Universities, public institutions and investors have a key role to play in the development of the Spanish Deeptech Ecosystem, however companies are the only potential partners that meet all startups' needs by combining technical, industrial and commercial resources and skills.
Now what's next?
Deeptech startups face diverse challenges from funding to market access and technical / business expertise, among others. In order to access the resources they need, these startups rely on several stakeholders to help them address these specific needs.
Such collaborations are especially important for Deeptech startups since they find themselves at the crossroads of fundamental research and industrial application.
Therefore, before jumping into designing a platform for corporates to collaborate with Deeptech startups, let's take a deeper look at what Deeptech startups look for when establishing corporate partnerships?
The following information is taken from interviews with various Spanish universities (UPC, UPF, IQS, UB, and UAB), some Spanish SMEs, some Deeptech experts and the Boston Consulting Group - Henderson Institute partnership with Hello Tomorrow reports ("The Dawn of the DeepTech ecosystem"; "From Tech to DeepTech").
In order to understand what Deeptech startups look for when establishing corporate collaboration, we first need to understand why Deeptech startup look to establish corporate partnerships.
Peculiarities of Deeptech startups
Deeptech innovations benefit from technological advances that often make them slower and more expensive to get off the ground than digital startups:
(a) Strong research base: Deeptech startups highly depend on fundamental research and advanced R&D. The latter combines a steady set of advanced skills, knowledge and infrastructure that lengthens the product time-to-market.
(b) Massive industrialization process: most products in the field are often using advanced materials, resources and technology that require high industrial skills, manufacturing and scale.
(c) Capital-intensive needs: in order to do fundamental research and be able to mass produce, Deeptech startups need substantial investment capacity over a specific period of time.
(d) Commercial application: as products are typically based on R&D, most of these products are in a "yet-to-be-defned" commercial application and therefore, need to open the doors to new markets that have yet to be created.
In that way, the time-to-market for Deeptech startups is usually longer than other startups because their products are based on a new technology that require longer development time, larger investment needs and "yet-to-be-defined" commercial applications.
The technology risk and complexity arise from the fact that Deeptech startups often use technologies at a low technology readiness and, after proving a technology in the lab, they are still facing a long road to turn the product into a demonstrated and tested solution.
In addition, stakeholders don't properly anticipate the heavy demands on Deeptech startups and therefore the startups underestimate the time required to reach the market.
This often leads Deeptech startups to view corporates as the preferred partner to support the full scope of their needs mainly for market access and technical knowledge. Although corporate funding is not at the top of startups' expectations, corporates usually offer it. That said, startups can still find themselves with many challenges when building collaboration with corporates.
Obstacles faced when establishing corporate partnerships
Mid-stage Deeptech startups are often the most interested in building corporate partnerships and roughly half will succeed in establishing at least one partnership.
However, the latter encounter four key obstacles:
(a) Risk of misunderstanding on vision and objectives.
(b) Misalignment of timing and processes.
(b) Lack of confidence in the technology and/or its maturity.
(c) Fear of lacking agility and reactivity (i.e. bureaucracy).
Therefore, establishing partnerships is easier through indirect recommendation at early stages because that arrangement enables both parties to build trust in the relationship and engage in free discussion without considering any immediate commercial application.
Type of collaboration that Deeptech startups look for with corporates
As Deeptech startups progress from a fundamental research idea to a commercial success, they go through different stages of development.
Based on the market readiness and the technology maturity level of the startup, the latter has its own needs, resources and preferred partners to collaborate with.
Therefore, we can identify four types of Deeptech startups looking to establish corporate partnerships:
(1) Potential wins are Deeptech startups that have a commercial-ready product and a market that is ready to adopt the technology. The immediate challenge is to scale up and initiate large production volumes. Therefore, they need fresh funding, market access and talent. In order to develop this customer base and the distribution network, these startups often turn to corporates although only 25% expect to get funding out of this collaboration. These startups expect to get visibility, credibility, business and technical knowledge.
(2) Demand bets are Deeptech startups with a product that is mature enough to be launched but doesn't yet have a broad commercial application. Their main challenge is to identify and build a market for their innovation. They often lack a distribution network and face market resistance to change. Although funding is an important aspect, market access and business knowledge are their crucial resource needs for which they look to build synergies with corporates.
(3) Development bets are Deeptech startups that have identified a market opportunity and defined a value proposition. They are developing a technology to deliver but haven't yet creation a market-ready product. They are looking to access technical expertise and overcome technological uncertainty. In order to cover this challenge they look to establish collaboration with corporates especially as research partnerships to share the costs and de-risk the R&D expenses. In that sense they are able to accelerate the development of the product.
(4) Technology bets are Deeptech startups that have identified a promising technology that lacks a market application yet. Their main goal is to develop a viable product and ensure that it will fit a market need. The crossroad these startups find themselves at are long development time and technological uncertainty. Obtaining corporate knowledge and support is extremely difficult as technological uncertainty makes funding risky. Therefore, these startups look to work on both technology / product development and market identification in order to reach collaboration with corporates.
As a general trend, corporate-startup partnerships are becoming more prevalent however, misalignments, bureaucracy and lack of technological confidence amongst others are still creating challenging obstacles to overcome.
Understanding all interests and needs is essential in order to build a platform that best nurtures collaboration between corporates and startups.
How can we build it?
Stay tuned for Part 4 of "How to build the Spanish Deeptech Ecosystem" ;)