Deep tech, the realm of innovation born from fundamental scientific and engineering breakthroughs, is increasingly being recognised as a vital engine for future economic growth and a key to tackling significant global challenges. It follows that investment in this sector is gaining traction.
Europe, underpinned by a strong tradition of scientific research and a highly skilled workforce, provides fertile ground for deep tech innovation. The continent benefits from world-leading academic institutions and a robust manufacturing base, particularly in advanced engineering and semiconductors. Deep tech has become the dominant category in European venture capital, absorbing roughly a third of all VC investment. In 2024, approximately €15 billion was directed towards European deep tech start-ups.
The United Kingdom, France, and Germany lead the way in deep tech funding, with innovation hubs such as London, Paris, and Munich serving as key centres. Sectors like novel AI, the future of compute, space technology, and robotics are attracting significant capital, with novel AI witnessing a doubling of investment in 2024 to approximately $3.0 billion. Public support, through initiatives like the European Innovation Council (EIC), plays a crucial role in bridging early-stage funding gaps. While Europe boasts a strong early-stage investor base, attracting more substantial growth capital remains a focus. Challenges include potential funding gaps for scaling companies and the need to enhance commercialisation expertise within research-intensive start-ups.
Meanwhile, Asia is rapidly emerging as a significant force in the global deep tech landscape, fuelled by considerable government backing, a burgeoning venture capital ecosystem, and a strategic emphasis on addressing regional and global imperatives. In 2023, China spearheaded Asian deep tech investment with $58.6 billion. Southeast Asia is also witnessing a surge in deep tech deal volume, accounting for 14% of total deals in the first half of 2023, with Singapore establishing itself as a pivotal hub. Healthcare and biotechnology have attracted substantial deep tech funding in Southeast Asia, alongside AI, robotics, and advanced manufacturing.
Governments across Asia are increasingly recognising the strategic importance of deep tech, implementing supportive policies and financial incentives. Major Asian corporations are actively engaging with deep tech start-ups through investments and collaborations. Furthermore, global limited partners are increasingly viewing Southeast Asia, particularly Singapore, as a promising innovation hub for deep tech investment. Asia's strengths include strong government support, a rapidly expanding VC ecosystem, increasing corporate-startup collaboration, a focus on addressing critical regional needs, and significant activity in major urban innovation centres. Potential challenges involve a lack of skilled personnel in certain areas, high development costs associated with deep tech, and market penetration hurdles for some start-ups.
North America, particularly the United States, presents a mature and well-established deep tech investment ecosystem, characterised by significant private capital, leading research institutions, and a global perspective. The US is a primary source of deep tech investment, with specialised investors and substantial capital available across various stages of company development. While strong in early-stage funding, the US market is also critical for providing the scaling capital and exit opportunities for deep tech companies worldwide. Artificial intelligence has been a dominant investment theme, although sectors like quantum computing, biotechnology, and advanced materials also attract considerable funding. Government support, through federal initiatives and investments in science and technology entrepreneurship, is vital. Corporate venture capital arms of major tech companies play a crucial role in providing financial support and validation for deep tech start-ups.
Similar to Europe, deep tech investment in the US has demonstrated resilience during economic downturns. The strengths of the North American ecosystem include a mature and well-funded VC landscape, world-leading research institutions, a strong culture of innovation, significant corporate engagement, and increasing government recognition of deep tech's importance for national competitiveness. Challenges include intense competition for talent and funding, the potential for investment focus to be heavily influenced by current trends, and the ongoing "lab-to-market challenge" of translating research into commercial products.
In conclusion, deep tech investment is a global phenomenon gaining significant traction across Europe, Asia, and America. While each region exhibits distinct strengths, challenges, and investment patterns, the overarching trend signifies a growing global recognition of deep tech's transformative potential.
