Capital ≠ Strategy: Is Venture Capital the Right Home for Deep Tech?

Stop pitching science like it’s software.

When capital meets complexity

Everyone talks about a lack of capital. But in deep tech, it's rarely a matter of money - and almost always the logic behind how it's allocated.

Venture capital in deep tech works. It's just not always designed to finance science-based technologies with long cycles, regulatory severity, and industrial embeddedness.

What deep tech needs is not a new source – but a new coordinate system.

“We start from the science and we build the business case based on its limitations.” – eM.

And that's exactly what most people lack...

Systemic Mismatch: Why Venture Capital & Deep Tech Are Not Running in Synchrony

Venture capital is an accelerator – designed for software, for markets with clear feedback loops, for products that can be quickly validated and scaled.

Deep tech works differently. It's not about "minimum viable products," but rather about reproducible functionality under physical conditions.

VC thinks in terms of traction. Deep tech thinks in terms of thermodynamics. And that's precisely where the divide lies.

🟣Product-market fit? Often it doesn't exist – because there's no existing market.

🟣Go-to-market? Doesn't work – because deep tech doesn't launch, it integrates.

🟣Exits? Must be planned before a pilot is even completed.

According to McKinsey, deep tech accounts for 44% of all tech investments in Europe – an increase of 18 percentage points since 2019. McKinsey & Company

And when you evaluate infrastructure with app logic, everything looks like a failure. But the failure lies not in the technology itself - but in the metric by which it's measured.

"Traction is never awarded for a scientific discovery. It's not a product - it's part of the infrastructure." – eM.

What we see: Narrative misunderstandings & strategy gaps

When we talk to founders, we always see the same pattern: They have substance, but no language for it.

Investors ask about traction. Teams talk about validation. While some focus on markets, others talk about molecules, material properties, or measurement accuracy.

Scientific technologies are presented as if they were software – with slides about total addressable markets and user personas. But the foundation remains untranslated: no clear path to industrial integration, no capital logic that explains the long-term viability of the technology core.

The result: pitch decks that shine – but don’t last.

“I’ve seen startups that have perfect pitch decks – because no one asked the right scientific questions.” – eM.

And that's not the fault of the founders. It's because they were taught to force their technology into a language that was never written for them.

“If I hear again 'just do an MVP' with a quantum computer or bionanomaterials, I will probably explode.” – eM.

What we see isn't a communication problem. It's a structural failure.

The real problem: Not a VC crisis – but matching errors

They do exist: VCs that truly understand deep tech. Funds like The Engine (MIT), Amadeus Capital, and Future Ventures bring in academic staff, think in terms of technology maturity levels, and evaluate based on physical reality rather than market hype.

But they are the exception—and that's okay. Because not every fund needs to finance every case.

The real problem? Startups that, without a capital strategy, are running into the wrong spaces.

They pitch quantum hardware to funds that scale API business models. They present five-year roadmaps to investors who prefer 18-month runways. And then they wonder why they're rejected - or worse: why their conversations fizzle out.

"I'm not anti-VC. I'm anti forcing science into SaaS logic." – eM.

VC is not the enemy. But it is a tool that must be chosen correctly - otherwise, it will fail in its purpose.

The alternative: capital architecture instead of capital hopping

Venture capital alone is not a foundation. Deep tech requires a structured framework that strategically connects various capital sources.

At Arise Innovations, we have so far identified 12 sources of capital that are often implemented unknowingly but in a well-structured manner.

Grants, co-development, venture clienting and IP monetization are not stopgap solutions, but rather viable building blocks of a well-thought-out capital architecture.

Instead of jumping from one pot of money to the next, deep tech startups should build a framework that fits the technology and strategically exploits its limitations.

"Grants aren't backup plans – they're the architecture's layer. But only one of them" – eM.

Such a capital architecture takes into account the long development cycles and specific requirements of deep tech. It integrates various financing sources to ensure sustainable and flexible financing across all phases.

Studies show that deep tech companies often rely on a mix of government grants, strategic partnerships, and other forms of financing to successfully implement their innovation projects. McKinsey & Company

Grants like those from the European Innovation Council (EIC) offer not only financial support, but also access to networks and mentoring, which can be crucial for market entry. As an applicant, I would be cautious here, though... EIC

The combination of these elements creates a capital architecture that not only secures financing but also the strategic orientation and scaling of deep tech enables innovations.

If physics doesn’t bend, the business model must bend

The problem is never just capital. It's the lack of understanding of capital.

Deep tech cannot be forced into existing growth models – it requires a design principle that works with scientific logic, not against it: strategic, systemic, long-term.

The solution isn't "more" money. It's a more precise, better coordinated interplay of capital sources.

"Founders are told they're not business-ready. I say the business isn't science-ready." – eM.

"Capital is not a finish line. It's an ecosystem entry ticket." – eM.

Those who understand this don’t build startups – but systems that last.

🧠 Glossary of capital logic in deep tech

(One sentence – a change of perspective)

Technology-Market Feasibility → “You don’t build what is desired – you enable what was not possible before.”

Scalability Paradox → “The deeper the technology, the harder it is to scale – and the more valuable it is.”

Silent Validation → “If your partner is a Nobel lab, you don’t need LinkedIn shouting.”

Capital Architecture → “You don’t build a startup on funding – you build funding around your technology.”

Strategic Dilution → “Don’t protect equity – create leverage.”

Narrative Mismatch → “Science communicates in uncertainty. Investors demand certainty.”

Infrastructure ≠ Product → “deep tech is not a feature – it is a foundation.”

So if you're currently building a technology that doesn't fit into any pitch deck template, you're not wrong.

You simply ca n't be built to standard standards . And that's not a flaw. That's your category.

We work with precisely these kinds of founders: those whose ideas are bigger than their current capital plan.

Because it's not about fitting into the system. It's about building a system that supports you.

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💜 Because Science doesn't follow Rigid Business Logic

eM. from Arise Innovations - Your only partner for deep tech fundraising through reverse-engineering

€80M+ raised & managed || 120+ projects

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