In today’s tech landscape, deeptech has emerged as a critical player in shaping the future.
To understand this better, I recently sat down with Doron Zauer, General Partner at Earth and Beyond Ventures. Together, we discussed the significance of deeptech and its growing influence, particularly in Israel and Startup Nation.
Deeptech refers to technologies based on significant scientific advances and engineering innovation. Unlike ‘traditional’ tech, which often focuses on software or consumer gadgets, deeptech leans heavily on core scientific concepts in areas such as quantum computing, biotech, spacetech, or materials science.
“There’s more demand around bandwidth, connectivity, energy, data storage, because of generative AI, ChatGPT, all those companies,” explained Zauer. “They need masses of electric power, processing power, and amounts of storage. At the end of the day, software sits on something; it sits on something physical and we’re really pushing the boundaries of what we’re demanding of software in other use cases such as driverless cars and connectivity in the areas of communications.”
For Zauer, the need for robust physical hardware is what will drive the call for these solutions. “It’s not as if we in Israel just came up with deeptech and decided it was a good thesis. Around the world, you can see more deeptech funds being raised, more allocations to deeptech from generalist funds. You can see all sorts of AI companies that are buying amounts of hardware and processing power because that’s what they know they’re going to need in the years to come.”
Listen to all the insights in the conversation above.
Zauer explained that deeptech companies possess a unique competitive advantage derived from their technologies, rather than just their business models. The fund invests at the early stage, and portfolio companies include QuamCore, Spiral Photonics, SkyPearl, and CoolVOC, among others.
The rise of deeptech was partly a response to the overvaluation of software companies during the tech boom, he claimed. As the market shifted towards a more substance-based approach, investors began prioritizing companies with sound business models and stronger advantages over their competitors. This shift has positioned deeptech as a vital sector for future investment and growth.
During our chat, Zauer highlighted various sectors that heavily utilize deeptech, including compute, climatetech, new energy, and defense. He also noted how even though Israel has long been recognized as a leader in sectors like cybersecurity and software, deeptech is equally critical to Israel’s future in the tech landscape.
“In terms of where the Israeli market is and how we’re bringing foreign investors… we’re not just selling specific technology, we’re selling the Israeli market,” he said. “We’re telling them that Israel’s open for business again. More open for business than it was before, because we never closed… We’re very optimistic. There are a lot of studies that show that economies come out of war and conflict bigger, better than ever.”
While software might dominate current investment trends, the balance is shifting, with more funds being allocated to hardware and deeptech solutions.
