Thomas Klem Andersen is Director of the DeepTech Alliance, a private non-profit association of leading European entrepreneurship hubs that specializes in connecting deep tech companies with large corporates. He assists European deep tech startups and SMES in business development and navigating the tech venture landscape and collaborates closely with open innovation managers, corporate venture managers, VCs and startup ecosystem hubs across Europe to offer deep tech companies access to the business and capital opportunities they need to scale their businesses. The DeepTech Alliance currently consists of 13 leading entrepreneurship hubs across Europe and expects to expand to 20 by 2026. Andersen has many years of experience working with the deep tech ecosystem in Denmark, collaborating with startups, SMEs and researchers in DTU Science Park and at the Danish Technical University. He recently spoke to The Innovator about why corporates should partner with deep tech companies.
Q: Tell us about the DeepTech alliance and what it does.
TKA: It started almost seven years ago with funding from a Danish industry association. The Danish Technical University runs a big science park where they work with startups and large companies. Becoming international was part of their ambition from the start because they wanted to work with the best deep tech startups out there and because Denmark is such a small country that to build big successful businesses you need customers outside of Denmark. So, we started looking for collaboration partners. It was natural to do some international acceleration activity together so we started brainstorming on what that could look like. Our programs and the others already had local early-stage acceleration programs, so we decided to build something on top of that: business creation programs that are designed to be the natural next step. Our value add is to bring corporates and startups together to create business opportunities. What we do is give them a platform to meet potential customers and development partners outside their own countries. We put them at the same table, face to face, to discuss and explore business and get those collaboration processes started.
There is a clear upside for both corporates and startups. We run our programs with multiple corporate partners. This of course gives the startups a bigger window of opportunity, but it also offers the corporate partners an opportunity to connect, learn and explore opportunities with industry peers which is a value dimension of its own.
It is so incredibly difficult for new and growing companies to get the attention of industry giants. Corporates can solve the customer problem for startups but they can also solve the money problem if they place big orders of if they have corporate venturing arms looking to invest with a strategic scope. Corporates are the best investors these deep tech startups can get because they offer not just money but industry insights, industry connections and a valuable stamp of approval.
Q: Can you give some examples of how this works in practice?
TKA: An example is how the DeepTech alliance connected the innovation manager of Bosch’s plant in Maklar, Hungary with IPercept, a Swedish startup that serves as a kind of fitness tracker for industrial machines, leveraging AI to track mechanical movements to do root cause analysis and predictive maintenance.
Bosch tested the technology on a welding machine used in the automotive steering systems it produces. The objective was not just to tackle unplanned downtime, but to preempt it, leading to reduced costs, improvement in product quality, and elevated customer satisfaction. The pilot was a success, and the Maklar factory is now looking at how to apply the technology to other production lines. But the story doesn’t end there. Through our stakeholders the Bosch innovation manager also met a Swiss investor who connected him to one of his portfolio of companies, Auxivo. Bosch is now testing their exoskeleton solution. This is a great example of how, because of the way we are building our community, there are multiplier effects. There is a lot of power and value in the community.
Another example is TechEnergy Ventures, the Corporate Venture Capital arm of the energy transition division of Tecpetrol, part of Techint Group. They met an Israeli startup, Luminescent, through our program and have now invested in them. They most likely would never have met without this program.
It can take time to develop formal collaborations, but the right connections are being made.
Q: Why should corporates work more closely with deep tech companies?
TKA: Corporates all need to innovate to meet market demand, stay ahead of the competition or to cut costs and emissions. It’s extremely difficult for well-established giant organizations to do this in-house. I recently talked to Josemaria Siota from IESE Business School who has done research on open innovation and corporate innovation. One of his findings was that for corporate innovation the venture client model is five times cheaper and three times faster. That’s a good argument for connecting with ecosystem partners rather trying to do innovation internally. If you want to stay ahead of the game, you need to open up.
Q: From your experience what works and what doesn’t?
TKA: From what we have seen through many years of matchmaking between corporates and startups the startups need to be corporate ready, meaning their tech is at a phase that is testable and implementable and that the team itself is mature enough to work with a big industrial client in another country. It is not a simple thing.
Even in the best case it can be super difficult for giant organizations to make a development case. What works well is if a corporate’s open innovation department has its own budget and they can commit when they see a relevant case and bypass the budget approval barrier. If you have a budget ready to go you can set up a test to demonstrate value creation. Having that budget ready can make things much quicker and much smoother because once you get the test going you can jump over that first critical barrier. There is a big incentive for a business unit to jump on a project if there is some money to cover expenses. If they do find out there is a good fit, then they are more willing to allocate a budget themselves.
One of our partners, Beta-I, which is based in Lisbon, offers an extensive program that involves everything from identifying relevant partnerships to following and facilitating the pilot collaborations themselves. It is a much more expensive model as they work quite hand-on over a long period of time with their partners and it requires substantial time commitment from the partners involved, but it produces great results What they do is to ask corporates to commit to a certain predefined budget for a certain number of pilots so that the funds are there and can be prioritized and allocated when and if the right cases present themselves.
Q: What advice do you have for corporates who want to work with deep tech companies?
TKA: You need to think about the stage of development of the technology and how deep in deep tech you want to go. We only work with companies that have a TLR [ Technology Readiness Level] of 5 or above. If you are looking into less mature technologies, so it is important to have realistic expectations on ROI. Less mature tech means bigger risk, but it is also where you could potentially have more impact. By investing in deep tech you could be planting the seeds for radical innovation rather than incremental change.
It is easier to get results by being connected to ecosystem players rather than just being out there on your own trying to identify those types of cases. Well-connected ecosystem players can help you navigate those ecosystems and keep an eye on relevant technologies or solutions emerging from them . Being involved with industry peers is also incredibly helpful. The feedback we are getting from the corporate partners we are working with is that this is one of the main value drivers for them, On top of the deal flow we are providing them with, the peer network lets them share best practices and tips and tricks on methodologies for open innovation and corporate venturing, how to allocate budgets in different ways to make the process of partnering with deep tech startups smoother. There is a lot of collaboration potential between the corporate peers as well. And finally, you have got to be willing to take a certain amount of risk to work with smaller companies. You need to be open to that and structure your processes to navigate the risk. It’s always easy to play it safe in the short term, but if you do, you fall behind in the long term, and that’s not a great strategy.
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