innovations in battery technology are very much in the spotlight.

The race is on to create more efficient, sustainable and eco-friendly alternatives to lithium-ion batteries, with startups in this space enjoying big investment. An example is Mumbai-based firm Gegadyne Energy, which is developing non-lithium battery technology for EVs and other applications. Utilising carbon derivatives, the company has received over $5 million in investment so far.

Another company that’s been attracting interest is Vancouver-based Mangrove Lithium, which as its name suggests is keeping with the lithium-based model, but has developed ways to refine the metal from more diverse sources in a way that requires fewer chemicals and generates less waste. It’s raised more than $25 million from backers including BMW’s investment arm.

While AI is still synonymous in the public consciousness with instant artworks and eerily life-life chit chat, its applications across many different verticals are going to become ever more apparent. In 2023 and beyond, it’ll be hard to conceive of an industry which won’t be radically transformed by AI.

Manjari Chandran-Ramesh of Amadeus Capital Partners has pointed to “agriculture, healthcare and cybersecurity” as three verticals that are particularly poised for revolutionary changes. And, as for generative AI, we’ve so far seen the tip of the iceberg. Antoine Blondeau of Alpha Intelligence Capital anticipates that it will “evolve into a plethora of content possibilities, including interactive and dynamic content as well as movies that adapt to each viewer.”

Last year, PwC revealed a striking fact: that more than a quarter of all VC funding had gone to climate technology. We can therefore expect to see some incredible advances in climatetech in 2023 and beyond. Much focus will be placed on companies working in green hydrogen, which is produced by splitting water into its constituent elements (hydrogen and oxygen) using renewable energy.

Government bodies like the US Department of Energy have announced major funding pools for green hydrogen innovators, and one of the standout technological milestones of last year was the launch of hydrogen-powered trains in Germany.

It’s estimated that the green hydrogen market will exceed $7 billion by 2027 – rich pickings for impact startups that have the vision and expertise to deploy this sustainable technology in bold ways.