The case for betting big on deep tech
Despite the myths, deep tech isn’t riskier than traditional tech. It just demands different skills, more courage and a bigger vision for Australia’s future.
The commentary on deep tech investing has tied itself in knots. We're told it's too hard for VCs, too risky for government, requires too much capital and takes too long to pay off.
But we've also been told VCs shouldn't be making those big bets at the capital-intensive scale-up stage anyway — they should stick to early rounds and leave the heavy lifting to others.
Melting emoji face. So who exactly is supposed to fund the future?
Here’s my personal take and what I shared at an investor summit a couple of weeks back: investing in companies aiming to create new industries and generational businesses takes a particular skillset and a unique disposition. But that’s exactly what makes it such an attractive investment class. It’s not something any fund manager can do well — but when it is done well, it outperforms.
Let’s start with what we actually know, not just assumptions. McKinsey's 2024 analysis of 1,500 European VC funds found deep tech significantly outperformed traditional tech — 17% net IRR versus 10% net IRR. That's a 70% performance premium. They also found equivalent risk profiles and similar capital requirements to reach €10 million in revenue.
