10 takeaways – Deep Tech Network Investor panel

Our top 10 takeaways from the first investor panel event for the Deep Tech Network on 1 May.  A must-read for deep tech startups and scaleups in fundraising mode.

Held in the slightly impenetrable, certainly secure Sir Michael Uren building, with just under 100 in attendance, we had a good mix of founders from the White City ecosystem and beyond, a handful of corporates and also university professors and students trying to get a taste for what’s to come, if they embark on a career as entrepreneurs.

Brilliantly chaired by John Anderson, Imperial’s Chief Investment Officer, this first one had a deliberately wide panel that spans the width of deep tech. Future investor panels will be focussed on specific verticals e.g. biotech, cleantech.  

Big thank you to our panel for their contributions and for sticking around till the end to speak to the long line of attendees:

• Manjari Chandran-Ramesh (Partner, Amadeus Capital)

• Jonny Clifford (Partner, Entrepreneur First)

• Adrian Dan (Acting Chief Commercial Officer, NATO Defence Innovation Accelerator for the North Atlantic – DIANA)

• Amy Nommeots-Nomm PhD (Early-stage deep tech investor, Octopus Ventures)

First thing to say is that it’s a complicated life: plenty of rejection, plenty of failure, uncertainty etc. But, as one of the panellists said: “If you are going to be making a disproportionate impact on the world (and to your personal finances), you’ve got to appreciate it’s not going to be a walk in the park”.

The event was sold out, as it’s increasingly the case in White City, so here’s a recap for everyone who did or didn’t make it:

1. Definition of Deep tech: The best was by Amy Nommeots-Nomm at Octopus: it’s about the defensibility of your tech against competition and if your core technology is cutting-edge, that defensibility is great and helps protect your business.  And you’re also definitely a deep tech company.

2. It’s not about the tech but the problem and the market size: Deep tech co-founders who want to attract investment should focus not just on the tech but on the problem it solves and for what customer. Oftentimes, VCs are presented with “a great piece of tech which is looking for a problem or a market” – this doesn’t fly. Also, is the problem experienced by a large enough market? How big can this idea be? If it’s niche, that isn’t going to fly either.

3. Technical vs Commercial co-founders: The ideal composition of the co-founding team can vary, and there is no fixed rule. If you are a technical founder – and some VCs find that preferable in DeepTech ventures, as it’s hard to hire “technical superstars” at the start of a venture’s journey, you need to avoid the pitfall of spending too long on building the tech and not long enough building the market. Be aware of your limitations and lean on commercial counterparts.

4. The 10x aspiration: Success for VCs doesn’t exactly equal business success. VCs take a portfolio approach, with up to 20 ventures sitting in one fund at any given point. Of these 20, only 2 or 3 (5 if you are lucky) are going to be “a VC success” – i.e. delivering the 7-10X returns that VCs aspire to. However, most companies will sit in the 2-5X bucket, and if you are one of those, you are not a failure, you are still doing really well!

5. Failure is success in progress. We pin so much of the narrative on unicorns and VC-successful ventures (see point above). However, most founders will fail before they succeed and we should be more open about the number of failures in the industry. In the US, failure is seen as a more natural part of the process, and founders who have failed are valued because they have experience and will fail less the next time

6.Don’t be defeated, persevere: VCs’ job is to meet ventures. However, for the 1500 teams they meet every year, they will only invest in 6, and don’t have time to provide detailed feedback to the remaining 1,494. What then can you do to engage with VCs and get a response? Most VC websites will give you a pretty accurate indication of what they are interested in, so read before getting in touch. Don’t discount your university’s Technology Transfer Office: they speak to VCs all the time. Then try LinkedIn. Failing all that, the best way is to get face to face, so find an event where they are speaking and corner them at the break, when they have pizza in their mouth!

7. Syndicates are in: If you can, avoid having a single CVC and don’t allow your technology to be owned. Aim for 2 or 3. In deep tech this isn’t unusual, investors know the development cycles are hard and long, and they don’t mind sharing the journey.

8. The criteria for early-stage valuation can vary, depending on whether it’s software (the KPIs are the typical ones you’d expect: conversion rate, pipeline) or hardware (harder, as it takes time to embed into product metrics). Some VCs will stick to standard KPIs. Others will call your customers to get qualitative insights. Others will base the valuation on “how much money they reckon you’ll need in the next 18 months”. Others – especially for Tech going into a known market- will look at previous examples and extrapolate. The reality is that it’s still very much a “finger in the air” or “back of envelope calculation” while at seed level, and obviously it depends on how competitive the round is, and how many other investors are interested in you!

9. VC isn’t the only way forward: There are MANY grants out there which are not dilutive – especially if you are affiliated with an academic institution. And NATO’s Defence Innovation Accelerator for the North Atlantic (DIANA) based here in White City provides funding to deep tech, dual-use innovators. It also helps derisk it for VCs making you more attractive to them. 

10. Land of the free money, home of the brave: Do you really need to go to the States to grow? The answer is still yes, if you want to scale you probably need to move there. Why? Probably a combination of more capital available, VCs have been in existence for much longer and have seen more cycles through so they are more established. The market is larger, failure is seen as a necessary stepping stone, and there’s a more entrepreneurial mindset.

Thanks to Cat Rigoni for this write-up!