Last year, he The information proclaimed that the software investment playbook has gone from being an exclusive recipe among venture capitalists to being common knowledge among all investors. That, plus cheap money, has turned software investing into a low-margin financial game.
Yet traditional venture capitalists are still stuck in their now low-margin businesses, unable to move forward and invest in the next big thing: deep tech.
But maybe that’s for the best. After all, unless software investors can unlearn their own playbook, they will continue to wrestle with the innovator’s dilemma as they slowly die out along with the companies they are so eager to fund.
In other words, the software playbook is dead, not just doomed. Here are three things software investors need to relearn before investing in deep tech.
Counting on one or two companies to return the entire fund is not only silly, it’s a good indication of an investment team that shouldn’t be investing in deep tech.
The market is king. Your founder has no power here.
The software investor mantra of being a founder first is simply wrong in the world of deep tech. This kind of magical thinking is exactly why your software playbook is doomed to fail.
Deep tech takes decades to pay off, not years, and it’s virtually impossible for deep tech companies to make a radical change. Expecting founders to overcome physical and technological limitations is a bad investment, especially in an era when cheap money tends to evaporate.
If you are a software investor looking to invest in deep technology, you need to understand that the market is king here. A charismatic founder cannot be trusted to “figure it out” along the way and a company’s team is only as good as its ability to exist within its market.
With pivots out of the window, a deep tech company needs to get the market right from day one. A shallow, half-baked assumption about product-to-market fit and go-to-market strategy is child’s play in the world of deep tech.