Professor of Entrepreneurial Finance Ramana Nanda explores how deep technology (deep tech) can help change the world for the better – and why it needs a lot more funding
It is well known that climate change, developing sustainable food and water systems, and improving human health and well-being are among the biggest issues the world is facing. But the sticking point, argues Professor Ramana Nanda, comes with developing – and funding – the technologies that can do just that.
Following his undergraduate degree in Economics at Cambridge, and a few years in business consulting in New York and London, Professor Nanda returned to the world of academia to complete his PhD at MIT’s Sloan School of Management. Focusing on entrepreneurial finance, he was able to take a more conceptual approach to business, while also looking at how theories can be applied to real-world situations.
“Entrepreneurship plays such a fundamental role in driving economic growth, but the best ideas don’t always end up getting the money they need,” he says.
Funding new technologies
Many of these ideas, he believes, are rooted in deep tech startup companies, providing technology solutions based on substantial scientific or engineering challenges.
For example, while tremendous advances have been made in reducing the cost of generating renewable energy from solar and wind, the tricky issue of storing the energy from these intermittent sources remains unresolved.
“Until we get better at developing batteries that can store renewable energy at scale, it’s going to be impossible for us to fully transition over from carbon-intensive sources of power such as coal and natural gas that can provide a very stable baseload,” he says. Financing the commercialisation of such technologies, many initially conceived and developed within universities, will be key to this effort.
Imperial is well-positioned to try and tackle the bottleneck in deep tech funding
And it isn’t only questions around climate change where deep tech solutions emerging from universities are crucial. They are essential to solving health challenges, as we saw with the development of coronavirus (COVID-19) vaccines.
But in order to create the technology necessary to solve these problems, he argues, more investment in deep tech startups is essential. So, why are these technologies struggling to get the funding they need? The answer is complicated.
"We need to fully understand these barriers before we can fix them,” he says. “This is one of our goals for the new Academic Strategy Initiative on Deep Tech Entrepreneurship.”
New funding models
Some of Professor Nanda’s recent work has highlighted that venture capital firms – the most important source of funding for startups – tend to invest in a narrow band of technologies that are amenable to de-risking quickly and cheaply.
Part of the dearth in funding in deep tech ventures often stems from them being a poor fit for venture capital, due to the long timelines and capital required to resolve technology and market risk. An important exception to this is biotechnology where validation from agencies such as the US Federal Drug Administration, combined with the ability to charge high prices once a new drug is approved, makes some biotechnology startups attractive investments.
Entrepreneurship plays such a fundamental role in driving economic growth, but the best ideas don’t always end up getting the money they need
In general, however, most deep tech investments made by venture capital investors are either into artificial intelligence-based technologies or software applications. Meanwhile renewable energy generation, batteries or carbon sequestration and storage struggle to find funding because they require substantial capital to reduce technology and market risk.
In a recent paper, he argued that "new funding and organisational models at the nexus of research universities, philanthropy, and "patient" private capital have the potential to unlock vibrant [deep tech] innovation ecosystems that are urgently needed to solve some of the most pressing problems facing societies today."
Fortunately, he says, Imperial is well-positioned to try and tackle the bottleneck in deep tech funding, with strong talent in the fundamental pillars of deep tech: science, engineering and medicine and business, as well as a strong culture of supporting entrepreneurship. "I think there’s an amazing opportunity for us to take a lead on this,” he says.
Professor Nanda has been a visiting academic at Imperial College Business School since 2019 and will join the School on a permanent basis on 1 July.