Jan Goetz explaining IQM quantum technology to Tony Nysten (right).

Deeptech: Solving global challenges

Finland is a top country for innovation, which is reflected in the country’s bustling deeptech ecosystem. For investors, deeptech companies offer substantial return potential due to their unique know-how and research. One such company in Tesi’s portfolio is IQM, a developer of groundbreaking quantum computing solutions.

Deeptech startup companies aim to solve major global challenges through significant scientific advances and high-tech innovations. International venture capital company Atomico has been following both the European and the Finnish tech scene for a long time, and they’ve witnessed notable strengthening in the deeptech scene.

Sweden and Finland were in the top 10 countries for deeptech investment in 2019.

SOPHIA BENDZ /  
PARTNER, ATOMICO

“We’re seeing a change in the mindset of academia in Europe; entrepreneurial careers are now an accepted alternative to academia among PhDs and graduates. More and more companies are being created out of research. There were 335 deals involving university spinoffs in Europe in 2019, up from 179 in 2015”, explains Sophia Bendz, Partner at Atomico.

FINLAND – THE LAND OF RESEARCH AND DEEPTECH INVESTMENTS. Finland is known for its high levels of science and innovation, and Finnish companies attract the most venture capital in Europe in relation to GDP (source: FVCA / Invest Europe). When it comes to deeptech investments, Finland is also among the top countries in Europe, making big strides in 2019.

“Two Nordic countries, Sweden and Finland, were in the top 10 countries for deeptech investment in 2019. Funding in Finland in particular jumped in 2019 – from 2014–2018, Finland ranked 8th for deeptech funding in Europe, and in 2019 it jumped to 5th. Finland has one of the highest densities of researchers and professional developers of any country in Europe, which is a key combination for supporting the development of a deeptech industry, Bendz says.



TESI IS A KEY INVESTMENT PARTNER LOCALLY. Tesi is also heavily involved in the deeptech scene. Investment Manager Tony Nysten lists several reasons for why deeptech is so interesting for investors.

Deeptech companies demand patience and deep pockets from their investors.

TONY NYSTEN /  
INVESTMENT MANAGER, TESI

“Deeptech companies usually have a long history of scientific research before the company is actually formed. Due to this, their products have high defendability through their unique know-how compared to traditional companies. Deeptech companies are also highly disruptive as they bring high levels of innovation and new approaches to the table. All of this makes deeptech companies interesting and lucrative cases for investors”, Nysten explains.

Higher potential returns naturally mean higher risk as well. The unique profile of deeptech companies means that Tesi is an important local partner for international investors.

“Because of the emphasis on research, deeptech companies often have longer lead times and higher capital needs than e.g. traditional software companies. In other words, deeptech companies demand patience and deep pockets from their investors. Tesi has both of these, so we can also join cases early, if needed, to share the risk with both local and international partners”, Nysten states.

IQM DOES GROUNDBREAKING WORK IN QUANTUM COMPUTING. One emerging and exciting deeptech company in Finland is IQM, a spin-out from Aalto University and VTT Technical Research Centre. IQM is developing quantum computing solutions for a variety of practical applications.

“Our quantum computing technology allows the solving of tasks that would take thousands or even millions of years to solve with classical computers. The goal is to build quantum solutions that are actually practical to utilize in many different fields, from e.g. academic research and the medical industry to cloud computing and finance”, says Jan Goetz, CEO at IQM.

Jan Goetz IQM

Our goal is to build quantum solutions that are practical to utilize in many different fields, from academic research to the medical industry and cloud computing.

JAN GOETZ /  
CEO, IQM

Goetz got his PhD in quantum physics Munich, but eventually his academic pursuits led him to Finland. An opening in Mikko Möttönen’s research group eventually turned into the quantum hardware leader known as IQM. IQM’s CTO Kuan Tan was previously working in the same group, which is part of Aalto’s quantum ecosystem, where also COO Juha Vartiainen was working before joining software industry.

“We operate from Finland partly because all founding members were already doing their work and research here, and hardware is not easy to move around. However, Finland also has excellent infrastructure to support working with quantum and nano technologies”, Goetz continues.

INVESTORS OFFER CAPITAL AND MENTORING. In addition to funding, IQM also benefits greatly from the experience of its investors Matadero QED, Maki.vc, MIG Funds, OpenOcean, Vito Ventures and Tesi.

“We have several investors from different backgrounds, each with their own style and flavor. There is a lot of knowledge there on running both software and hardware businesses, and we’ve been lucky enough to leverage it on occasion”, Goetz explains.

Naturally, IQM also brings a lot to the table for the investors with their strong scientific background and high-level technology. From Tesi’s point of view, three things in particular persuaded it to partner up with IQM.

“Firstly, IQM has a world-class team and a background in an ecosystem that has produced successful companies before. Secondly, their solutions have a massive potential to be truly impactful, so it’s exciting to see what we can achieve even after the investment window. Lastly, while Europe is very strong in scientific research, US and China have traditionally been better in commercializing innovations. We believe that both Finland and Europe have what it takes to bring successful solutions to market, and we want to be a part of making that happen”, Nysten says.


 

Read more about Atomico and IQM on Tesi’s Dare to Grow website.