Europe’s deep technology sector is uniquely positioned to have global influence, with a wealth of technological talent and research leadership.
The region has a higher proportion of high-impact research publications at 28.1% than the United States (19.3%) and China (17.7%), and a higher proportion of STEM graduates than the United States. Europe is also home to prestigious universities, including six of the top 20 in computer science and five in engineering.
Despite these strengths, Europe has historically struggled to commercialize significant scientific and technological advances.
As Europe faces increasing difficulties in regaining its position as a world leader in innovation, one of the driving forces is to encourage more scientists to enter the venture capital field . By leveraging their scientific and technology expertise, scientists can play an important role in identifying and supporting innovative start-ups, fostering economic growth, and fostering collaboration between the scientific and entrepreneurial communities. playing a role.
Analyzes have been published on the benefits of hiring CEOs with STEM backgrounds, and similar arguments can be applied to the venture capital industry.
Bridging innovation and investment in Europe with scientist VCs
Europe is keen to support the future of technology and science with France offering €2.5 billion, Germany €1 billion and the UK up to £3.5 billion, with multiple governments pledging major contributions to deep tech. is set up for success. But without the right talent in venture to speak the language of the scientific entrepreneurs behind these new breakthroughs, European venture capital will struggle and miss out on huge opportunities.
At its core, venture capital is a science. This involves forming a hypothesis, collecting data, and testing it against the facts. This is especially true for deep technologies, where technical risks typically outweigh market risks. The trending concept of “data-driven VC” is self-evident. The only way to conduct a successful VC is to test your initial hypothesis using all available data.
As with science, we often work with incomplete data, and understanding its limitations is critical to making good investment decisions. This is where STEM graduates have an unfair advantage in the investment industry.
More VCs need scientific background to identify, evaluate and fund more deep tech startups. This fosters innovation and fosters economic growth. Europe is particularly well placed to benefit from an excellent university environment and university graduates.
For example, Germany had 1.8 times more STEM graduates per capita than the United States, and Switzerland had 1.4 times more resident patent applications to GDP in 2022 than the United States.
“Imagine a reality where scientific founders are backed by scientific investors who share a set of methodologies, values, and common understanding with the person across the table.”
To attract the next generation of deep tech investors, policymakers should support universities that offer venture capital as a career path. Additionally, today’s scientist VCs need to actively promote deep tech investment by being role models, speaking up, and encouraging younger colleagues to join the industry.
Common challenges for venture capital scientists
Getting scientists into venture capital can present several challenges. Still, they can all be mitigated by certain techniques so that the potential benefits of such an approach can be fully realized.
One of the typical challenges for scientists is understanding how business works. Scientists are often burdened with economic factors, such as developing business plans, marketing, and negotiating commercials with customers. In some cases, it may simply be due to a lack of interest in these topics. A well-rounded education starting from university can do wonders in creating awareness and motivation for business issues, which leads to further self-education of scientists.
Another challenge is access to appropriate networks and resources. Scientists typically do not belong to the same networks and have access to the same resources as investors from business schools, making it difficult to find potential investors and co-investors. Here, various federal and state startup programs should actively strive to prioritize welcoming and including scientist VCs into their local investment communities.
The third challenge is cultural barriers. Scientists may have different communication styles, work habits, and values, which can create challenges and misunderstandings when working with venture capitalists. This is a situation in which non-scientist colleagues within VC firms can help scientist investors navigate the social structure of the investment community.
Finally, scientists may not immediately gain the trust of other venture capitalists. This can significantly slow down the collaboration process. The solution here is for established scientist VCs to embrace and validate new entrants and help them build their own brands that they can trust.
All in all, these challenges can be overcome with little effort, but with extraordinary benefits. Let’s imagine a reality where scientific founders are backed by scientific investors who share a set of methodologies, values, and common understanding with the person on the other side of the table. We need more of this kind of collaboration in a world where too often the best marketing idea wins, rather than objective facts derived from data.
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