The world of deep tech investing is exciting. AI and its infinite number of applications are on the rise, gene therapies are curing incurable conditions, lithium-metal batteries are about to be eclipsed by their solid-state counterparts, and robots are on track to becoming as much a part of our day-to-day lives as our phones (which will eventually be fancy pieces of glass that serve as terminals as edge computing becomes obsolete).
And as more generalist investors start to call themselves deep tech investors, I can’t help but lament all of the founders and LPs they will inevitably fail. I’ve learned a thing or two investing in 39 deep tech companies over the past decade as both GP and LP. By directly investing out of my sovereign wealth-backed venture fund and allocating out of my own family office, I have a perspective few managers have. I can see trends at both company and fund levels.
So whether you’re an LP looking to invest in the deep tech space or a founder navigating the world of VC, having the answers to the following four questions is non-negotiable when selecting a deep tech fund manager and entrusting them with your future.
Is your fund manager relying on pivoting?
At the bare minimum, a capable deep tech fund manager understands the gap between a deep tech founder’s aspirations and a realistic product-market fit. An even better fund manager knows the chance of pivoting is minimal and acts accordingly during diligence and beyond.
A capable deep tech fund manager understands the gap between a deep tech founder’s aspirations and a realistic product-market fit.
Deep tech founders tend to be PhDs who have spent decades in labs researching the most niche areas, paving the way for some lofty commercial breakthroughs they intend to bring to market. And while they may be excellent researchers and innovators, they’re often not the most apt at understanding product-market fit.
This is where a deep tech fund manager steps in with a clear understanding of whether a fit exists. They don’t trust a founder’s assumptions or presentations unquestioningly because they know doing so is costly. Deep tech solutions take 9 to 12 months for an entire sales cycle to complete and prove product-market fit. There’s no room for pivoting if it fails. Aiming at the right market from the start is crucial.
Your job is identifying whether a manager has embraced the paradigm shift away from the B2B SaaS playbook. If they’re still “investing in great founders” without understanding what that means for deep tech, they have no idea what they’re doing. A good deep tech VC fund manager will thoroughly understand (and be able to explain) founder-market fit without relying on black box pattern recognition that cannot be explained or replicated . . . which leads me to my next point.
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