In the Ventures team at Octopus, we think about deep tech as the technology that allows us to transcend the status quo. Current technologies eventually block progress and deep tech is the un-blocker. Existing computer chips, for example, can’t handle the ravenous computing demands of AI and machine learning algorithms. Deep tech describes the radical new solutions that break open these bottle necks. Model T Ford motor cars weren’t just “faster horses”, to paraphrase Henry Ford. Whatever examples you choose, deep tech is central to the accelerating flow of progress in the world. Advancing technology now touches every aspect of life, from agriculture to education, health, commerce and communication. Deep tech is what will power the next industrial revolution.
All three pods are focused on finding the pioneers who are reimagining the future. In the fields of money and health, the pioneers are often shouting about what they do and can be easy to spot. But with deep tech, the significant advances are often happening quietly, out of sight in laboratories, research centres and universities. We spend a lot of our time in the incubators and accelerators that provide the link between universities and the outside world. And we build relationships with Angels and Seed investors such as the Cambridge Angels, Bristol Private Equity Club and their equivalents at centres like Imperial and Oxford. This is how we interface with the real pioneers at the heart of the deep tech revolution.
At Octopus Ventures, we’ve been investing in deep tech for over a decade. Our investment in Evi, in 2007, involved backing a small company that was doing something big in knowledge graphs and natural language semantics in Cambridge. Evi would become the underpinning technology of Amazon’s Alexa (Amazon acquired Evi in 2012). We have also had a string of other successes in deep tech with businesses like SwiftKey (acquired by Microsoft in 2016) and Magic Pony (acquired by Twitter in 2016). But we are also very excited about our more recent investments in deep tech companies.
Our portfolio company, Dogtooth, makes robots that are capable of harvesting soft fruit. It has created a piece of hardware intelligent enough to see a strawberry and decide whether to pick it, then grade it and place it in a punnet over and over again. This area of agriculture has been facing a concerning labour shortage for years, but with Dogtooth’s delivery of the right kind of robot, the bottle neck is set to be smashed open.
A few others we’re excited about include: WaveOptics who create the waveguides that make augmented reality a reality, Slamcore that gives spatial intelligence to robots, and Third Eye which has used pose estimation technology to understand what products shopping customers are browsing, engaging with and picking up. (But you can find all our current deep tech investments here.)
In the Deep Tech pod at Octopus we invest in some incredibly exciting deep tech entrepreneurs with big, pioneering ideas. We understand that deep tech development is laborious and time-consuming, so investment capital must be big and patient. The wins can be enormous, but there are also many risks. Deep tech advances don’t always work as promised, they can be superseded or fail to adapt to unpredictably shifting markets.
We know there are many other challenges that deep tech entrepreneurs face. The journey from laboratory to reality can be a labyrinth of decision-making and nerve-holding.
Commonly, deep tech advances can be so pioneering that a market doesn’t yet exist to sell into. Creating markets is expensive and often relies on finding niches to start in and then expand from there. Our portfolio company UltraSoC has technology that puts intelligent self-analytic capabilities in the systems-on-chip (SoCs) at the heart of consumer electronic, computing and communications products. The business started by using its technology to solve the problem of how to debug SoCs that are built from IP from many different sources; they have since expanded to selling analytics about how chips are performing as well as security products.
Another problem area where we have a lot of experience (and scars) is in IP ownership. For spin-outs there can be real challenges in navigating this thorny issue and every case is different, whether negotiating with corporates or universities. “Who owns the IP?” will often be a question at the front of our minds as potential investors and it will be a critical question asked by potential acquirers.
As they surface into the light, deep tech companies often face a common issue: when and from whom to accept help. The Googles, Facebooks, Amazons, Apples and Microsofts of the world are of course very keen to acquire deep tech as it emerges, but how do you know if or when to take that route? Do you grow within Google? Or stay out there, independent, fuelled by venture capital? Do you hold on tight to your IP or let a giant in on it now? What if they’re building similar technology themselves as a competitor? This is a key area where investors’ knowledge and advice can be invaluable.
So how do we, as the Deep Tech pod, spot genuine game-changers among ‘everyday’ innovations? We spend a lot of time tracking the past and thinking about future trends. We also go to conferences, speak to academics and experts, and read a lot too. Everyone in this pod lives and breathes technology. In this increasingly complex world, we also look for convergence. Convergence describes the way in which technology doesn’t necessarily follow a linear evolutionary path. Rather, it relies on the intersection of advances in complimentary but different fields. The renaissance in AI is a good example of this: the rise of big data, combined with increasing compute power (and GPUs in particular) has allowed the advances we’ve seen in machine learning over the last decade.
As you might expect, this landscape is constantly changing, but there are a few technology areas that we’re currently focused on in particular: quantum computing, synthetic biology, human computer interfaces, edge computing and intelligent robotics.
We’re biased of course – deep tech is our focus – but there’s no doubt that now is a great time to be a deep tech investor. To be surrounded by universities, hubs and research centres that are churning out radical advances that will change the world is an exciting place to be.
We’ve recently launched a deep tech newsletter to share our obsession with cutting edge tech and the “hard stuff,” and more importantly connect with others who share their passions. To sign up and read the first edition, click here: https://bit.ly/32RqdWt