Report finds deep tech talent coming from "unexpected places"

A report compiled by incubator Cicada Innovations has challenged preconceptions that most science-based deep tech startups and CEOs originate from academia, although two in five partnerships in the space are with a university or research institution.

Having helped more than 350 companies raise billions in funding, file thousands of patents globally and create thousands of high-quality Australian jobs since its founding 23 years ago, Cicada is calling for a systems approach to resolve the deep tech 'scale-up problem'.

To help better understand the sector, data has been gathered from 128 deep tech applicants to the Cicada x Tech23 2023 festival, unveiling some perhaps unexpected statistics.

Of the applicants involved, a massive 76 per cent were founded independently instead of being spun out of universities or research institutes (11 per cent).

Cicada claims this demonstrates that some of our nation’s greatest talent is originating from unexpected places, and that we must broaden our national support and commitment to include a more diverse talent pool. 

Meanwhile, partnerships were cited as one of a startup’s most important growth tools (62 per cent), just behind funding at 67 per cent.

Respondents were engaging in an average of 2.8 active partnerships to validate and build their solutions with partner support, as further evidence deep tech startups are routinely built via collaboration.

The deep tech incubator notes it is actually in collaborations where academia plays its starring role, with 41 per cent of all 358 cited partnerships occurring with universities or research institutions - only slightly lower than the 44 per cent occurring with industry where it is normally assumed these partnerships occur.

"For many years, the focus has been on universities and research institutes to pioneer the next big breakthroughs – but if we cast our nets a little wider, we’ll discover that some of the country’s most ground-breaking ideas often come from determined individuals with a problem to solve," Cicada Innovations CEO Sally-Ann Williams says in the report.

"Deep tech cuts across climate and energy, health, medicine and agriculture. It demands a collaborative, coordinated approach – challenging the siloed mindset prevalent in industry today.

"Deep tech startups are often born from a simple idea – a new solution to an existing or emerging problem – and are grounded in science and engineering breakthroughs. They typically require founders to navigate tightly regulated sectors with extended timeframes for market entry."

Williams emphasises that research, development, testing and manufacturing processes are often capital intensive, and long development timeframes combined with a high level of uncertainty of outcome means deep tech startups can be less appealing to traditional venture capitalists who often look for faster returns on their investments.

Despite more than 35 per cent of Tech23 applicants having raised over $1 million in their journey to date – some raising over $20 million – Cicada clarifies that more significant, long-term investment is required to overcome the multiple ‘Valleys of Death’ that characterise the typical startup journey.

The report found that 40 per cent of applicants had more than five staff, which lags behind figures of 62 per cent in Germany and 64 per cent in Canada for example, and 14 per cent had paying customers. More than 30 per cent were in the proof of concept stage, while a further 22 per cent had built a minimum viable product (MVP) and were looking for support to pursue trials.

The leading sectors for applicants were software at 45 per cent, artificial intelligence at 41 per cent and biotech at 31 per cent, while the least common categories were quantum computing at 2 per cent, blockchain at 5 per cent and photonics at 19 per cent.

The report highlights 'a considerable opportunity for scaled growth that has not been realised', that could be leveraged by applying the same collaborative, systems approach implemented within Cicada Innovations, and championed by CEO Sally-Ann Williams for the entire ecosystem.

"The world’s leading nations and regions are building resilient science-backed economies of the future through integrated policies and systems across government, industry and academia that catalyse billions in public and private investment into deep tech," Williams says.

"These initiatives are not siloed into individual industries or technologies either, with a great example being the US Inflation Reduction Act, which offers deep levels of funding, programs and other incentives to significantly accelerate the climate transition across multiple industries and technologies.

"So when Australian deep tech companies are ready to transition from startup to scaleup, they are being lured offshore - and taking their valuable IP, jobs, contribution to GDP and future tax revenue with them.

"We should be looking to programs like the $15 billion National Reconstruction which is now investing in Australia's industrial capabilities, and create a similar, systems-based environment here. This is the only way to stem this exodus of Australia’s most promising value-creating deep tech companies."