If I Had $1,000,000
The Deeptech Capital Stack
Happy Friday! Apologies for the delay on this post due to international travel and picking up a little flu along the way. This week we have news on the NASA science cuts, Chinese bioengineering to extract uranium from seawater, the popularity of nuclear energy, and more. But first, this week’s deep focus thought piece: the deeptech capital stack.
This Week’s Deep Focus: Deeptech Capital Stack
Whether you live in Silicon Valley or simply have seen the streaming show of the same name, most people think of founders starting startups and venture capitalists (VC) funding them. The venture capital model works for companies expected to grow fast and large. However, deeptech doesn’t fit the venture capital growth model in part due to the technology development prior to commercialization and physical infrastructure needed. At the most simplistic level, a traditional VC would look at two companies with identical cash flows but one being a traditional software startup vs a deeptech startup very differently. The reason is that software has negligible recurring maintenance costs while a startup with a factory or lab requires capital expenditures to maintain. The difference in recurring capital expenditure takes away from the return on investment. Therefore, deeptech will always lose to software in traditional venture capital.
So, how do we invest in and grow these societally important companies? It takes a village to raise this child. This village that will help the startup crawl, walk, and run is the capital stack (akin to a technology stack that makes a software product work):
Crawl: At this stage a startup may have one or two unpaid founders and no technology prototype. Non-dilutive grants and “catalytic capital” fit here to complement early stage VC. This bucket includes government or non-profit grants like National Science Foundation (NSF) grants or Department of Defense (DoD) grants. These grants do not take any ownership in return for funds. This “non-dilutive” capital is good for the founder and future VC investors who both profit based on ownership levels if a company is acquired or goes public on the stock market. Additionally, “catalytic capital” groups like the Prime Coalition will invest in lower growth or riskier technology startups if they fit a societal mission or need.
Walk: At this stage, a startup may have a working prototype. Venture debt and offtake agreements complement VC here. Venture debt is a loan from banks and non-banks to startups that specialize in helping founders bridge capital needs in-between venture capital funding rounds. Venture debt financiers are experts in understanding if a startup will be able to secure a future financing round. Offtake agreements are pre-purchase agreements with or without upfront payment by customers or coalitions of customer for your product. Frontier is a good example in the clean tech industry. They coordinate the demand of large players like Microsoft, Amazon, etc. and agree to purchase products at a fixed price and volume when they are developed. Even without prepayment, these offtake agreements can be used to get loans from banks since the future cash flows are more certain with these agreements.
Run: When a company is ready to commercialize and scale, traditional VC is a perfect fit here. While venture capital is involved in the crawl and walk stages, it needs help there to work. A common mistake of many deeptech founders is speaking to VCs and not thinking about commercialization. Without at least some thought to commercialization, a VC at any of the stages will not be interested.
In future posts, we can dive into the nuances of each of these areas as well as the major players for deeptech.
DeepTech News & More
AI
Google Gemini 2.5: Google released its latest reasoning model with signs that AI reasoning continues to grow. 3 min read
US + UK AI: The US Stargate $500B data AI center fund has considered investing in the UK. 2 min read
Large Quantitative Models (LQMs): My friends over SandboxAQ just raised over $400M and reviewed how they are moving forward with LQMs. 19 min watch
The Bismuth of Computing: Anastasia in Tech provided a nice overview of the recent work in using bismuth to further accelerate computing power. 19 min watch
Energy
Popular Nuclear: Gallup reported polling that showed support for nuclear energy is at a near record high. 5 min read
Nuclear Army: My friends over at the Defense Innovation Unit (DIU) announced eight companies to build micro-reactors at various army bases. 3 min read
Cali Fusion: Pacific Fusion laid out its roadmap to net gain fusion by 2030. 4 min read
Quantum
Quantum State: Colorado laid out its blueprint to grow the quantum industry in-state as well as paths for workforce development. 7 min read
Quantum People: The Rand Institute in Europe shared the state of the quantum workforce and how to grow it including non-physicist talent. 52 page read
Quantum Space: Boeing completed the ground-based twin for its space-based quantum entanglement test next year to provide secure communications in space. 3 min read
Space
Space Science Sadness: The current administration has slashed space science by 50%. 5 min read
Space Force War: The US Space Force released its guidance for warfighting in space focused on establishing space superiority. 20 page read
Space Dome: Payload Space provided an overview of the plans for “Golden Dome” including news that SpaceX is angling to provide it support as a service. 4 min read
Synthetic Biology
Uranium Bio: Chinese researchers have developed a protein that can bind to uranium in seawater, opening a new pathway to critical metals of all kinds. 3 min read
State of Synbio: My friend John Cumbers at Synbiobeta gives a great overview of synthetic biology and all of its opportunities. 51 min listen
Free Your Cell-f: Researcher recently published a nice overview of cell-free biomanufacturing (aka “exozymes”) and their applications. 75 page read
Your Future Career: Communities and Resources
You do not have to be a scientist to work at any of these companies. They need all kinds of skills like any company, especially with regards to commercialization. So don’t exclude yourself from an exciting career. For an overview and a whole host of resources for each of the deep tech areas, see this post and this other post of mine.
Ignition News: Great easy to read resource for keeping up with what is going on in the nuclear industry. Plus they have announced their inaugural summit for May 20th in New York City.
Payload Space: It’s a great resource for space startups news in an easy to read format and they have events in different parts of the US.
Quantum Biology Speaker Series: Weekly speaker series hosted by my friend Prof Clarice Aiello on various topics in quantum biology.
Quantum Computing: My friend Marianna Bonanome at SandboxAQ has lots of resources from podcasts to explainers, including a new residency program for graduate students.
Space Ambition: Regular video office hours where they break down the business case for space tech for current and future founders and advisors.
Synbiobeta May 5-8 2025 in San Jose, CA: One of a few of my favorite communities run by my friend John Cumbers for synthetic biology with tracks including space medicine and brain computer interfaces. Highly recommend it if you are a student, a founder, or investor. Students can get reduced or free access if accepted to volunteer at the event or some sponsored tickets have been possible via my friends over at Nucleate. Many and increasing number of international groups including my friends over at the UK BioIndustry Association (BIA).
TWiML: I attended one the first events that This Week In Machine Learning (TWiML) ever ran and it was better than any other AI conference I had attended. Sam Charrington runs a wonderful podcast series as well as a community section with study groups on Slack.
Utility Dive: A nice summary of energy and utility news to keep in the loop.
XPrize Design Studio: Do you have an idea of an XPrize to change the world? You can submit your idea and it might get selected to be funded by the XPrize. This year’s opportunity runs from Feb 18 to Apr 15.
XPrize Adventure Trip: My friends over at the XPrize have. a pretty cool deeptech adventure trip planned for Glasgow, Cambridge, and London. Very cool experience if you aren’t already a practitioner plus the people that participate in these trips are great to know.