The terms 'Frontier Tech' or 'Deep Tech' come up often in casual conversations here in Silicon Valley, and throughout startup communities across the globe. However, for many, it's unclear what these terms actually mean.
Contributing to the confusion is that the 'frontier' is always changing as technology rapidly evolves.
What follows is a description of what frontier technology means today, and why we at the Founder Institute believe NOW is an optimal time for entrepreneurs to start these types of companies.
What are ‘Frontier’ Technologies?
According to Merriam-Webster, the ‘frontier’ is "the farthermost limits of knowledge or achievement in a particular subject."
To be more applicable for startups and venture capital, "frontier technology" is defined by innovations that hold great long-term potential that has not been possible until recently.
As of this writing, frontier technologies include:
The Internet of Things
Augmented and Virtual Reality
Why is Now a Good Time to Start ‘Frontier’ Businesses?
If there are always technologies that are considered 'frontier', then why is now special in terms of opportunity? I believe there are a few unique factors.
1. Strong Venture Capital Interest
The Venture Capital industry got its start by funding ambitious scientists such as Robert Noyce, a physicist, and Gordon E. Moore (creator of "Moore's law"), a chemist, who went on to create Intel. Then, as the internet revolution started to take hold, Venture Capital shifted to predominately funding software projects, which required lower capital requirements and less time to mature.
However, because the cost to go to market has decreased so significantly over the last two decades, the number of startups has exploded. This phenomenon has created an environment of near-perfect competition, and as a result, it has become increasingly difficult for companies to develop the competitive moats necessary to survive.
Ironically, frontier technology companies have come back in vogue with investors because of the fact that they are hard to bring to market. These companies have defensible IP that's very difficult to replicate technically, which creates a natural moat against potential competitors that most software companies will never have.
As a result, venture capitalists have invested $5+ billion in the frontier tech category since 2014.
For new frontier startups, it's often easier to raise a seed round as well.
For example, today most marketplace companies that are raising a seed round need significant traction (~$250,000 - $1M in ARR), while frontier tech startups are raising seed financing with limited customer traction, strong teams, and some IP.
2. Strong Appetite for Acquisitions
One of the reasons why investors are flocking to frontier tech is the increase in acquisitions by the world's top tech companies. These companies are building up their competitive moats by acquiring startups (and talent) at a faster and faster pace, and many of the companies they are acquiring are PRE-REVENUE.
These are not small speculative acquisitions, but rather big bets like:
On top of these companies being pre-revenue, the common trait is that they were acquired for their IP, and their team’s deep technology expertise. Above all else, these teams recruited excellent and hard-to-find engineering talent which enabled them to execute at light speed, and quickly get ahead of a new trend.
When you dig further, many of companies being acquired have a frontier technology component, and the ratio of these companies is seemingly increasing (especially in AI).
In addition, frontier innovations have been forcing non-tech companies to pay significant sums so that they are not left behind. For a prime example, look no further than GM’s recent acquisition of Cruise for ~$1B, less than 3 years after the company was founded.
The acquisition of frontier technologies is turning into an arms race of IP and talent, and most everyone wants in.
3. Breakthroughs in Enabling Science
Entrepreneurs have also been increasingly pursuing frontier technologies due to recent scientific innovations that have enabled their companies to exist. These innovations have expanded the technical possibilities for products, while also driving down the cost of building such solutions.
For example, Silicon Valley Founder Institute graduate Bleximo is developing special-purpose quantum accelerators that will aid conventional computers in solving industry's hardest technical problems. Though general quantum computing is still far away, recent discoveries make it possible for vertical quantum computing processors that focus on very specific applications. The company closed a $1.5M seed round within three months of graduating from the Founder Institute.
Another beneficiary of breakthroughs in technology is Ceres Robotics, also a recent SV Founder Institute Graduate. Ceres Robotics is like Caterpillar but for space. They develop robots for planetary surfaces that specialize in prospecting, mining, and refining.
Two breakthroughs make such an ambitious project like Ceres Robotics possible today:
- The cost of developing and launching these payloads into space is >10X cheaper today than it was just a few years ago.
- Surface landings are scheduled over the next 5 - 8 years, which create ample sales opportunities for the company's solutions.
Similar breakthroughs have been found across neuroscience, genomics, robotics, autonomous vehicles, and more.
The Time to Launch an Expedition is Now
The other definition of frontier, according to Merriam-Webster, is “a region that forms the margin of settled or developed territory”.
Today's conditions are well aligned to support the development of breakthrough technologies “on the margin of settled or developed territory” that will foster the future of humanity. The timing is optimal for scientists and innovators to make the leap to entrepreneurship.
In addition, with the help of programs like the Founder Insitute, innovators have the toolkit and support network to turn their innovations into scalable businesses.
If you are considering launching an expedition to the frontier, the time is now.
Where the frontier of science once was is now the centre" - Georg Christoph Lichtenberg
This post was written by Mike Suprovici, Entrepreneur in Residence at the Founder Institute, and Local Leader of the Silicon Valley Founder Institute. Prior to joining the FI, Mike was most recently founder and CEO at Explorence, a seed funded startup that developed iOS apps focused on turning outdoor recreational activities into real life video games.
The Founder Institute is the world’s premier pre-seed startup accelerator, with chapters across 180+ cities and Graduates that have built companies exceeding $20B in estimated value. In the Founder Institute, high-potential entrepreneurs and teams can get the critical support network and structured process needed to build an enduring company.
Learn more at FI.co/overview, or apply to build a startup in the Washington DC Founder Institute today.