In Brazil, there are 875 deep techs – startups developing technologies with research at the forefront of scientific knowledge – and 40% of them are involved in some area of biotechnology.
When these new companies are categorized by sectors of the economy – or in other words, their potential future clients – half of them focus on human health or agribusiness solutions.
These findings come from the Deep Techs Brazil 2024, a comprehensive and unprecedented study on the profile of these startups in the country.
The study, which will now be conducted annually, was carried out by Emerge, a consultancy that works to connect large companies with deep techs. The report was supported by Cubo from Itaú, Chemical Abstracts Services – a division of the American Chemical Society – and Suzano Ventures.
The data from this extensive sector overview resulted from the analysis of public and private databases, following international criteria.
The deep techs identified were classified into 12 trends at the scientific frontier, covering areas such as biotechnology, cloud computing, nanotechnology, artificial intelligence, blockchain, and aerospace technology.
Over 1,200 businesses were analyzed, leading to the identification of 875 deep techs.
More than half of them originated in the state of São Paulo, incubated in research centers like USP, Unicamp, and ITA.
Nearly 70% of them are in the Southeast region, but there are regional initiatives – such as Inova Amazonia – contributing to the emergence of new cutting-edge research hubs and startup incubators.
The study will be discussed at the Deep Tech Summit in November.
The first major challenge for a deep tech to scale up is proving the viability of the technology they have developed, and this is the stage where 70% of the startups analyzed by Emerge currently find themselves.
The study concluded that 30% are already in the commercial scaling up phase.
However, hurdles may arise due to financing restrictions in Brazil. While public sources are available in incubators, the study points out that the availability of capital for startups to scale up their solutions is limited.
Daniel Pimentel, one of the founders of Emerge, stated, “We need to unlock this potential by acting on various channels – whether it’s bureaucracy, funding, or bringing universities and researchers closer to companies.”
Guy Perelmuter, an investment manager in deep techs and founder of Grids Capital, believes that the obstacles to developing these startups go beyond funding.
He prioritizes incentivizing education in ‘hard’ and foundational sciences like physics, chemistry, biology, and mathematics. Additionally, having robust and reliable legislation that promotes innovation ecosystem development is crucial.
Perelmuter added, “Competition among deep techs is global – researchers worldwide are seeking analogous solutions to major scientific challenges.”
The innovation ecosystem is maturing, especially in areas where Brazil has comparative advantages and natural vocations. There is also a growing diversification in funding sources for research, development, and technology validation phases.
“Agriculture is one of the most promising sectors for deep techs, especially in biotechnology, given Brazil’s role as one of the world’s largest producers and exporters of grains,” the study authors noted.
Lucas Delgado, co-founder and director of new businesses at Emerge, pointed out another evident vocation of Brazil in sustainability.
“This area includes cleantech, such as carbon capture, but also extends to technologies that replace chemical assets with renewable sources,” Delgado stated.
Among the deep techs analyzed by consultants, 55% generated revenue in 2023, and 72% are projected to have earnings in 2024.
The study reveals that the main business model of deep techs is developing technologies to be sold or licensed to large companies.
According to a recent report by McKinsey, deep techs have a business cycle and success rates similar to traditional technology startups – with slightly over 2% evolving into mature companies.
However, the consultancy points out that American and European investment funds focused on deep tech have achieved higher profitability than general technology funds – 17% compared to 10%, on average.
This explains why these embryonic companies are attracting increasing investments in the US and Europe, after a cycle where investments were concentrated in sectors like fintechs and marketplaces.
Among European VC funds, deep techs now rank first among sectors with the highest investment. They received $14.7 billion last year, surpassing $11.9 billion in energy, $8 billion in health, and $7.8 billion in transportation.
Source
Arwen Volkov, A graduate of the University of St. Gallen in Switzerland with a degree in International Finance, Arwen specializes in sustainable finance and green investments. She began her career at an investment bank in London, where she developed financing models for environmentally friendly projects. Known for her analytical and strategic thinking skills, Arwen is a sought-after financial consultant. In her spare time, she mentors fintech startups, contributing to their growth strategies. She is also a nature enthusiast and an amateur photographer.
