According to the latest insights from a report by Boston Consulting Group (BCG), deep technologies, aimed at addressing humanity’s most intricate challenges like climate change, food scarcity, and diseases, have significantly increased their share of venture capital funding. The report, titled “An Investor’s Guide to Deep Tech,” paints a comprehensive picture of the deep tech landscape, indicating a shift in investment patterns over the past decade.
Deep tech’s foothold in venture capital funding has doubled, claiming a stable 20 percent share today compared to a mere 10 percent a decade ago. Despite an overall decline in venture funding from $160 billion in 2021 to approximately $105 billion in 2022 and a further decrease to $40 billion in the first half of 2023—nearly reverting to 2020 levels—deep tech investments have maintained a resilient position.
Antoine Gourevitch, a managing director and senior partner at BCG and a coauthor of the report, highlighted the evolution of deep tech: “Once confined to the domain of high-risk, high-return enthusiasts, deep tech has now migrated to the mainstream of venture funding.” He emphasized the potential for substantial returns and the expanding markets unlocked by these innovative startups.
Despite this growth, deep tech investments pose unique challenges for investors due to the inherent nature of supporting technologies still evolving in their underlying science. These ventures typically take longer to mature, with an average of 25 percent to 40 percent more time needed between funding stages — from seed capital through Series D — compared to other tech investments. Additionally, the risk of failure at each stage is notably higher, underscoring the patience and risk tolerance required in this sector.
The report analyzed four key areas benefiting from deep tech investments: climate and sustainability, demographics, technology, and security. Noteworthy technologies like digital AI, autonomous systems, and advanced physics and chemistry, coupled with use cases spanning mobility, energy, climate, health, and wellbeing, are attracting substantial funding shares.
In terms of geographical distribution, the US and China emerge as leaders in absolute deep tech funding share, capturing over 60 percent and 12 percent, respectively. Europe collectively represents 14 percent of this investment landscape. Countries like Israel, Sweden, Singapore, and the UK are aggressively supporting deep tech development, as evidenced by BCG’s examination of deep tech funding relative to GDP.
Despite the challenges and risks associated, the rise of deep tech investments signifies an exciting convergence of technology, innovation, and addressing global challenges, promising transformative solutions in the years to come.