Deep technologies have been booming in Quebec in recent years, and the arrival in early 2021 of the first venture capital fund dedicated to these companies, Boreal Ventures, proves it. Launched with an initial investment capacity of $26M, Boreal Ventures was quickly followed by BDC Capital, which created the $200M Deep Tech Venture Fund in May 2021.
Deep technologies, businesses of impact above all
The very mission of deep tech companies is to address societal challenges through high technology – artificial intelligence, biotechnology, blockchain, robotics, photonics, electronics or quantum, for example – in various fields. They are, by nature, businesses of impact.
Let’s take a local example: Molecular Forecaster Inc. (MFI) has created a computational chemistry platform that uses machine learning to accelerate drug discovery, potentially saving years of research. During the pandemic, the company has been involved in the search for treatments for COVID-19. The company’s societal impact is clear.
“The current pandemic has made researchers, entrepreneurs, industry and government more aware of the importance of adopting deep tech when conventional means are no longer effective in solving complex problems”.
Yet, the notion of impact is hardly raised when referring to these cutting-edge companies, and does not seem to be a funding criterion.
“Health, agriculture or clean technologies are industries where deep tech can bring the most benefits. However, the current support offered to technology SMEs is generally organized by field of activity. It is not sufficiently adapted to the specific needs of deep tech companies and does not take into account the potential impact they can bring to our societies,” says Alain Bakayoko, Director, Commercialization of Innovations, Life Sciences and Health Technologies, PME MTL.
Should deep techs adapt to existing financing models?
These companies have, by their very nature, a longer development cycle. Research, building their technological solutions, tests, certifications… it can take several years before they start selling.
This specificity can lead to a gap between the technological application and the market reality – this is one of the biggest challenges for deep techs. Ideally, a company’s technological advances should move as fast as the market and meet a current need at the time of going to market.
This dynamic has led to a lack of funds for this type of company in Quebec. Is it up to deep techs to adapt to current financing models?
“At MFI, we tailor the solutions we offer our customers to meet their unique needs and requirements. For us, it’s about finding ways to help them be successful, whatever that success looks like. I believe that we should see a similar commitment to customized offerings from institutions supporting young life sciences companies. The reality is, not all startups need or want to seek venture financing, and maybe acquisition isn’t their only desired outcome; there are other options available to reach various development goals”.
Should the ecosystem evolve to adapt to these new technology companies?
“In fact, in order to respond more effectively to the growing needs of this emerging Montreal industry, the SME support ecosystem should evolve its model and be more structured around these innovative companies,” concludes Alain Bakayoko.
But what do we need to keep building this growing deep tech ecosystem in Montreal? How can we better support these companies and their development?
We will look at these questions at the Social Innovation: New Approaches to Impact Financing for Deep Tech conference co-organized by PME MTL and the Technoparc Montréal during the Effervescence 2022 – the Future of Life Sciences event, in the presence of several SMEs in the industry and key players in the area of business support and financing.