Deep Tech Investments *Should* Be Hard Work!

If you’re investing in deep tech, know what you’re getting in to; if you’re a deep tech firm, help investors clearly understand your proposition.

As I’m sure you’ll have seen, Elizabeth Holmes, CEO of blood testing firm Theranos and once a darling of Silicon Valley, has been prosecuted for defrauding investors. Holmes made claims about her firm’s capabilities in an effort to attract investment, that ultimately turned out to be untrue.

Those with long careers in the tech industry will recognise the parallels with similarly spoofy SpinVox who claimed that its technology transcribed mobile phone voicemails to be sent as text messages to recipients. Following a BBC investigation, the company was forced to admit that transcription work was done by humans in call centres around the world, not its own technology, raising questions about the company’s technology capabilities as well as significant privacy concerns.

News reporting of these firms and their eventual collapse tends to focus on the dishonesty of their executives in duping investors out of millions of dollars. No doubt this dishonesty occurs and is worthy of note.

But especially in the deep tech world, should investors carry some of the blame, too? I think it’s incumbent on investors to know what they’re getting in to and understand exactly what they’re investing in, and know when the wool is being pulled over their eyes.

I wonder sometimes if investors more readily (and dare I say lazily) “follow the money,” track major trends and hot topics, and get on the next hype curve (right now that’s metaverse, but see also AI, NFT and Crypto for details!), rather than do the hard yards in drilling into innovators’ claims.

Unless you properly understand the technologies involved, it’s far harder to be able to look at potential tech investment opportunities objectively and truly understand whether you’re being pitched snake oil, or opening a gold mine of genuine, original innovation with market potential.

There is of course hype, spin, and optimistic projections and forecasts in every pitch, but investors need to do more than compare potential and performance with similar firms, experiences and “market vibes”.

Of course, deep tech firms must also take responsibility in properly and clearly communicating their value propositions to give comfort to investors that they’re genuine contenders, as well as providing the much-needed context to enable investment decisions. (If you’re a deep tech reading this, check out some other articles on communications tips for deep techs, how tech innovation should be communicated (TL/DR: humanise your technology, explain the detail) and why deep techs need vision and mission to be “buyable and believable". And drop me a line if you’d like to discuss your messaging!)

But as far as the investor community goes, getting to grips with the detail of the technology and how it is used is paramount and a key responsibility to protect against the kind of distraction and deceit that Theranos and SpinVox pulled off. Don’t just follow the hype.