It’s a myth that tech startups will face just one ‘valley of death’ over the course of their lives.
For decades the tech startup valley of death has been broadly understood as the point where the fundamental discovery and translation work is complete, significant resources have been deployed, and operations have begun. But sufficient revenue is not being generated yet, and the technology is still too early for venture capitalists to pull out their wallets.
And this is certainly a critical stage for any startup.
However, startups — and scaleups, and mature ventures — will face multiple valleys of death over the course of their life cycles.
And these stages will also be more acute if their innovation is a ‘deep’ technology, which is one rooted in leading-edge science and engineering, with significantly novel intellectual property. Deep tech companies are typically building innovations founded in multiple disciplines, creating a higher risk, higher cost, and regulated pathways in manufacturing.
This obviously calls for far greater capital requirements than tech startups focused on software products and services.
Deep tech companies will therefore experience many valleys of death as their science progresses from the lab, to proof of concept (is the science and tech repeatable?), proof of business (can I access a supply chain, source material, and talent?), proof of market (who will buy my product?), and proof of scale (can my business supply global markets?).
So why do these valleys of death matter?
The economic opportunity
Deep technologies include advanced innovations such as artificial intelligence (AI), robotics, the internet of things (IoT), quantum computing, biotechnology, advanced materials, nanotechnology, clean energy, energy storage, and so much more.
The predicted economic opportunity of any individual deep technology is enough to create significant economic value for any country wise enough to invest in it.
As an example, a PwC report predicts AI alone could contribute up to $15.7 trillion annually by 2030 – more than the current output of China and India combined.
The global IoT market could reach $1.6 trillion by 2026, the global market for industrial robotics is predicted to reach nearly US$70.6 billion by 2028, and the global quantum computing market is expected to surpass US$125 billion by 2030.
But while these predictions are clearly compelling, they actually fall short in capturing the extent of the economic value deep technologies can create.
Why? Because the value derived from a thriving deep tech company is not limited to the value of its own output due to the spillover effect for the hundreds of SMEs that form its supply chain.
Deep tech companies help to increase the productivity and expand the market opportunities of thousands of existing SMEs, which could potentially add trillions of dollars in value to any national economy.
As an example, the Gold Coast’s Gilmore Space reports working with over 300 local SMEs as part of its launch vehicle and satellite platform.
In the reverse, Sydney startup Omni Tanker has expanded its business to work in both space and hydrogen, becoming enabling infrastructure for both hydrogen and space companies locally.
And Cicada resident Gelion recently partnered with a local lead-acid battery manufacturer to launch a production facility for its sustainable zinc-bromide batteries using existing lead-acid processes, creating production efficiencies for both.
These are just three examples out of hundreds, if not thousands, of others. Exciting opportunities are already emerging, if you know who to ask.
But we won’t reap the full economic rewards of these opportunities unless we are better able, as a nation, to support these deep tech startups through the dozens of valleys of death they will face.
Building bridges over the valleys
There are so many ways Australia can support deep tech startups through these multiple valleys of death, building on what is already working.
We need policy frameworks and processes with far less friction when it comes to creating, registering, and licensing intellectual property.
We need to establish enduring programs that encourage governments to procure from domestic deep tech startups, while driving both research and translation agendas through programs like the NSW Small Business Innovation & Research (SBIR) program at a state and a national level.
We require patient capital that caters to varying risk profiles: pre-seed and seed capital when the technology is still unproven, and capital to scale when the technology is proven as repeatable and reliable, and there is an identified market opportunity.
Our industry needs more strategic capital which supports greater access to global markets, talent, and the skills needed to scale production.
Our best superannuation fund managers must unlock their considerable capital resource and align funds with long-term strategic national economic objectives, building wealth for all.
Industry partnerships must help shape product development, giving startups access to systems and processes that de-risk product market fit and adoption, and allowing industry to access productivity gains and new market opportunities through early collaborations.
And, as always, we need incentives to drive greater connectivity between breakthrough science and engineering and industry, from SMEs to the top end of town. This includes new ways of accelerating the way we spin out this new IP from the university and industry research and development labs that create it.
We need to do all this and more, and we need to start right now. Because the world won’t wait for us to catch up.
The world will take every opportunity we leave on the table if we are too slow to adapt and commit to our growing innovation industry’s needs.
So let’s take it up a notch and build those bridges as if our future as a nation and a planet depended on it. Because they do.
Sally-Ann Williams is chief executive at Australia’s pioneering deep tech incubator Cicada Innovations. She has been involved in driving national engagement and change strategies in innovation, entrepreneurship, computer science and STEM education, including contributing to the COAG STEM Partnership Forum and the foundation of StartupAUS.
Do you know more? Contact James Riley via Email.