The Royal Academy of Engineering State of UK Deep Tech report released earlier this year provided a comprehensive overview of the sector, detailing the challenges faced by founders in commercialisation, raising investment and regulatory hurdles. We partnered with Sifted to pull together an expert panel to discuss these challenges in more detail.
Two of our Hub members joined the panel, Atif Syed, CEO and founder at Wootzano, a robotics company and Simon Thomas, co-founder and CEO of Paragraf, a pioneering graphene electronic device company
Atif is an alumni of our Enterprise Fellowships programme, which supports academics to commercialise their innovations and spin out from academia. He is based in the North East and has successfully scaled Wootzano to now operate globally across eight markets.
Simon came through our Shott Scale Up Accelerator programme and now has a vantage point as Chair of its steering committee. The Shott Scale Up Accelerator provides best-in-class leadership training that is designed for leaders of scaling deep tech and engineering firms.
Simon and Atif joined Estelle Godard, Vice President at Promus Ventures on the panel along with Rebecca Gorman, Founder and Chief Technologist from Aligned AI.
Atif Syed, founder & CEO, Wootzano
in the UK, we don’t have enough VCs who fund beyond seed stage in this space
95% of Wootzano’s investors are from the US, Atif told us. This echoes the findings in the report, with non-domestic investment into UK-based deep tech firms elevated once again. Firms outside the UK have participated in more than 300 deals each year since 2021.
Atif made the point that investors view his firm as hardware and that here in the UK, we don’t have enough VCs who fund beyond seed stage in this space. AI is perceived as software only, although as Simon highlighted, AI relies upon essential hardware such as chips like the ones that Paragraf manufacture, something which is often overlooked in the hype surrounding AI. Generally, the sentiment across the panel was that UK and European VCs don’t have the mandate for deep tech or hardware.
Atif and Simon both gave a dose of reality. Is the intense focus on AI any different from previous trends, such as Blockchain, quantum or fintech? There will always be a new exciting thing that investors, politicians, and the general public will be intrigued by. The perception that AI is diverting investment from other sectors is misplaced. The whole investment scene has been through a downturn and as such we need to address the challenges across the whole investment ecosystem.
This need for greater education in deep tech investment alongside the UK’s vibrant innovation landscape has fuelled a pioneering partnership between ourselves, the Royal Academy of Engineering Enterprise Hub, and Imperial College Business School. Together, we have launched a government-backed Venture Capital Fellowship to boost investment in the deep tech sector. We also have a regular investor newsletter which highlights our outstanding deep tech alumni who are actively raising.
The challenges for deep tech companies
We define Deep Tech as capital, time, R&D intensive companies. This belies the true complexity and vast range of innovative products and services that deep tech companies are developing. Moreover, Deep Tech companies are often operating in both hardware and software, but there is a lack of understanding about how these integrate to create the products of the future.
A further challenge is again particular to the context in which Deep Tech companies are currently operating. Even early-stage funders require much more de-risking than they have done previously. Companies at seed stage now need to demonstrate a strong pathway to market and solid traction. This manifests itself as a real challenge for Deep Tech companies: developing an early stage prototype in robotics, medtech, chip development etc requires significant capital, and the product is required before going to market. It takes a lot longer for Deep Tech companies to get to seed funding.
How Deep Tech companies can overcome some of the challenges
Atif approached this challenge head-on by developing a low-cost MVP which he was then able to take to customers, tackling early technology adoption without the need to rely on VC investment. With a relentless drive on high quality and exceptional customer service, Atif was able to find early-adopters who have paved the way for other customers to follow suite.
Simon Thomas, co-founder and CEO Paragraf
When you unearth the right customer, they will be prepared to embark on a journey with you. Ultimately, it is a better quality relationship, founded on overcoming challenges and creating efficiencies, rather than merely a transactional supplier-customer relationship.
Simon echoed this sentiment, advising deep tech entrepreneurs to develop a value sell to help the customer find the use case. Simon shared his experience: for a company like Paragraf, developing transformational solutions and finding customers in Europe is a challenge. He and Atif both suggested that ambitious Deep Tech entrepreneurs need to go to Taiwan, or Singapore to find inspirational tech companies with the experience and attitude to adopt something truly innovative and drive forward its use. Simon advised fellow entrepreneurs to spend time finding the right organisations and the right people in them, for instance by scouring online forums for the tech evangelists.
When you unearth the right customer, they will be prepared to embark on a journey with you. Ultimately, it is a better quality relationship, founded on overcoming challenges and creating efficiencies, rather than merely a transactional supplier-customer relationship.
Room for optimism
Despite the negative headlines about deep tech investment, we believe that there is room for optimism. One upside that Atif mentioned was that because there is less VC capital available, deep tech companies are looking at other ways to fund their growth. This includes family offices, sovereign wealth funds, and in some cases private equity. In previous years, these options would not have been so readily available for deep tech companies, so the message from Simon was to think beyond VC as the only option for raising capital.
The previously mentioned Science and Technology Venture Capital Fellowship shows a commitment from government to upskill generalist investors capability in identifying and deploying capital into high-potential, scalable, life science and deep tech ventures. And we hope to see increased investment start to flow into a greater number of deep tech companies.
This underlines the government’s focus on creating growth through deep tech innovation. Through the programmes that we run at the Enterprise Hub, we are in a hugely privileged position to support deep tech companies, and across all of our programmes, we have noticed that the quality of applicants increases year on year. Our programmes are very competitive, providing best-in-class education and training for entrepreneurs, whether that’s to support them in starting up, spinning out, or scaling.
From Hub members like Notpla, who are replacing plastic packaging with sustainable alternatives, to MintNeuro, who are improving patient outcomes with chips that enhance neural implants, the innovators and engineers we support are solving global challenges, as well as growing the UK economy. They are also demonstrating the potential of the UK as a hotbed of innovation.
Read more about our programmes to support deep tech founders
This blog was a write up from the panel event we ran with Sifted on February 19 2025