Amazon, Apple, and Google may have all started out of a garage, fueling the myth that all you need to start a successful tech company is a desk and a Wi-Fi connection.
But it’s not as easy as this for deep tech companies.
These companies are producing IP-intensive science-based innovations as they attempt to solve some of the world’s most pressing problems, such as transforming agricultural and food practices to make them more sustainable, or tackling energy insecurity.
As a result, a few more pieces are needed in the deep engineering puzzle to move from R&D to industrialization and commercialization.
Specialized facilities and equipment
The engineering-based nature of deep tech companies means they often require highly specialized lab space, infrastructure and equipment.
In the earliest years, this is best offered in a university lab or research facility.
But once the company is ready to commercialize its findings, a dedicated incubator like Cicada Innovations can provide the specialized physical infrastructure and equipment, while also promoting scientific discovery and innovation and providing commercialization support – all in one ecosystem.
This prepares a deep tech company for the inevitable exit from the incubator when it may need to move up to its own dedicated manufacturing facility.
Cicada alumnus Invertigofor example, has graduated from building small-scale prototypes in Cicada’s lab to setting up large-scale production facilities outside the incubator to meet the growing demand for its indoor vertical farming pallets.
It recently partnered with Woolworths to launch Australia’s first in-store vertical farm and their technology will power the Sensoria Mars mission in NASA JPL’s HiSeas Simulator in Hawaii – no small feat!
A lot of (patient) capital
The hardware and R&D intensive nature of deep technology innovation equates to significantly higher capital requirements and much longer runways for ROI.
VCs and other investors therefore need a bigger, longer-term view to overcome the many years it takes to get TGA approval, or commission fully functional manufacturing facilities, or cancer treatment in hospital wards, just to name a few. to name a few examples.
And the payouts can be astronomical.
Take medtech company Cochlear, which listed on the ASX in 1995. If you had invested $1,000 in 1995 when their share price was $2.98your $1,000 today would be worth 66 times that amount.
If you had invested before they were listed – at the same stage that most of Cicada’s deep tech companies are in – your return on investment would probably have been over 1,000 times over.
And there are many companies today that could perform the same way for the next 10 to 20 years, especially in critical areas like climate technology. But it takes an investor who can tolerate the necessary patience.
Governments can also play a vital role in supporting early innovation through grants and also as early purchasers of the product – which I discuss in the next section.
Corporate supporters & customers
Large established companies and smaller agile technology companies can develop quite a symbiotic relationship.
Companies can support deep tech companies by being one of the startup’s first customers and buyers, or by collaborating to access data, labs, and/or production lines where industrial and technical capabilities complement each other.
Some of these companies may then continue to integrate the startup’s technologies into their own systems, creating a large amount of business value.
As an example, Cicada incubatee and zinc bromide battery storage innovator Gelion recently started industrial production of its gel-based zinc bromide battery through a strategic partnership with Battery Energy.
This partnership will help Gelion move from the start-up phase to the scale-up phase and meet the incredibly rapidly growing demand for its safer and more sustainable alternative to lithium-ion batteries.
Does this sound like you?
As you can see, deep tech startups require a complex ecosystem of infrastructure, equipment and supporting actors, including mentors, investors, legal support, governments, companies, universities and incubators, just to name a few.
The right environment can help turn innovation into commercialization, which is what we aim to provide at Cicada Innovations, where we are currently looking for the next generation of deep tech startups that will transform the world.
We welcome the following Gelion of Morse Micro to the Cicada Open House on October 19: you can register here.