Shining a spotlight on Australia’s ‘hidden gem’: Deep tech

From the creation of WiFi to the cochlear implant, Australian innovators have developed deep technology that has shaped the lives of billions of people across the globe.

While the path to commercialising these complex systems can be arduous, expensive and require long-term strategic support, investors back home are increasingly taking note of the potential opportunities in Australia’s startup scene.

Sitting down with Business News Australia at ‘_SOUTHSTART’ in Langhorne Creek, South Australia, Cicada Innovations CEO Sally-Ann Williams said many local venture capital firms that have typically tended to back Service-as-a-Software (SaaS) businesses are embracing deep tech for the first time.  

“Deep tech in Australia is a bit of a hidden gem. There is a growing appetite for people to invest, and venture capital firms in Australia that have traditionally only invested in SaaS are getting very excited about it,” Williams said.

“The risk profile is no different. Actually, it's probably even better to some degree than in some of these SaaS businesses [they’re] investing in. What they do is hard, but because there's generally a regulated pathway to market, they're really good at managing the scientific risk.”

“The business case is there - let's help work through that with them. Because that's the part that we can collectively solve together with smart capital, the right procurement strategies and the right connections to industry. We're just seeing an appetite for it that we've never seen before and I think Australia is a little bit behind the eight ball globally.”

The increasing local interest is refreshing for Williams, who is at the helm of a 23-year-old deep tech incubator that has often looked abroad to help its founders secure capital.

“We've always had a really strong history of being able to attract international investment into our resident companies and into the companies we work with - that capital comes from the US,” she said.

“There's lots of people over there who have really good experience and [we] want strategic investment. People who understand automation, robotics and hardware. People that can connect you to market opportunities for scale and growth. We see that from coming from the US and increasingly Japan, South Korea and Europe as well.”

“Our companies raised a lot of money during the last three years and they did it without getting on a plane. That gives me great comfort when there’s a real problem that a large part of the world feels and you have a tangible solution. You can find the people out there who have a vested interest in seeing that solved.”

One local company making a mark is Sydney-based biotech SpeeDx, which is enhancing the capabilities and utility of standard polymerase chain reaction tests (PCR tests) to detect specific cancers and infectious diseases.

Just last month the company secured $26 million in a funding roung backed by US-based Northpond Ventures, Platinum Asset Management (ASX: PTM) and Tenmile - a healthtech fund of Andrew ‘Twiggy’ Forrest and his wife Nicola’s private investment vehicle Tattarang.

Williams also noted the company has put 11 people through an industry-based PhD, which covers the expenses of their degree in exchange for their time and labour.

“They've been supervised by one of the co-founders to get their PhD. Not only does that give them a great pathway of success as a researcher should they want to go back into academia, but it grounds them to be the next discoverers,” she said.

“They're deeply understanding fundamental scientific discovery and how that relates to commercialisation. That's 11 future founders that I'm seeing sitting right there.”

Other Australian deep tech companies with significant backing include Advanced Navigation, which raised$108 million in a Series B funding round announced four months ago, as well as environmental tech startup Samsara Eco.

“Now is the time for deep tech. The conversation is changing. Even at [this conference], I've had a half a dozen investors going: I keep following what you do and I love what your companies are doing. I don't know how to invest in them,” Williams said.

“Come and be part of this - see how it's done, walk alongside us on this journey. Get to know these businesses, because they're not only are they trying to do something really hard, it's also really exciting.”

According to Cicada Innovations, of the leading 2,500 global firms that are recognised as R&D leaders, roughly 12 of them are Australian.

For comparison, the economies of South Korea and Canada – which are only slightly larger than the Australian economy in terms of GDP - have 60 and 28 firms, respectively.

Williams noted that one of the biggest challenges the deep tech sector back home must overcome is providing a strong support system for founders as they tackle global expansion.

“With deep tech, you have to be a global company from day one. The market is never going to return enough to you in Australia to actually make you a profitable business. So, balancing and understanding that and having the right advice, mentorship and people on your board to help development - that's still challenging,” she said.

“It's because we haven't done enough of it. We need more deep tech companies and we'll start to get a flywheel of momentum happening in that space. We will see it happen. I'm absolutely confident because we have no choice but to make it happen.

“The planet, people and our economy depend on it because our economy has to transition. We need more science and engineering R&D businesses because what they do is not only solve the problem and bring something to market, but they actually create an enormous spillover effect.”

On the upside, financial support for deep tech may increase through government initiatives such as the National Reconstruction Fund – a bill recently backed by the senate looking to pump $15 billion into agriculture, medical science, renewables, advanced manufacturing and sovereign capabilities.  

Williams also noted that some VCs in Australia are backing deep industries like biomedicine, climate tech or robotics, naming CSIRO-backed Main Sequence, Brandon Capital, OneVentures and Blackbird as examples.

“We never shine a spotlight on deep tech. We have amazing and incredible research and discovery capabilities - both in our universities, but it's also in industry and community,” she said.

“You benefit from diagnostic tests that tell you what illness you have, but also what antibiotics that you're resistant to so that you actually get a reliable treatment the first time. Those are kind of hidden solutions that I think we've got a real capability and skill in. It's time to sort of tell those stories and see what more we could do.

“How do we make the unfamiliar, familiar? And actually shine a spotlight on where the investment opportunities are, where the return of investment is going to be? We need to connect founders with long-term capital and pull them through to market to build the next generation of industries in Australia that will go on transforming our economy for the next 100 years.”