Building deep tech startups across borders
By: Florian Doetzer
Tags: Globalization, Entrepreneurship, Deeptech, Startup, Singapore

The challenges of building capabilities and doing business across borders are familiar to many venture founders chasing expansion and growth, starting with the last generation of key digital players, from the GAFA to regional unicorns like Grab in South-East Asia or Revolut in Europe.

In the case of hard tech, framing an international strategy is not only driven by market sizing, timing and scalability. The successive steps of the deep tech entrepreneurial journey require both short-term, dynamic, and medium-term, trust-building types of interactions with top-in-class industrial players looking for an entry ticket to the adequate spot on the value chain. Because of the complexities of the productization tasks at hand and the deep scientific background needed, the barriers to entry, maturation and scalability are extremely high — and the associated rewards in the case of a successful go-to-market equally attractive.

The risks inherent to developing or combining high technologies can be methodically and systematically mitigated by founders who are successful at striking those key cross-border partnerships: finding the right equipment manufacturer, prototyping workshop, machining expert or international distributor, and developing long-standing collaborations. While framed as client-supplier relationships, these collaborations are more complex and rarely purely commercial. Founders find themselves interacting with corporate R&D teams — otherwise unavailable to small customers — who convinced their decision makers about the opportunities of a collaboration. Equipment manufacturers and process specialists are broadly keen on showcasing their products altogether with the technologies the startups develop. Our experience shows it is a mix of corporate giants and “hidden champion” SMEs that forms the fabric of a successful long-term, win-win partnership network.

The amount, typology and aggregated know-how of those industrial key players often hint towards North America, Europe and Japan as Tier 1 targets, together with Israel, South Korea, China and India as contenders. While leapfrogging at tremendous speed — even leading in selected niche markets — South-East Asia as a whole is still structurally considered as Tier 2 with regard to hard tech intensity, depth and maturity. While the global technological and economic maps may be totally different in one to two decades, the scarcity of mature deep tech players in the region requires that young ventures focus on developing abroad early on. Deciphering those cross-border value chains constitutes both a strategic necessity and a schizophrenic element. In order to successfully create impact, founders need to navigate a moving network of stakeholder relationships. They must constantly assess and understand the ultimate users of their startup’s product or service as well as the intermediaries. Decisions about how much time, energy, and resources they want to spend then drive how they approach the intermediaries — e.g., asset managers, corporate sponsors, advisors or investors — who sit between their venture and the future customers or partners. While intermediaries are a bridge, they can also create barriers. The expertise and willingness of an intermediary to work with the founders on the creation and evolution of a startup strategy can be critical for its success. This very strategic mindset and the associated cross-border processes go hand-in-hand with a better control of development timelines, go-to-market and funding in the long run. The need to intimately interact with established players forces deep tech startups to professionalise internal processes and governance much sooner than other startups. Successful mastery of this change process — from the “garage startup” to a process-oriented tech company — boosts the attractiveness for future corporate acquisitions. It is therefore a key success factor.