Deeptech is taking a growing share of Europe’s early-stage investment, but university spinouts are still receiving only a small portion of the funding. Investors who back these companies say that risk aversion among venture capital firms is holding them back—and may mean missed opportunities.
The investors point to the distinctive challenges of turning university research into a business. Spinouts can require specialist expertise, lengthy development and substantial capital, while their technologies may be difficult for generalist investors to assess. These factors can make the companies appear less attractive than startups with more familiar business models.
Backing a spinout also involves navigating the relationship between a university and a new company, including the terms under which research and intellectual property are transferred. Investors say these issues can add complexity to setting up a business and securing its first funding.
The investors’ view is that this complexity should not be mistaken for a lack of potential. They argue that specialist investors can help teams address the obstacles, build companies around research and bring technologies closer to market. But doing so requires patience and a willingness to support businesses that may not fit conventional venture-capital expectations.
Their message to the wider deeptech investment community is that avoiding spinouts because they are difficult to finance or evaluate can leave valuable opportunities untapped. Europe’s universities are producing research that could underpin new companies, but turning that work into investable businesses requires investors prepared to engage with the risks.
Sources: Sifted.