Despite the European economic climate throughout 2022, Deep Tech was one of the strongest sectors for investment.
A report published by Dealroom, Lakestar and Walden Catalyst Ventures uncovered that Deep Tech was the second-strongest-performing sector in the second half of 2022, with Energy taking the top spot.
While the $17.2 billion investment is slightly down from 2021, it is 60% higher than in 2020.
Although Deep Tech is known for its extensive R&D phases and can take decades of innovation before breaking through, the current level of investments demonstrates the move to back more high-risk ventures.
The report cited four key areas within Deep Tech which emerged as the highest investment throughout 2022:
Novel energy applications - Nuclear fusion Next-gen battery chemistries Large-scale storage Green hydrogen Supercapacitors Waste heat recovery
Novel AI - Generative AI AI-first biology Privacy-preserving AI Explainable AI AI acceleration Autonomous systems General purpose AI
Future computing - Quantum computing Silicon photonics AR/VR/MR Neuromorphic & advanced AI chips Decentralized & distributed computing Brain-computer interfaces Ambient Computing
Space Tech - Reusable and next-gen rockets Satellites for communication & earth observation In-space transportation In-space manufacturing Debris removal
These four Deep Tech areas raised $4.4bn in 2022, their highest amount.
David Dana, the European Investment Fund's head of VC investments for disruptive tech and innovation, "The deep-tech breakthroughs of the next decade will shape our societies well into the next century. It is therefore essential for Europe to lead from the front in shaping these revolutionary technologies and their real-world applications."
Europe is still behind the US in funding.
Even though it has been a brilliant year for European Deep Tech investment, it is still significantly behind the US.
Between 2020 and 2022, the US invested $166bn in Deep Tech, whereas Europe, including the UK, invested $52bn.
Previous reports have suggested that the need for more skilled talent within Europe is a barrier to investment in emerging technologies. Many of the successes seen from Deep Tech are the result of spin-outs and university incubators. With European Deep Tech being rooted in acidemia, more needs to be done to fund outside of these initiatives.
Europe needs to catch up when investing in the late stages of deep-tech companies. The share of funding coming from the US and Asia grows to nearly 45% when deals are worth $250m or more. At the same time, the US and Asia's funding is only 11% during the seed and pre-seeding stages.
Other key enablers to unlock the growth of Deep Tech in Europe include bridging the gap in funding between early-stage dedicated Deep Tech investors and generalist funds, VC investment in European and increasing diversity and inclusion.
While the prediction of tech investment is only to rise by 3.5% across Europe, the strength of Deep Tech is expected to grow throughout 2023. Forecasts for more commercial investment within AI, cyber security and quantum computing have all been highlighted as growth areas within Deep Tech in 2023.
