Deep tech investments require a unique approach to diligence, one that takes into account the complex technological and regulatory landscape. At its core, deep tech refers to technologies that are based on significant scientific or engineering advances. These investments often involve cutting-edge technologies that have the potential to disrupt entire industries.
When evaluating deep tech investments, it’s essential to consider the manufacturability of the product or service. This involves assessing the feasibility of scaling up production, as well as the potential costs and challenges associated with doing so. Additionally, regulatory considerations must be taken into account, as deep tech investments often involve complex and evolving regulatory frameworks.
TRLs and Milestones
One key aspect of deep tech diligence is evaluating the Technology Readiness Level (TRL) of the investment. TRLs are a measure of the maturity of a technology, ranging from TRL 1 (basic research) to TRL 9 (proven technology). By assessing the TRL of a deep tech investment, investors can better understand the potential risks and challenges associated with the technology.
In addition to TRLs, investors should also consider the go-to-market strategy of the investment. This involves evaluating the potential market size, competition, and customer adoption rates. By considering these factors, investors can better understand the potential for growth and returns on investment.
Stress-Testing Unit Economics
Another critical aspect of deep tech diligence is stress-testing the unit economics of the investment. This involves evaluating the potential costs and revenues associated with the product or service, as well as the potential risks and challenges. By stress-testing the unit economics, investors can better understand the potential for profitability and returns on investment.
Investors should also consider the IP position of the investment, including the potential for patent protection and other forms of intellectual property. A strong IP position can provide a significant competitive advantage and help to protect the investment from potential competitors.
Scale-Up Risks
Finally, investors should consider the potential scale-up risks associated with the investment. This involves evaluating the potential challenges and costs associated with scaling up production, as well as the potential risks and challenges associated with expanding the business. By considering these factors, investors can better understand the potential for growth and returns on investment.
By following this comprehensive approach to deep tech diligence, investors can make more informed decisions and better navigate the complex landscape of deep tech investments. Whether you’re a seasoned investor or just starting out, this guide provides a valuable resource for evaluating deep tech investments and achieving success in this exciting and rapidly evolving field.
