For European companies, deep tech is fast becoming big business. More corporations in non-technology sectors are investing in or otherwise forming partnerships and alliances with startups and smaller companies in emerging technologies built around significant R&D advances. The trend is picking up steam, and corporations that are not actively exploring such innovations as artificial intelligence (AI), advanced materials, biotechnologies, blockchain, augmented reality (AR), and virtual reality (VR) may find it hard to break in later when ecosystems have solidified around maturing and market-ready technologies. For some more-advanced deep technologies, the ecosystems are already well developed.
For this report, BCG and the corporate and investment banking firm Natixis joined forces to gain a 360° view of how corporations engage with and invest in deep tech in Europe. BCG has been writing about deep technologies with our partner, Hello Tomorrow since 2017, when we first explored the relationship between large companies and deep tech startups. In its publications, Natixis CIB Research and Natixis subsidiary Clipperton have explored such topical tech issues as the cloud in the digital transformation of European companies, the special-purpose acquisition companies craze, and digital health.
BCG and Natixis surveyed 226 respondents from 204 organizations (more than half of which are companies with annual revenues of more than €2 billion) in ten major European sectors. To augment the survey data, we conducted a series of qualitative interviews with senior executives.
Four conclusions stand out:
- Deep tech is a wave that large companies do not want to miss—especially in the face of crises such as COVID-19 and climate change. Both direct investment through partnerships, alliances, and M&A, for example, and indirect investment through corporate venture capital (CVC) and independent venture capital funds appear to be on the rise.
- European companies appreciate the disruptive power of deep tech. While AI may be seen as the most disruptive emerging technology today, many companies view blockchain and AR and VR as the most relevant disruptors in coming years. Assessments of the probable impact of any particular technology depend strongly on the industry and correlate with the technology’s maturity.
- Investing in emerging technologies is good, but investing in people and partnerships at the same time is even better.
- Blockchain, which came to prominence in the finance sector, is powering new asset classes, known as digital assets, that companies far removed from finance are adopting. Beyond cryptocurrencies, real asset and security tokens are growing rapidly.
Here’s our look at the approaches that large companies are taking to deep tech and their rationale and expectations for their investments.
A Powerful Wave
The BCG and Natixis Explore Tech Survey found that 90% of European companies invest in deep tech; and among these corporations, 78% have maintained or accelerated their investments in response to COVID-19. This contrasts with generally declining capital expenditures in the aftermath of the great financial crisis (down 8% overall, according to Natixis estimates).
Because they are rooted in fundamental science, deep tech technologies are often transformative (think electric cars), and early movers can establish a powerful edge over the competition (as Tesla has done). Companies want to monitor trends and keep an eye on promising technologies, even if no clear business application yet exists. Others want to experiment with proofs of concept (PoCs), and a few see the potential for a near-term return.
By Antoine Gourévitch, Amine Benayad, Jean-François Bobier, Shamina Bhaidjy, Thibaut Cuillière, Eric Benoist, and Micaella Feldstein
Read the full article at https://www.bcg.com/en-mx/publications/2021/how-european-corporations-becoming-deep-tech-investors.
