Welcome to the 33rd episode of Deep Tech Catalyst, the channel by
where science meets venture!Today I'm excited to host Calvin A. Cupini, Director of Investments @ Activate!
In our conversation, we explore the essential qualities of tomorrow’s Deep Tech leaders, drawing from Activate’s extensive experience.
We delve into the unique challenges Deep Tech founders encounter, from transforming groundbreaking scientific discoveries into viable market solutions to navigating the complexities of securing investment in a dynamic landscape.
Here's what you will get:
🔍 How to Identify the Deep Tech Leaders of Tomorrow
🤼 Switching Mindset from Lab to Entrepreneurship
🏋️ Founders Training and Education
🚀 Articulating a Vision to Investors
🥇 The Role of Founders in the Pre-Seed Stage
🎧 Prefer to Listen?
KEY INSIGHTS FROM THE EPISODE
🔍 How to Identify the Deep Tech Leaders of Tomorrow
Activate's approach differs significantly from traditional accelerator and incubator models. Rather than seeking viable companies, Activate prioritizes the discovery of visionary scientific leaders.
The program specifically seeks out emerging scientific founders who are pioneering uncharted domains or tackling challenges that currently lack immediate commercial viability.
These ventures demand extensive time, effort, and innovation to uncover and capitalize on potential opportunities.
The entry criteria may appear unconventional. For instance, prospective candidates are required to possess a minimum of 5 years of PhD-level experience and have raised less than $2 million in dilutive capital.
Are you just an incredible, inspiring researcher who is looking to commercialize something that can make a huge difference if it works and if it can scale? And is the reason why it's not happening just because you haven't had the time or the effort or the support to get it there?
🤼 Switching Mindset from Lab to Entrepreneurship
Aspiring STEM founders excel in their scientific disciplines but often encounter daunting obstacles during the transition to entrepreneurship, particularly in attracting venture capital investments.
A critical hurdle arises from the stark divergence in communication styles between science and business.
For instance, scientists often struggle to assert absolute certainty when defending their research findings, as statistical analysis typically precludes 100% certainty. This challenge extends to commercializing research, where proving to investors that an opportunity is both exceptional and viable involves navigating the inherent uncertainties of the venture.
This challenge resonates deeply in the realm of commercializing research.
So, to secure investor backing, scientific founders must effectively convey confidence in the potential outcomes of their ventures, a task complicated by their academic background.
However, this training in navigating uncertainty can also serve as an advantage.
Scientific founders, accustomed to the uncertainty inherent in scientific inquiry, are uniquely equipped to navigate these challenges.
While some may prefer the stability of government or corporate settings, entrepreneurial scientists excel in pioneering uncharted territories where outcomes are uncertain.
“A true startup founder and entrepreneur is comfortable in that realm of uncertainty. Nothing is known about your company. The market is wobbly and unknown and investor interest can come and go. [...] Scientists are absolutely trained around uncertainty and paving a way into a space where no one knows what the outcome is. No one has a perfect solution. And getting closer is the effort. This is perfectly aligned with early-stage entrepreneurship.”
Thus, the primary challenge—and opportunity—for scientific founders lies in bridging the gap between scientific caution and entrepreneurial confidence. Mastering this balance significantly enhances their credibility and the attractiveness of their ventures to potential investors.
🏋️ Founders Training and Education
There is a common belief in the startup world that a scientific founder needs to be paired with a business-minded individual, such as an MBA, in order to achieve success.
The idea is that the MBA would take on the role of CEO and provide guidance to the "nerd" in the lab, while the scientific founder focuses on the technology.
However, not everyone agrees with this philosophy. Some organizations, such as Activate, believe that a scientist-trained leader can successfully lead a startup on their own. They argue that PhDs are capable of learning about entrepreneurship, early-stage finance, and the legal entity of their startup in order to make it a success.
So, Activate provides intensive, tailored training for founders, guiding them from the initial concept to the pre-seed stage.
The goal is to provide fellows with a comprehensive understanding of the entrepreneurial journey and equip them with the tools they need to succeed.
During this period, founders gain insights into diverse aspects pertinent to their entrepreneurial journey. They benefit from a supportive community of fellow startup founders who share similar academic backgrounds, offering mutual assistance and perspectives on challenges that may be unique to them.
This model of immersive learning and community support ensures that scientific founders aren't just equipped to initiate businesses but are also prepared to excel as leaders of potentially groundbreaking ventures.
🚀 Articulating a Vision to Investors
Scientific founders must be able to pitch their vision not just as tech projects but as scalable ventures capable of delivering substantial returns.
To support this path, the approach at Activate, originally named Cyclotron Road and based at the Berkeley National Laboratory, challenges the conventional startup model prevalent on Sand Hill Road, where many of the largest VCs in the Bay Area and Silicon Valley have offices.
In 2015, investors were primarily focused on fintech and social media apps, leaving little to no venture capital available for Deep Tech founders. This was due to several factors unique to Deep Tech ventures, including their high capital intensity and the technical complexity and risks involved.
So, unlike sectors such as fintech or social media apps, which attract considerable investor attention, Cyclotron Road focuses on pioneering fields like novel electrolyzers and new chemistries.
When we describe how venture capitalists work in our space, I always like to talk about how investors don't invest in a point, but rather a line. And we're looking for this trajectory, even a derivative below it, where at this moment, your company isn't worth much and your idea is still very early. But you both see a place where this is of great demand.
For instance, while the current market centers on lithium, founders are encouraged to anticipate shifts like the potential adoption of sodium or changes in geopolitical dynamics affecting mineral resources.
This foresight is critical in an industry where technology integration and market demand evolve gradually over time.
When engaging with investors, founders must articulate a vision that transcends immediate market entry. They should outline a trajectory of growth, highlighting key milestones and opportunities for investment and technological advancement.
This strategic communication distinguishes Deep Tech ventures from other sectors, which often focus on shorter-term returns and rapid scalability.
🥇 The Role of Founders in the Pre-Seed Stage
At the pre-seed stage, many companies do not have a profit and loss spreadsheet or revenue multiple to compare for investment purposes.
Likely, there are no public comparisons or public companies doing similar breakthrough technologies, as the market may not exist yet.
So, if there is no product, market, customer, or anything to base a financial investment on, investors are likely investing in the founder.
However, investing in a founder can be fraught with bias and difficulty.
It is important to consider whether the founder has the same energy and passion for learning, and can identify their own gaps and fill them with people who can also fill in additional gaps.
These leaders have a groundbreaking level of research and understanding of the deepest and hardest parts of their topic but also have the humility to recognize that there is still more to learn about plant design, permitting processes, commodity markets for inputs, and working with software teams.
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