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Deeptech — the catch-all term for companies building in areas like life sciences, robotics, AI and quantum computing — has been a bit of a darling for VCs of late. Investors have been allocating big sums to European companies doing everything from developing new materials to making vehicle structures lighter and stronger, to using robotics to make manufacturing more efficient.
According to Ben Blume, a software and deeptech-focused investor at VC firm Atomico, part of the reason why deeptech is more in vogue with VCs is that SaaS companies have grown a bit lacklustre of late (especially amid reports of slowing growth).
“Because of the very competitive nature of so many spaces [within SaaS] these days,” investors are “looking for things that have more edge, more defensibility,” Blume tells me. “If you push more into deeptech, you inevitably see more of that, because there's more IP in those businesses.” (Atomico defines ‘deeptech’ more as ‘frontier tech’: things like autonomous vehicles, quantum computing, fusion and synthetic biology, new materials generation and climate.)
One particularly hot area Blume is eyeing? Robotics. Previous waves of interest in the space came too soon — “There were a bunch of interesting ideas and companies there, but a lot of them struggled to find a clear go-to-market,” Blume says. “I think we're now seeing a second wave of that powered by the more powerful AI technologies that exist now, and by the fact that if you want to build an autonomous vehicle today, you've got a lot of existing stack to build on.”
The gaps in robotics for new startups
There are now numerous robotics startups catching VCs’ eyes that are building a wide range of products to help automate various processes, but for Blume “there's still a lot of room” for more innovation.
In particular, he wants to see more companies building robotic exoskeletons — devices that attach to the human body to help with some function. The technology has progressed a lot faster than the adoption or application so far, he says, but “the ability to let people lift the heavy loads they need to for their day-to-day without causing as much damage to their body [is] a really nice use; that's robotics, right? It's smart, it's context-aware…it helps someone, but is also not replacing a worker, which is great,” says Blume.
He sees promise in both workplace and medical applications, like for people with specific industry injuries or the elderly. “I'm guessing that there's also a pretty strong dual-use case there as well — which gets you quite close to some kind of sci-fi, dystopian” Avatar-type thing, he says, referring to technologies with both military and commercial applications.
Blume is also keen for more robotic applications in the logistics space. “There's also a lot of manual work that goes into logistics, whether it's in the warehouse, at the end delivery, at other points,” he says. “There are probably other really interesting places there where you could drive more automation, and maybe even improve and speed up global freight, which I think is an important thing right now. There's huge bottlenecks and inefficiencies in global shipping and freight.” Atomico has invested in a robotics warehouse visualisation startup, Dexory.
Another area Blume deems a gap in the robotics market is low-cost robotics for precision manufacturing for smaller companies, in particular in life sciences — things like lab experiment automation, or in hardware like electronics component testing.
Ultimately, from a VC standpoint, startups need to think beyond just a physical robotic arm or hardware component. Blume notes that even if it’s a good idea, it’s hard to protect the intellectual property of hardware — and it could easily spawn copycats. Startups “need to be part of some kind of broader platform vision, where, in the end, the software adds enough value that if the hardware does commoditise, then there's still a valuable business there”.
Blume is also thinking about how robotics can help improve processes beyond just automating tasks, particularly in areas like construction. “Can you in some way build better buildings because they've got better thermal properties? Or you can use less cement — which is a very carbon-intensive material — because you've been able to build in a smarter way because a robot is building it?”
I’m curious to hear from you, deeptech investors: What underrated or underinvested sectors are you watching right now? Are you seeing any new or interesting use cases for robotics I should know about? What’s next for the sector? Send me a note.
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