British tech VC IQ Capital have announced a new fund that will specialise in ‘deep tech’ start-up investments. The Cambridge-based venture capital investor has already run two tech investment funds but the third, which was successfully closed for investment on Monday having reached its $300 million target, will be more specialised.
Its ‘deep tech’ scope will limit it to investing in start-ups with a business case founded on ‘substantial scientific advances and engineering innovations’. That would rule out digital and other tech businesses that might be ‘disruptive’ of industries and markets but aren’t underpinned by the use of technology that could be considered ground breaking.
The $300 million raised by IQ is split between two pools. The first is for $175 million that will be focused on seed and Series A investments in tech start-ups. The value of investments will come within a range of £300,000 to £5 million. The remaining $125 million will be funnelled towards a ‘growth opportunities’ fund which will offer additional later-stage investment to the best performing companies already in the IQ portfolio.
IQ Capital’s deep tech fund will look at start-ups using particularly innovative or new technological developments in areas such as biotech, AI, big data and the internet of things. Co-founder and partner Max Bautlin commented:
“The firm is positioned as the go-to deep tech fund in the EU, and the team has a proven ability to connect with founders through all stages, from seed to exit.”
He also touched on some of the complexities of the deep tech niche that the fund will concentrate on:
“Deep tech is really hard, and it has taken us years to find the perfect model. It’s not just about ideas. It’s about finding the right people, the ones who can figure out how to transform their technology into a product, before scaling up and taking it international, taking them to the next step.”
The skill of packaging new technology as a scalable, mass market product or service is one that Silicon Valley has mastered particularly well in comparison to the tech start-up and VC environment elsewhere in the western World. While the UK does have a thriving tech sector, its biggest successes have been in developing technology that has been bought or licensed for use in other products. Chipmaker ARM, now under the ownership of Softbank, is a perfect example. Taking the final step towards packing new tech as a product must be made if the UK and Europe is ever to produce its own ‘giant tech’ companies in the same vein as the FAANGs (Facebook, Amazon, Apple, Netflix & Google) of the USA.
However, there are positive signs. UK AI start-up Deepmind was acquired by Google in 2014 for £400 million. There is also a rich seam of prospective biotech companies in the UK, with a particular concentration around Cambridge and Oxford.
IQ Capital is certainly one of the businesses helping support the best of the UK’s tech start-ups. Companies earlier IQ funds have invested in include Speechmatics, which is developing deep learning algorithms which work in a similar way to our sense of hearing it hopes will eventually become a real time digital translator. Another is Kisan Hub, an agritech which is developing a ‘crop intelligence SaaS platform offering actionable insights across the supply-chain for the agri-food industry.