The number of deeptech companies exploring SPACs is an indication that there is a gap in the market between post-venture financings and pre-scale commercial traction.
This gap poses a question if there can be a Long Term Stock Exchange-equivalent exclusively for more deeptech solutions. Why could this make sense?
Venture capital does a good job at funding early stage entrepreneurs that look to catalyze hard problems. In the deeptech space, however, the money and time between subsequent success milestones usually becomes increasingly capital intensive or lengthy. The technology developed in a lab or with early customers ultimately enters real-world production and integration.
Given how many deeptech investments directly interact with atoms (not just bits) the real world feedback loop requires more time and money. This extension is due to a combination of systems integration, hardware requirements and regulatory structures. Like biotechnology startups, when these deeptech businesses do ultimately achieve their benchmarks, the value and real-world impact is very material. And accordingly, the valuations are step-function increases.
I believe there are cohorts of investors (from young professionals to pension funds) that would be interested in financing these opportunities due to
1) the impact and world-changing potential of these company types and
2) the horizon exposure offered by financing these businesses. Young professionals and pensions like long-term investment horizons that compound over decades.
By my calculation that is around a $5-10BN per year financing opportunity – a figure measurably digestible within the larger equity markets. There probably needs to be a minimum hold period to ensure long-term alignment but everything else is up in the air. And given how these businesses are usually world-positive, perhaps these types of opportunities can also better match to a pre-tax contribution structure?
Who is working on this? Does anyone else feel similarly? With enough interest, I’d be happy to spearhead exploring this opportunity with an enterprising entrepreneur.