2021: The year of Deep Tech

European deep tech companies are now worth a combined €700B. 

A new report published as part of the two year European Startups project, in collaboration with Sifted, supported by the European Commission and European Parliament, shows that deep tech – including Artificial Intelligence, blockchain, robotics and quantum technology – now accounts for a quarter of all venture capital investment in Europe.

Some stats

• European deep tech companies are now valued at a combined €700B
• The UK, France and Germany lead for deep tech investment in Europe, raising €12.0B, €5.1B and €5.0B respectively since 2015
• Europe’s most deep tech focussed ecosystems are Finland and Norway, where over 40% of all venture capital goes to deep tech startups
• Deep tech accounts for a quarter of all European venture capital – €10B in 2020
• Deep tech startups take more time to develop, but are just as likely to successfully exit as other tech companies

Frontiers of innovation

Breakthroughs in deep tech are set to define a generation’s worth of innovation.

Famously last year, Mainz-based biotech company BioNTech created the first ever mRNA-based vaccine used to combat Covid-19. Their journey though extraordinary in impact and outcomes, was typical of a deep tech startup. Spun-out of a university, they received EU funding, went through long R&D phases, before finally finding transformational technical success and market fit. 

The difference with deep tech

The report shows that deep tech startups follow a different growth trajectory than other tech startups. Deep tech startups have longer R&D cycles, and take more time and capital to build than regular startups. 

But despite the higher perceived risk, deep tech startups are no more likely to fail than tech companies, and have roughly the same (or slightly higher) exit probability.

Deep tech nations

Within Europe, startups in the UK, France and Germany lead for deep tech investment, raising €12.0B, €5.1B and €5.0B respectively since 2015.

However, Europe’s most deep tech-focussed ecosystems are Finland, Norway and Austria, where a higher percentage of all venture capital is being channelled towards deep tech startups – nearly 40% in Finland and Norway.

Competing the the deep tech era

Many deep tech success stories have their roots in academia and drew early support from government grants. Europe’s universities and research really are world-class, yet there’s a lot more potential to be unlocked. The commercial gap with China and the US can be closed by fostering an entrepreneurial culture on campuses, training first-time academic entrepreneurs and tech transfer officers, and offering spinouts simpler and faster deals.

Closer collaboration is needed to support Europe’s most promising Deep Tech startups. Some of the most successful startups will manage to break through silos by combining disciplines, while attracting different talent and investors across stages of development. 

Successes like BioNTech demonstrate the importance of early support from governments and universities. Such programs need to be streamlined to really attract Europe’s top talent.

Meanwhile, Europe could benefit from replicating some of the large scale long-term strategic R&D approaches of the US (DARPA) and China, to ensure tech leadership (outside academia) in areas which are going to become important in 2035+. Because as Marc Andreessen wrote, “It’s time to build.”

We’d like to thank the following people for contributions and conversations that helped shape this report, including: Stephen Nundy (Lakestar), Dr. Inga Deakin (Draper Esprit), Nathan Benaich (Air Street Capital), Rodolfo Rosini (Undead), Julia Hawkins (LocalGlobe), Suranga Chandratillake (Balderton), Siraj Khaliq (Atomico), Nicolas Colin (The Family), and Gil Dibner (Angular Ventures).