diving into deep tech
A hard tech revolution is coming, and Houston is primed to play a role in it
The past couple decades of innovation has been largely defined by software — and its been a bit of a boom. However, lately it's become evident that it's time for hardware innovation to shine.
At the HX Venture Fund's recent conference, Venture Houston, a few hard tech innovators joined a virtual discussion on the future of hardware — and what Houston's role will be in it.
When it comes to advancing technology for humankind, Adam Sharkawy, founder and managing partner of Boston-based Material Impact, a HXVF portfolio fund, says it's time to expand the walls of what is possible.
"Unlike other types of technologies that may facilitate the possible, deep and hard technologies expand what is in the realm of the possible," he says on the panel. "Software has caught up, and we need a new deep tech wave."
And the future looks promising, as Sharkawy says he's seen hard tech grow over the past 5 to 7 years by about 22 percent. Nic Radford, president and CEO of Houston Mechatronics agrees it's time to shift the focus to hard tech.
"The Information Age was the ubiquitous manipulation of the virtual world, but now we need to uncover the ubiquitous manipulation of the physical world is," he says. "And we need to make those investments toward that."
But investments seem, at least in the recent past, harder to come by for hard tech startups compared to software companies with quick exit strategies.
"Deep tech is traditionally thought of as requiring deep pockets," Sharkawy says.
Radford says there was over $167 billion in capital deployments last year, and only 8 percent of that went to industrial or hard tech. Hardware, he says, is tougher to evaluate, they take longer to exit and are tougher to scale.
"To me that's what makes them a gold mine," Radford adds. "It's an underserved market for sure, and that's because we're tougher to evaluate."
Something to note though, he continues, is that hard tech is going to have a bigger societal impact, but maybe it's not the one with the biggest return.
"I think corporates have an special role to play in the inevitability of hard tech," Radford says. "They aren't completely motivated by financial returns."
Gaurab Chakrabarti, CEO and co-founder of Solugen, says he's had a different experience with raising funds. The Houston entrepreneur has raised over $100 million and is planning to go public soon. He's achieved this by attracting investment from the top VC funds in the country. If you zero in on these powerful funds, you can see they are dedicating more and more funds to this arena. And, he predicts, other VC funds will follow.
"This is a unique time for hardware companies to go and and raise from the top venture capitals of the world," Chakrabarti says.
The city of Houston, with its firm footing in the energy and space industries has an important role to play in this new era.
"The Houston area has all the key ingredients to be an innovation hub — no question," Sharkawy says.
The panelists identified Houston's fine education institutions, major corporations present, access to talent, and more as indicators for success. But the innovation here needs to continue to develop intentionally.
"I'd love to see Houston not try to copycat into a general tech hub," Sharkawy says. "Instead it would be great for Houston leverage its unique position as a leader in energy and space and help its constituents of more traditional energy — big corporates, for example — transform into the new frontier."
Vanessa Wyche, deputy director at NASA's Johnson Space Center, says she's seen the space industry take off as the field becomes more and more commercialized. And locally there's a lot of potential for Houston and all the resources and infrastructure that already exists.
"It's about taking what you're good at, and making it better," she says.
Each of the panelists expressed confidence in this evolving wave of hard tech — and are keeping a close watch on the major players as well as the city of Houston.
"We're going to have to get into the world and do something," Radford says. "That next wave of innovation is specifically interacting with our environment, in my opinion."