Deep tech opens up a world of possibility
In 2016, Mubhij Ahmad and Timothy Day were finishing their graduate studies at UC Berkeley and struggling to get resources to support early validation of their work: developing a novel treatment for colon cancer and other diseases that could deliver gene therapy via a pill.
At the time, Patrick Scaglia and Alic Chen were running CITRIS Foundry, which they had launched as UC Berkeley’s innovation hub. Excited by Ahmad and Day’s vision, they gave the two scientists a $5,000 grant, which enabled them to run their first experiments on pig intestines.
With proof of concept, Ahmad and Day launched DNAlite Therapeutics and went on to secure $1.25 million that same year. They’ve since raised upwards of $4 million and are preparing for their series A.
What’s noteworthy about this example is not just how a science-based “deep tech” start-up is revolutionizing medicine. It’s that its growth timeframe isn’t that different from that of a traditional software start-up.
Because, while deep tech ventures certainly face market and technology risks, these risks are often misunderstood by the global investment community.
So although the amount of capital flowing into deep tech has quadrupled – from $15 billion in 2016 to over $60 billion in 2020 – it’s still a small niche compared to the estimated $1.9 trillion in PE, VC and growth capital.
Scaglia and Chen, who are now partners at Blue Bear Ventures think limited partners (LPs) are missing out. I spoke with them to learn more about the misperceptions associated with investing in deep tech.
Renita Kalhorn: Let’s start with deep tech is “too expensive.”
Alic Chen: Sure. Over the last two decades, the growth of investment around software development has created a focus around capital efficiency: the idea that you only need a laptop and a few hundred thousand dollars to get a company up and running.
Contrast that with a start-up developing a synthetic biology or physical hardware. You need a lab, access to tools, reagents and physical materials. So there’s this perception that a deep tech company needs millions of dollars right off the bat. But costs have dropped significantly in the last five or so years.
Twenty years ago, it was a billion dollars to run the whole genome project. Now, the cost of generation sequencing has dropped to $1,000 for a whole genome. You can now produce microfluidic chips on the scale of tens of dollars, as opposed to hundreds or thousands of dollars.
Patrick Scaglia: I would add that many of these tools — the microfluidic chip production, “clean …….