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From Exponential Challenges to Deep Tech Unicorns | Deep Tech Catalyst

A chat with Tom Baruch, Founder @ Baruch Future Ventures

Welcome to the 30th episode of Deep Tech Catalyst, the channel by

where science meets venture!

Today we are thrilled to host Tom Baruch, a true legend in venture capital, and founder of Baruch Future Ventures.

In our conversation, we dive deep into the concept of exponentiality and explore the key ingredients for a successful Deep Tech startup.

In our episode, you will discover:

  • 📈 Understanding Exponential Challenges

  • 🌎 The Need for Scalable Solutions in Climate Tech

  • 🧮 Alinging Impactful Solutions with Financial Returns

  • 🚀 Leadership and Fundraising

  • 🏭 Scaling Challenges in New Ventures

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📈 Understanding Exponential Challenges

The 1970s marked a crucial turning point in the history of integrated circuits and venture capital, igniting technological advancements that continue to shape our world today.

As we traverse these exciting times, the rapid evolution of integrated circuit technology stands as a testament to over five decades of exponential growth, as exemplified by Moore's Law.

The challenges we face today, particularly with climate change, require solutions that match their exponential nature.

In response, we are witnessing a surge in the availability of innovative tools from fields like advanced chemistry, biology, electrochemistry, photocatalysis, and additive manufacturing.

These technologies, emerging from the intersection of diverse, multidisciplinary areas, are vital in addressing the complex challenges posed by climate change through their potential to create a multiplicative effect when they converge.

Impactful Solutions + Financial Returns

Climate change necessitates aligning impactful solutions with financial returns to make these innovations investable and scalable.

It is crucial for investors that founders not only propose innovative solutions but also demonstrate potential for significant financial impact. This alignment is particularly challenging in hardware production and manufacturing, where the business model must meet the expected timeframe of venture capital returns.

The balance between innovation and financial viability is essential, particularly during the early stages of a venture when companies may only have a prototype and the final product is yet to be realized.

These considerations underline how integrating various technological approaches can revolutionize industries and address the grand challenges of our time, demonstrating the transformative power of multidisciplinary technologies.

🚀 Leadership and Fundraising

Despite the complexity and hardware focus of Deep Tech, the key to a successful venture often boils down to leadership.

Effective leaders must articulate a clear vision and excel in fundraising, particularly in today’s environment where interest rates exceed 5%, making fundraising more challenging than when rates were lower.

Leaders must be able to take calculated risks and demonstrate the ability to convince investors of the viability of their vision. It's not merely about having cutting-edge technology; the business itself—the model, the plan, the potential for returns—becomes the product.

For a company founder or CEO, your business is essentially the first product you have to sell. If you can’t sell your vision, you won’t get things done in ten years—it could take twenty or thirty. But that’s beyond the reach of achieving a reasonable return.

You need to be willing to tackle really hard problems, so being a good fundraiser is crucial. Cash flow is more important than anything else.

📚 Learning From the Past: The Revolutionary Impact of Integrated Circuits

In the 1970s and 1980s, many believed that the best we could achieve with integrated circuits was line widths of maybe a few microns.

Most people didn’t understand exponential growth.

But look at where we are now—we’re making integrated circuits with line widths of 2 to 3 nanometers. That advancement is why we have AI and technologies like ChatGPT. It’s all about exponential growth and our ability to harness it.

I remember a fellow who worked with me. He had just earned his PhD in artificial intelligence from Stanford in 1985. Back then, he struggled to find a job—a situation unimaginable today.

People were very skeptical, especially about the internet. When the markets surged in 2000, many thought the internet was just a fad. But exponentiality changed everything.

There’s another story from my early career when I was a patent attorney. I worked on patents for a product that turned out to be the first Xerox machine. That machine weighed 642 pounds.

Today, I have a desktop copier that weighs less than 10 pounds. The difference? Integrated circuits. Back then, machines were full of power tubes and other bulky components. Today, we have sleek, efficient devices, all thanks to integrated circuits.

Intel’s founders, like Andy Grove and Gordon Moore, truly understood exponential growth and its potential.

Another visionary who grasped the importance of exponential growth was Bill Gates. His initial vision was simple yet profound: a computer on every desk in every home. Today, it's hard to find a home without one.

🏭 Scaling Challenges in New Ventures

In the realm of deep tech, a holistic approach to the technologies we use, the problems we address, and the scalability of these solutions is essential.

Founders need to focus on 2 key elements: the Technology Readiness Level (TRL) and techno-economic analysis.

  1. The TRL measures how developed a technology is and outlines the necessary steps to achieve a level of 9 or 10.

  2. Techno-economic analysis, on the other hand, evaluates the economic viability of the technology.

It's crucial that the right technology is applied to the right problems and executed in a way that can truly scale.

In the context of climate tech, 3 core messages emerge:

  1. Climate change is an exponential problem that demands exponential solutions.

  2. Innovation often occurs at the intersection of different fields.

  3. The greatest challenge lies in effectively scaling these innovations.

A common hurdle is that many new climate-oriented ventures are initiated by individuals who lack experience in scaling. They often underestimate the complexities involved in scaling, which is vital for the growth of a company and for delivering returns to investors within their expected timeframe.

Before you go, don’t miss our latest Deep Tech Briefing!

💡 Insights on crucial facts from the week shaping the Global Deep Tech landscape at the intersection of technology, policy, and markets.

Get practical insights from cutting-edge tech innovations to the most significant startups and capital moves to stay ahead, and seize new market opportunities.

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Please be aware: this is not investment advice! The information provided in this publication is for educational purposes only and should not be construed as financial or legal advice or a solicitation to buy or sell any assets or to make any financial decisions. Furthermore, we want to emphasize that the views and perspectives expressed by guests on The Scenarionist do not necessarily reflect the opinions or positions of our platform. Each guest contributes their unique viewpoint, and these opinions are solely their own. We remain committed to providing an inclusive and diverse environment for discussion, encouraging a variety of opinions and ideas. If an episode includes promo material, it will be marked with an asterisk (*) for identification.