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The King is dead, long live the King! (Marketplacers vs Deeptechers)

This expression, a ritual in the succession of monarchies, was pronounced to the people when it was intended to communicate the death of the monarch and the immediate validity of their successor to the throne.

With this motto, the aim was to avoid the dangerous political situation that arises during an interregnum, as well as to serve as the last occasion to praise the deceased king and the first occasion to do so for the new one. This holds significant political meaning, as it expresses the loyalty of the subjects to the king and, especially in the context of feudal society, the automatic renewal of vassalage ties.

And this is the cry that is now heard in the hyper-powered Kingdom of Startup Investors. Those who are seeking a more efficient alternative to their investments made in Marketplaces and other apps, which, despite having been the vector of development for a thriving business, now start cheering for the Successor (without implying that the current ruler is dead). This Successor to bet on would be encompassed by what is known as Deep Tech companies, which are those that develop disruptive solutions based on the use of advanced technologies related to science or engineering to address global problems.

The truth is that the market for Marketplace is becoming saturated. This is reflected in the fact that as a customer, you always find someone who can offer what you are looking for, and as a competitor, someone can do it just as well or even better than you. There is not much room left in the market share for many more applications and business projects that pivot with little differentiation. Furthermore, their products or services, which offer little added value compared to other initiatives, are starting to be considered “commodities.”

At this point, the battle and strategy for customer acquisition focus on price, cost reduction, or providing better efficiency and service, but not on addressing previously unmet needs. We have countless examples: insurance trackers, telecommunications offers, online stores, health and mindfulness programs, travel agencies, home delivery services, etc. All of them currently struggle to gain a relevant market share, leading to significant build-up operations where larger companies realize that to continue growing, they need to acquire others (bigger or smaller), yielding substantial profits for investors. However, it’s clear that opportunities are being swallowed up: “Unicorns eat Unicorns, or they get eaten by Dinosaurs,” and the barriers for new entrants are rising substantially.

This obviously compels investors to seek new opportunities that either didn’t exist before or were not as attractive and productive as the ones that previously caught their interest. This is always said with respect to the investors who invested in startups ten years ago when people called them crazy for not investing in the dominant large companies.

It’s true that a Deep Tech project involves different types of risks and maturity timelines, which may be slower than the process of launching a startup and turning it into a “Unicorn.” However, these timelines are being drastically reduced. Currently, a period of five years to achieve this milestone from its launch seems validated and considered viable. This is due to several factors, which provide significant advantages such as lack of competition, a broad market to address, a profusion of Deep Tech projects originating from university research centers, research talent, project mobility across different verticals, and the presence of an Open Innovation system eager to include, assimilate, and acquire disruptive technologies as differential values in the development of established traditional businesses. For instance, AI is not a business in itself, but it becomes incredibly valuable when applied to agriculture, insurance, travel, food manufacturing, or other sectors.

As a result, the returns on investment are much more significant than what one might get from investments in less technological, typically B2C (business-to-consumer), projects. Deep Tech projects are often B2B (business-to-business) in nature and highly scalable within the chain of influencers who want to include the technology in their processes, leading to exponential development ramp-up.

The necessary investments to bring Deep Tech to the market are not as high when one knows how to leverage and return to society the work done with public funds to obtain the most challenging part of this proposal (generating talent, researching, and obtaining results to have an MVP). By capitalizing on this resource and stimulating the already amortized investment (once the research was done and put into boxes, nothing more was expected from it), these projects can reach the required development stage for integration into the market. This eliminates a huge cost/risk that the company wanting to incorporate Deep Tech into its processes no longer needs to bear. However, to achieve this, the project, knowledge, technology, and motivated team must be extracted from research centers and assembled to align with what the market and investors expect. Until now, this system has not worked as well as desired, at least not until we arrived.

About the Author

Luis Morró
Luis A. Morró
CEO-Chief Evangelist Officer en TRL+