The missing middle: Designing and implementing a venture capital fund for seed-stage deep-tech ventures

What is it about?

Deep-tech ventures draw on technological breakthroughs in, for example, new materials, photonics, mechatronics, quantum computing, and nanotechnology. These ventures can help solve major societal challenges but, especially in Europe, they face significant barriers in raising capital and require significantly more time between funding rounds. These barriers arise from a capital supply-demand gap, also known as the 'missing middle' (or valley of death) of deep-tech entrepreneurship. Focusing on the supply side of this gap, we adopt a design science (DS) approach to craft a venture capital fund dedicated to deep-tech ventures in the seed-funding stage. The DS approach implies we iteratively move from problem analysis to creating and evaluating the solution, until a substantial number of investors have committed capital to this solution. The final solution is a venture capital (VC) fund that draws on an ecosystem-driven approach to provide seed-stage funding to deep-tech ventures. Subsequently, we theorize the main findings into two design propositions. Our study contributes to the extant literature by providing the detailed blueprint of a VC fund for investing in deep-tech ventures, one that can attract capital from investors and thereby fill the missing middle in the funding landscape. This paper also has important practical implications such as the fund's economic life of 15 years and the power of an multidisciplinary investment team.

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Why is it important?

This study provides the detailed blueprint of a VC fund for investing in deep-tech ventures, one that can effectively attract capital from investors. This paper also has important practical implications such as the fund's economic life of 15 years and the power of an multidisciplinary investment team.