Europe is home to some of the world's most sought-after scientists and dazzling deeptech projects, but scaling these ventures can feel as challenging as quantum computing.
According to EIT Digital, an EU-funded organisation that helps digital scaleups grow across Europe, scaling deeptech ventures especially struggle with raising money and finding the right contacts to help them enter new markets.
But help is at hand: EIT Digital runs an annual scaleup competition for digital deeptech ventures, the EIT Digital Challenge. The winning three finalists will receive 12 months of tailored international growth support from the EIT Digital Accelerator — worth €50k — to scale their businesses. On top of that, one first prize winner will receive an additional cash prize of €100k.
We spoke with EIT Digital and several past winners of the EIT Digital Challenge about the key challenges European deeptech scaleups are facing.
1. Opening up impactful investments
Landing funding has always been tricky for deeptech ventures, which are often seen as risky due to a longer gestational period and higher R&D investment. But at the moment, it seems VCs think the risk is worth the potential rewards.
According to Dealroom, as of January 2021, European deeptech companies were worth a combined €700bn, and accounted for a quarter of all European VC investment in 2020.
To stand out, deeptech startups need a worthy aim or cause, EIT Digital’s chief innovation officer Chahab Nastar told Sifted.
Projects need a little extra something. They now need to improve quality of life, deal with the climate emergency or boost equality.
“The funding challenge is not getting harder but it’s evolving, in a nice way,” Nastar says. “Projects need a little extra something. They now need to improve quality of life, deal with the climate emergency or boost equality. VCs are now looking for impactful investments that change the world for the better.”
2. Networking and access to markets
A successful deeptech scaleup will have already tapped into demand in its domestic market — the challenge is then moving into new markets. European countries each come with their own culture, language and working practice that only a true local can navigate. This kind of knowledge is key to helping a deeptech position itself in an attractive way, and getting in front of the right potential customers.
“Europe is a highly fragmented series of markets, and so scaleups with customers in their domestic market need a lot of help finding customers in different regions,” says Nastar.
“They need to tap into a network that can get them around the table with the right customers, which is why the business development package we offer across Europe is as important as the prize money on offer with the EIT Digital Challenge.”
Needing to tap into local expert networks has been a key challenge for Willemijn Schneyder, CEO at digital productivity tool, SwipeGuide, which was a finalist in EIT Digital Challenge 2020.
We are a David in a world of Goliaths — we have a lot of American manufacturing productivity deeptechs showing a great interest in Europe right now.
European factories generally have more modern equipment than their counterparts in the US, which makes it easier for deeptech productivity software to be integrated within manufacturing systems, Schneyder says. The region is attracting American rivals, so European deeptechs in manufacturing need to move quickly and build a local network of business development experts to get there first.
“We are a David in a world of Goliaths,” she says. “We have a lot of American manufacturing productivity deeptechs showing a great interest in Europe right now. Competition is always a good sign you’re doing something right. It means our challenge is to get a foot in the door with the right people so we can compete effectively.”
3. Competing for talent
Deeptech ventures rely on talent with specific expertise — and there isn’t loads of it around. Augustin Marty, CEO and cofounder of AI visual automation tool Deepomatic, another EIT Digital Challenge 2020 finalist, plans to nearly double his current headcount of 40 to 70 in the year ahead — which he says is his company’s biggest challenge.
In his field of AI, tech giants, like Google and Microsoft, are after the same talent and have much deeper pockets.
“For a startup, you can usually find all the technical talent you need to create the technology to build a product in your home market,” Marty says. “The difficulty then becomes opening new markets with top talent who understand the technology, have all the right skills and contacts in their region to help you expand. It’s highly competitive out there because there are tech giants you need to compete against for the best people, and that increases salaries.”
4. Keeping up innovation while serving customers
When deeptech scaleups make it big, they often struggle to keep up innovation while juggling global clients.
This is the biggest challenge in the year ahead for Oli Viggosson, chief product officer at SideKick Health which helps pharmaceutical companies offer digital treatments for medical conditions. After winning the EIT Digital Challenge last October, Sidekick was able to raise €17m in Series A funding with the support they received as part of their prize. Now, Viggosson says, the trick is to keep up the momentum.
“When you’re a small startup team, everything is always about innovating and tackling problems,” he says.
When you’re a small startup team, everything is always about innovating and tackling problems.
“Now we have big clients, they have a lot of gravity. Serving them correctly takes up a lot of our resources, so we have to be very dedicated in carrying on the innovation side of our business. That’s why we’ve increased the size of my team from eight people to 50 in just over a year. For long term success, you have to keep up the momentum on innovation.”
Exactly how to keep up the momentum will depend on the scaleup, but for SideKick Health the solution is to utilise the data it collects. It’s using AI and machine learning to delve deep into the patient information it processes on different medical conditions, which means future improvements to its service will be data-led.
Apply now for EIT Digital Challenge 2021
Whether you’re a deep tech venture struggling to find funding or expand to international markets, EIT Digital wants to help European scaleups become global players.
The EIT Digital Challenge is an opportunity for digital scaleups to not only win funding and business development support, but also tap into the EIT Digital Accelerator’s international network of investors and top corporations.
“It’s our ambition to help companies overcome the fragmented European market and successfully grow across the continent,” says Nastar. “The EIT Digital Challenge helps us identify the best European deep tech entrepreneurs and help them, through our Accelerator, to raise funds, access new markets and scale up internationally.”
The deadline for entries for the next EIT Digital Challenge 2021 is May 10 — apply now!