There are some sectors in deeptech that are so promising that investing in every minimum viable opportunity will likely pay out over time. These trends are so powerful that an unusual number of startups in the space have opportunity for success. Rather than high conviction in particular teams, investors can focus on high conviction in particular sectors.
If you assume that 10% of venture backed startups return invested capital, and 1% have outsized success, I think you could reasonably double it for these sectors. I’m convinced that seed investments into all startups with a minimum viable team & product, in one of these deeptech sectors, would generate good returns.
Water technology (atmospheric water generation and desalination)
Fertility and reproductive technology
Synthetic cell development
Fungal engineering
Bioengineered / trait enhanced wood
Biocatalysis and enzymatic biomaterial synthesis
Fermentation scaling technology
In order to capture deal flow, the capital would have to be hyper-focused. Capital allocators need to be leading tacticians in one of these sectors, and build reputation (as any other firm might) to be the first stop for startups.
The best investors to tackle this? Technical and operator talent currently working in the sector of interest. I would love to see a syndicate of deeptech microfunds, being managed by sector experts, quickly funding all opportunities that come their way.
“Spray and pray” investing is generally considered a dumb guy’s game. But if your edge is extreme conviction in a vertical or tech stack before everyone else, writing lots of checks into any available opportunity might just work.
Arye, I think the people with the deep technology expertise to do this exist, but I'm not sure they have enough money to be accredited investors just yet. I think there is a huge amount of operator talent out there with deep knowledge of systemic problems too. Perhaps a new type of investment company outside of traditional VC and even the newer syndicate model makes sense.
Isn't this what a16z is attempting to do around crypto and NFTs? Could easily be another model for biotech/materials science/chemistry oriented firms.