Three VC’s Tips for Investing in DeepTech

Venture capitalists aim to invest in innovation with the potential to change millions of lives. This can take many forms, from pure consumer plays, like on-demand dog walking, to crazier ideas, like interplanetary travel. While both could foreseeably grow to a scale that would return funds to the VC, one has a clear market while another is working to develop it.

Within the venture industry, there is a sub-sector of investors that focus exclusively on the latter, dubbed “DeepTech VCs.” This type of investing comes with some unique challenges, however, at least according to Sonny Vu, Zain Gulamali, and Jalak Jobanputra. These three VCs shared a stage at Web Summit on November 7th to discuss their strategies around backing some of the most futuristic technologies.

One main difference between these investments versus the average VC investment is the amount of time between capital being deployed to cashing in returns. As Jobanputra, Founder and Managing Partner at Future\Perfect Ventures, put it, “Any game-changing technology takes a really long time to get to market. And it’s not only about getting to market, but also the time needed for the market to adopt something entirely new.” A good example of this is decentralization, which recently emerged and is a focus for her firm. Jobanputra points out that our society is built on the need for intermediaries. Decentralization removes that need, but it will take time to be widely adopted as society must shift.

Another characteristic that sets this type of investing apart is the need to take a wider view in regard to finding emerging technologies. Per Vu, founder of the investment firm Alabaster, much of the more interesting developments are made outside of the oft thought of places. As he put it, “Some of the more prestigious places drive incremental change. Less well-known places are open to trying something wild.”

This point was supported by Gulamali, who is part of a venture team at Amazon that back startups leveraging voice technology. “Our firm has seen a lot of innovation outside of the usual places, like the US or Canada,” he said. “For example, the voice-based accelerator we run in partnership with Techstars saw over 40 countries represented in recent applications.”

So, what are the secrets to investing in DeepTech? While there are likely many, a tolerance of a longer time-horizon for returns and the ability to source deals from anywhere are things interested investors should keep in mind.