The Deep Tech investment paradox

Deep Tech represents scientific and engineering breakthroughs that address global challenges like climate change, resource scarcity, food security, energy transition and healthcare. These technologies—ranging from advanced AI and quantum computing to biotechnology, robotics, nanotechnology, and clean energy systems—have the potential to reshape industries and create entirely new markets. However, the commercialisation journey for Deep Tech startups is fraught with unique challenges, including long development cycles, heavy upfront investment, and significant technical risks compared to traditional tech ventures.

Unlike conventional startups, Deep Tech ventures require longer development phases, often facing substantial R&D efforts before reaching product-market fit (PMF). These ventures typically need 35% more time and 48% more capital than traditional startups to generate revenues. For example, the average time to Series A for Deep Tech startups is approximately 18 months longer than for software startups. This means Deep Tech founders and their investors face higher dilution and more capital-intensive scaling journeys. Additionally, the teams driving these startups often come from academic or scientific backgrounds, which, while providing the necessary technical expertise, may lack the commercial experience needed to scale successfully. Beyond team and capital challenges, Deep Tech startups also face heightened technology risk. Cutting-edge technologies do not always function as intended, adding another layer of uncertainty to the already complex equation of commercialisation.

Europe’s strategic position in Deep Tech

Despite these hurdles, Europe is uniquely positioned to become a global hub for Deep Tech excellence. In 2023, venture capital (VC) funds in Europe invested more than €10 billion in early-stage Deep Tech startups, reflecting a growing interest in supporting disruptive innovations. The continent boasts strong foundational research, with six of the world’s top 20 computer science institutions located in Europe, and a well-educated talent pool with nearly 1.5 times the number of STEM graduates compared to the US. Europe also leads in intellectual property protection, with more than 193,000 patents registered in 2023 through the European Patent Office (EPO), a significant percentage of which are linked to advanced technological innovations in Deep Tech. In addition, public sentiment is also highly supportive, with 90% of Europeans recognizing the positive influence of science and technology on society.

The innovation valley of death

One of the biggest challenges for Deep Tech startups is navigating the Innovation Valley of Death—the critical phase between early-stage research and commercial viability, where funding often dries up. Private investors, particularly venture capital firms, tend to shy away from this stage due to the high uncertainty and long timelines required for technological validation and market adoption. As a result, many promising Deep Tech ventures struggle to secure the resources they need, even when their innovations have transformative potential. In Europe, most Deep Tech venture funding at the pre-seed (€0-1m), seed (€1-4m), and Series A (€4-15m) stages comes from domestic investors, leaving a significant funding gap for startups attempting to scale.

The role of EU public funding in bridging gaps

This is where public funding, like the European Innovation Council (EIC) Accelerator, becomes vital in Europe. While private venture capital often focuses on startups with quicker returns, the EIC specifically targets Deep Tech companies in the Innovation Valley of Death. The EIC offers up to €17.5 million in a combination of grants and equity to help these startups overcome funding gaps, validate their technologies, and scale towards commercialization. Since 2021, the EIC has awarded over €4 billion to 631 companies, addressing the funding gap that exists at this critical stage of development. By de-risking breakthrough innovations, public funding makes these companies more attractive to private investors, helping them to secure later-stage investment and avoid stagnation. In addition, the Commission has recently launched a Trusted Investors Network bringing together a group of investors ready to co-invest in innovative deep-tech companies in Europe together with the EU. These investors will work together with support from the EIC to boost investment and exchange best practices when investing in the deep tech sector.

Euro-Funding’s expertise in the EIC Accelerator program

Successfully navigating the EIC Accelerator application process is no easy feat. It requires a compelling demonstration of breakthrough technology, a robust business case, and a clear societal impact. Applicants must balance technical depth with commercial viability and prepare a persuasive pitch for a jury of experts—a time-consuming and resource-intensive process. At Euro-Funding, our expert team brings over 60 years of combined experience across diverse fields, including health and biotech, advanced AI, cleantech, energy, nanotechnology, agritech, and advanced materials. Specializing in the unique challenges of Deep Tech, we guide companies through this complex process. From refining their value proposition and business plan to crafting a winning pitch and addressing the EIC jury’s stringent evaluation criteria in the interview stage, we provide end-to-end support to help them succeed.

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