Investments in deeptech startups, why are they becoming increasingly important for venture capital and what are the elements to take into account? Startupbusiness talked about it with Cristina Odasso, head of business analysis at Liftt. Odasso, before joining Liftt, graduated in Management Engineering at the Polytechnic of Turin, obtained a PhD in Economics and Management of Technology at the University of Bergamo and then started working in the field of management consulting, as manager and head of the practice development and intelligence division at ICM Advisors, with a focus on the valuation and enhancement of intangible assets, he subsequently held the role of head of EMEA market intelligence at Comau, a multinational automation and robotics company.
My role is to take care of the selection of the projects that enter our portfolio through a structured, shared process based on tools and methodologies capable of making the analysis as independent as possible with respect to personal preferences. The factor that represents the most important aspect for us is technology, we need projects that have technologies that help make an important leap forward with respect to the state of the art, this together with the solidity of the project therefore the skills and professional history of the people who propose it, therefore people who know in depth the technological field in which the ideas we evaluate are developed and then of course we also look at what they can actually be the areas of application of these technologies.
Another important aspect is the level of protectability of technological innovation , in order to understand how it can generate value over time thanks to the intellectual property strategy, which is a very relevant aspect for us and is an aspect on which we give great support to the startups we have in our portfolio in order to give value to projects also from a prospective perspective, and in our team we have the necessary skills for this task.
We prioritize technology or industry areas that we identify as important, our goal is to have a portfolio of a hundred companies diversified in terms of tech segments, sectors and stages of development from early stage to those closer to the market, this is why we give ourselves specific tech focuses to accelerate the analysis of the projects that we consider most interesting such as for example in 2022 we focused on photonics, a sector in which we have three investments, in 2023 the focus shifted to quantum computing and to do this we study a lot to understand which are the areas in which Liftt can make a difference and invest in a timely manner.
All this, of course, net of aspects such as the team, the complementarity of skills and the ability of the founders to be ready to grow even with the grafting of business skills because the economic and financial dynamics of the project are also important to understand the rationale of our support, In the deeptech field, the timelines are long and therefore it is necessary to be aware that there is a need for substantial support in terms of capital, and this must be planned as much as possible so as not to risk having projects that cannot move forward, So the financial risk profile associated with the technology is critical.
Today we have 50 companies in our portfolio for a total commitment between initial investments and follow-up, of about 60 million euros. Most of the deals are in the pre-market and early stage, for us the most interesting levels of development are those between TRL4 and TRL6 (technology readiness level, ed.) because that is the phase that makes the most sense for us given our structure and our ability to provide not only capital but also other types of support.
Compared to the average performance of the VC sector in the last 18 months, deeptech is the sector that has shown good resilience in terms of new investments, and important system initiatives have also been born in this sense at the European level. Investing in deeptech is not easy, you have to be aware that deeptech startups structurally absorb significant amounts of capital even just to make a prototype, even in the early stage it is a very particular financial risk profile and the development times are long, if in biotech this awareness exists, in other areas it is something that is happening now, Adequate capital is needed for the timing that does not always coincide with that of closed-end funds. If until a few years ago it was a little easier for startups to raise, today this is no longer the case and we have many projects in dealflow that struggle to find capital, it is therefore important that the rounds even in the early stage are sized in an important way, it is not enough just to give immediate oxygen with rounds that are too small, you need to have a long-term vision and you also need to work in co-investment to respond to this, having more financial partners on the same project helps, obviously you need the right partners who also bring non-financial value and not infrequently the most structured projects tend to choose investors to have those who bring more value also in terms of contacts, skills, abilities.
In the venture sector, Europe still has a gap to fill compared to the US benchmark, but it is also true that the approach to European venture is different because the cultural assumption is different, it is a market that is growing and can still grow a lot, with characteristics that are close to European culture, certainly the current one is a bit of a particular moment, There has been a slowdown both on the investment side and on the fundraising side, and this creates natural selection both between projects and investment vehicles, but there are good prospects for recovering growth and there is room to be able to grow further both in terms of numbers and in terms of capital invested and in terms of the number of operators in the area and in Italy there is a lot of room to grow in this direction.
What is needed is a long-term vision and that it is maintained, there are sectors in which there is great attention and this also helps the focus on the part of the private sector, but the rationale must always be linked to clear areas: semiconductors, quantum computing, nuclear fusion and new generation, are for example areas on which important capital is poured that also favors the birth of quality and substance projects, All this always keeping in mind the fundamental role of the market.
With regard to our country, I would like to underline that compared to the European scene, Italy has grown well and I am confident in the rapid evolution of the Italian market in general for the venture world, it is said that in Italy it is years behind other countries, which is true but it is also true that in the last two or three years there has been new vitality and new operators, I am confident that the venture market in Italy will grow well.
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