startups

What smart investors look for in deep tech startups – Wired.co.uk


Deep tech – or “frontier tech”, as the investment team at European VC firm Atomico prefers to call it – has innovation at its core. Ideas can be in development for years before germinating into companies, and even then investors may work with startups for a long period of time before deciding to follow up with funding.

“Over the course of a year we will tend to do three to four theses and deep-dive processes, where we end up deciding whether we want to pursue investments or not,” says Atomico partner Siraj Khaliq.

Part of the reason he is so selective is because deep tech is a moving target – something that is revolutionary one year will become the baseline for the next year. A founder needs to show investors that the company is worth what they think it’s worth, with evidence of meaningful progress and milestones for the future.

Khaliq is particularly interested in startups working on quantum computing and innovations in biology. The nature of deep tech means founders usually require a background in the subject matter before they can think about starting a company, or need to find a partner with the knowledge to put their idea into action. But now is a great time for first-time founders, he says, with more funding available than ever before.

He advises deep tech entrepreneurs to talk to people about their plans before developing them. In industry, many people worry about others stealing their ideas, but this can be counter-productive. “You’d rather get early feedback than spend months or years of your life on the wrong thing.”

What characteristics do you look for in a founder?

We look for grit and determination, but also that they are responsive to the changing conditions around them and the feedback they receive.

How have things changed in the startup ecosystem since 2010?

There is a higher ambition level. People are not just looking to start companies and flip them or get acquired for a few hundred million; they’re looking to build bigger things. There’s a talent pool people can draw from. You can hire employees now that are willing to take a risk in the startup, when previously they would have just liked to stay at a large company.

What deal do you most regret missing out on?

A company called CRTL-Labs, which was acquired by Facebook recently. It’s a really interesting way of controlling machines using neurons using your brain firing, and special entrepreneurs. I really liked that one. I wish we would have made that investment.

What’s the worst pitch you’ve heard?

I think stylistically sometimes people focus on the wrong things, or are not attuned to reality. Sometimes they don’t realise that a market is not big enough to support a good business. But I wouldn’t criticise individual companies.

What trends will be significant over the next decade?

I think the future of biology and synthetic biology is going to be one of the most compelling changes over the next decades, and we’re all going to be amazed by the progress.

Maria Mellor is a writer for WIRED. She tweets from @Maria_mellor

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