VC Perspectives on Deep Tech Fundraising in Q1 2023 • TechCrunch

Like almost everyone Deep tech faces major upside in 2022. As interest rates rise, deep tech deals that take more capital than other software businesses become more attractive to many VCs and LPs than low-risk investments.

For example, despite the sudden popularity of quantum computing in the public markets last year with the likes of D-Wave, Rigetti, and IonQ, private investment has fallen sharply—the sector received more than $600 million in venture capital in 2022, down from $800 million. In the year In 2021, according to Crunchbase.

Investors and operators in various deep tech sectors are adapting to these changes in real time as the days of cheap money recede in the rear view. For example, in this environment, space technology startups would never be able to make the kind of money they make in 2021 to deploy the technologies they are making today. According to Delian Asparovhov, Principal of Founders Fund and Founder of Varda Space Industries; It has been shared. Last month, the startup raised $42 million for its space factory “idea” by 2021, which is unlikely in today’s market climate.

While some investors may continue to stand on the sidelines as we enter 2023, it’s important to note that many funds are still sitting on dry powder like never before. That doesn’t mean they or their LPs are rushing to deploy that capital, but money is available to startups that can demonstrate current interest and are realistic about their valuations. As big exits become more difficult to realize in the coming years, technologies in deep tech are transforming entire industries that offer the only paths to “10x exits.”

These are positive signs for deep-pocketed tech founders gearing up to raise money this year. Another positive note is that some of the logic driving VCs to stay away from deep tech startups in underserved markets may be unfounded. Our team recently did an in-depth analysis of tech unicorns to understand how much money it took to reach $1 billion. The results reinforce what we know from experience: the capital and time requirements of deep-tech startups are on par with companies in other sectors. In fact, the median deep tech startup took $115 million and 5.2 years to become a unicorn.

While the space economy will continue to offer many opportunities to invest in atoms, there will also be an opportunity to invest in bits of atoms moving through the skies.

With that as a backdrop, let’s look at a few areas where deep technology will garner interest from investors in 2023.

Startups go beyond launch technology in space

Although Delian rightly stated that long-term “moonshot” funding will be difficult to find in the current market, I still believe that investors are looking for startups that are closer to business in the sector. To date, 99 percent of the total investment in the space technology market has gone into satellites. It’s time to focus on moving things in space instead of getting them there.

For example, investors are looking for solutions that address astrodynamics or propulsion to guide the movement of satellites and other spacecraft — for example, AI startups can simulate scenarios and help operators avoid space collisions by planning maneuvers. Investors are interested in the future of machine learning and the use of neural networks for astrodynamics such as orbit prediction and spacecraft flight modeling.

Space missions also require robust software and hardware. As we look to edge solutions for space-borne vehicles and equipment, startups that can create radiation-safe applications will be in demand. So while the space economy will continue to offer many opportunities to invest in atoms, there will also be an opportunity to invest in bits of atoms moving through the skies.

Deep technology ride the wave of climate control

Software alone will never solve the many issues that contribute to our climate crisis. Hardware solutions and engineering-led innovations in deep tech are needed to solve our most pressing climate challenges.

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