INSUBCONTINENT EXCLUSIVE:
The rapid pace of technology innovation and applications in recent decades — you could argue that just about every kind of business is a
&tech& business these days — has spawned a sea of tech startups and larger businesses that are focused on serving that market, and equally
demanding consumers, on a daily basis
Today, a venture capital firm in the UK is announcing a fund aimed at helping to grow the technologies that will underpin a lot of those
daily applications.
Cambridge-based IQ Capital is raising £125 million ($165 million) that it will use specifically to back UK startups
that are building &deep tech& — the layer of research and development, and potentially commercialised technology, that is considered
foundational to how a lot of technology will work in the years and decades to come
So far, some £92 million has been secured, and partner Kerry Baldwin said that the rest is coming &without question& — pointing to strong
demand.
There was a time when it was more challenging to raise money for very early stage companies working at the cusp of new technologies,
even more so in smaller tech ecosystems like the UK&s
AsEd Stacey, another partner in the firm acknowledges, there is often a very high risk of failure at even more stages of the process, with
the tech in some cases not even fully developed, let alone rolled out to see what kind of commercial interest there might be in the
product.
However, there has been a clear shift in the last several years.
There a lot more money floating around in tech these days — so
much so that it created a stronger demand for projects to invest in
(Another consequence of that is that when you do get a promising startup, funds are potentially giving them hundreds of millions and causing
other disruptions in how they grow and exit, which is another story…)
And while there are definitely a lot of startups out there in the
world today, a lot of them are what you might describe as &me too&, or at least making something that is easily replicated by another
startup, making the returns and the wins harder to find among them.
A new focus that we are seeing on &deep tech& is a consequence of both
of those trends.
&The low-hanging fruit has been discovered… Shallow tech is a solved problem,& Stacey said, in reference to areas like
the basics of e-commerce services and mobile apps
&These are easy to build with open source components, for example
It shallow when it can be copied very quickly.&
In contrast, deep tech is &by definition is something that can&t easily be copied,& he
&The underlying algorithm is deep, with computational complexity.&
But the challenges run deep in deep tech: not only might a product or
technology never come together, or find a customer, but it might face problems scaling if it does take off
IQ Capital focus on deep tech is coupled with the company trying to determine which ideas will scale, not just work or find a customer
As we see more deep tech companies emerging and growing, I&m guessing scalability will become an ever more prominent factor in deciding
whether a startup gets backing.
IQ Capital investments to date span areas like security (Privitar), marketing tech (Grapeshot, which was
acquired by Oracle earlier this year), AI (such as speech recognition API developer Speechmatics) and biotechnology (Fluidic Analytics,
which measures protein concentrations), all areas that will be the focus of this fund, along with IoT and other emerging technologies and
gaps in the current market.
IQ Capital is not the only fund starting to focus on deep tech, nor is its portfolio the only range of startups
focusing on this (Allegro.AIand deep-learning chipmakerHailo are others, to name just two).
LPs in this latest fund includefamily offices,
wealth managers, tech entrepreneurs and CEOs from IQ previous investments, as well as British Business Investments, the commercial arm of
the British Business Bank, the firm said.
