Deep Tech Needs More Than Capital

Deep tech is attracting more attention from investors, governments and corporates. Defence, space, healthcare, energy and advanced technology are increasingly being viewed as strategically important, while advances in AI, sensors and other technologies are opening up new opportunities for founders.

For the latest episode of Nothing Ventured, our founder and CEO Aarish Shah sat down with Rubina Sigh, Investment Director at Foresight Group to explore the changing landscape of deep tech venture capital, strategic infrastructure, and the challenges of turning breakthrough technology into scalable businesses.

That creates an important question for the companies building in these markets: what does it actually take to turn breakthrough technology into a scalable business?

Capital is part of the answer. It is rarely the whole answer.

Great technology still needs a real customer

One of the biggest challenges in deep tech is the gap between technological potential and commercial demand.

A technically impressive product can still struggle if customers do not understand the problem it solves, are unwilling to pay for it, or if the market is too small to support a venture-scale outcome.

For investors, that means looking beyond the technology itself. What problem is being solved? Who has that problem? How urgent is it? What does the customer journey look like? And how large could the market become?

This is particularly important as more capital flows into areas such as defence, space, AI infrastructure and healthtech. Strong funding can help a company move faster, but it does not automatically create product-market fit.

For founders, the commercialisation strategy needs to develop alongside the technology.

Deep tech often needs a different path to revenue

The timelines involved in deep tech can look very different from those of a typical software business.

A medical device may require regulatory approval. A new therapeutic could involve years of clinical trials. A defence company may have large contracts but face lengthy procurement processes. A university spinout may need to move from laboratory research through product development before it can establish a repeatable sales process.

These timelines create a challenge for venture-backed businesses because the traditional venture model depends on significant growth within a defined investment horizon.

That does not mean these companies are poor businesses. It means the capital structure needs to match the business.

Some businesses may be better suited to venture capital. Others may require strategic investment, infrastructure capital, grants, debt or a combination of different funding sources.

Founders need to understand this early. Choosing capital based purely on availability can create problems later if the expectations of the investor and the economics of the business do not align.

University spinouts have a commercialisation gap

The UK has an extraordinary research base and a strong pipeline of university spinouts. The opportunity is significant.

The challenge often comes further down the line.

Building breakthrough technology and building a company are very different jobs. Founders coming out of universities may have deep technical expertise without having experience of fundraising, managing budgets, selling to customers, building commercial teams or scaling an organisation.

The technology transfer process therefore matters just as much as the research itself.

Founders need support to identify customers, understand commercial applications and navigate intellectual property, equity structures and the journey from laboratory to market.

The terms attached to university IP can also have a material impact on a company’s ability to raise capital and scale. If a business starts its fundraising journey with a complicated ownership structure or restrictive terms, it can become harder to attract the capital required to grow.

The UK has made progress in this area, but there is still a significant opportunity to improve the path from excellent research to commercially successful companies.

Corporate partnerships can accelerate growth, with the right structure

Corporate partnerships can be extremely valuable for deep tech companies.

A large corporate can provide access to customers, infrastructure, data, distribution and markets that would otherwise take years for a startup to reach. In some cases, a successful partnership can eventually lead to an acquisition.

But the relationship needs to be structured carefully.

One common problem is pilot fatigue. A startup can spend months running pilots without a clear route to a commercial contract. For a large corporate, a six-month or 12-month procurement process may be manageable. For a startup with 18 months of runway, it can be existential.

The same applies to strategic investment. Having a major corporate on the cap table can provide credibility and commercial access, but founders need to consider what that investment means for future customers, competitors and potential acquirers.

The right corporate relationship should help a company build a market rather than unintentionally limit it.

The capital stack needs to reflect the business

Deep tech founders are often building businesses where technology development, regulation, infrastructure and commercialisation happen over long periods.

That makes financial planning particularly important.

Founders need a clear view of how much capital is required to reach each major milestone, how long that capital needs to last, and which funding source is best suited to each stage.

A company developing a medical device may need a different funding strategy from an AI infrastructure business. A defence startup with substantial government contracts may have a different working capital profile from a university spinout still proving its commercial application.

The important question is therefore not simply how much money can be raised.

It is whether the company has the right capital, at the right time, for the milestones it needs to achieve.

Building a deep tech company requires more than technical expertise

The next generation of deep tech businesses could have a significant impact across healthcare, defence, energy, infrastructure and other critical industries.

But technological progress alone will not determine which companies succeed.

The strongest businesses will combine technical depth with a clear understanding of customers, markets, commercialisation, capital requirements and operational execution.

For founders, that means thinking about the business model alongside the technology from the beginning.

For investors, it means recognising that a brilliant company may still require a different capital model from a traditional venture-backed software business.

And for the wider ecosystem, it means giving deep tech founders the commercial and financial support they need to take genuinely valuable technology from the lab into the real world.

That is where the opportunity lies. The technology may be the starting point, but building the business around it is what creates lasting value.

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