158. The Deep Tech Debate: Why Invest in a Capital Intensive, Long Time-to-Exit Category? (James Hardiman)

james hardiman the full ratchet

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James Hardiman of Data Collective joins Nick to discuss The Deep Tech Debate: Why Invest in a Capital Intensive, Long Time-to-Exit Category?. In this episode, we cover:

  • James’ definition of deep tech
  • The segments within the category
  • How this area differs from others
  • Types of founders and founder profiles that he looks for
  • Why he’s willing to invest in a capital intensive, long-time horizon category
  • Why deep tech will drive the biggest outcomes
  • How founders are able to de-risk deep tech opportunities where many others don’t
  • The waves that are coming in deep tech
  • and finally how some consumer, social companies became deep tech companies by accident.

 

Guest Links:

Quick Takeaways:

  1. Deep Technology companies have a technological, engineering or scientific advancement– and that’s the core asset
  2. Investment areas within deep-tech include biotech, medtech, semiconductor, quantum computing, robotics, AI, blockchain and new materials
  3. In the past business founders were looking for technical co-founders; now it seems the technical founders are looking for business or domain experts
  4. A key question James asks w/r/t founding teams is: “Do the complementary skill sets need to manifest in one person or two different people?”
  5. The pivot-based approach of “move fast and break things” is not one that lends itself to deep tech– That’s one for software-based companies
  6. Technologists in deep tech should validate market questions early, then build the technology– Many entrepreneurs are taught the reverse
  7. In many deep tech areas high-level SMEs are required to validate the tech
  8. Deep tech innovation requires more time and more money– and that timeline seems to be increasing
  9. If you build core technology that provides massive economic value, it leads to monopolistic outcomes that are large and defensible
  10. High growth, low friction software businesses have lower barriers to entry– the same goes for investors targeting startups in these areas
  11. Hardware is finally at a stage where quantum computing may become a reality
  12. Many consumer social companies became deep tech by accident b/c they ran up against scale and speed issues that required novel engineering

 

FULL TRANSCRIPT