Deep technology, often called deep tech, involves cutting-edge technologies that stem from significant scientific or engineering breakthroughs. These innovations are considered “deep” because they provide highly sophisticated and advanced solutions to complex problems or challenges. In India, deep tech is bringing in a new era of digital transformation and fundamentally changing the operations of traditional industries.
In this interview, with Nicolas Sauvage, founder of TDK Ventures, a Corporate Venture Capital firm – we’ll explore more about Deep tech, their investments in hard tech projects spearheaded by entrepreneurs committed to creating sustainable innovations, as well as TDK Ventures’ initiatives to support India’s deeptech community.
Here are the excerpts of the interview with Nicolas Sauvage:
What according to you is Deeptech, considering the varied interpretations we often encounter from different individuals?
For us, deep tech revolves around material science, focusing on innovations at the atomic level that have the potential to significantly impact the world. This is why we prioritize investments in climate tech, as many breakthroughs in this field stem from advancements in material science.
Is there an intersection between the traditional perception of deep tech in India, which focuses on data, AI, and software, and the deeper level of innovation in material science that you’re discussing?
Innovation at the level of atoms complements software advancements, forming a symbiotic relationship crucial for digital transformation. It’s the convergence of hardware and software, bridging analog and digital realms.
What drew your interest towards deep tech, and when did you begin exploring it?
To me, deep tech signifies a profound dive into material science, followed by the construction of solutions atop this foundation. Solutions entail not only hardware but also software. For instance, TDK, our parent company, specialises in developing electronic components, sensors, and batteries, which require various types of chemistry and structures to enable comprehensive solutions, including software integration.
What sparked your interest in hard tech and deep tech? And how did the idea for a Corporate Venture Capital firm come about?
I’ve always had a passion for technology, even back when it wasn’t as popular. My engineering background, in microelectronics, fueled this interest. I’m fascinated by how technology can provide scalable solutions to real-world problems while remaining profitable. At TDK Ventures, we stress-test technologies across multiple generations to ensure long-term viability. Sometimes, the challenge lies in securing rare materials needed for future iterations. This approach ensures that our investments have lasting impact and scalability.
You emphasised the importance of profitability in deep tech. In India, there’s been a perception that deep tech ventures are mainly academic or charitable endeavours. However, do you assert that deep tech can be fundamentally profitable?
No, what I mean is, for deep tech to achieve its full potential in scaling, it must be profitable. And for this they can rely on support from venture capital, corporate VCs, and universities to explore and develop technologies with potential societal impact. However, for deep tech to scale effectively, it eventually needs to become profitable. Otherwise, funding may run out, hindering its ability to grow.
Could you briefly explain how you convinced TDK, a large corporation, to establish TDK Ventures?
TDK, an 88-year-old tech firm, started as a university spin-off focused on B2B material science. It transitioned to B2C with the iconic cassette and then back to B2B with batteries and electronic components. Given TDK’s history and commitment to societal contribution, establishing a corporate VC to support entrepreneurs aligns with its DNA.
How do your investments as corporate VC or VC in technologies like auto flight and battery recyclings intersect with your views on geopolitics and the future of humanity? What overarching thesis guides your investment decisions in these areas?
We approach investments from first principles, seeking opportunities not yet obvious to everyone. The goal is to be ahead by around two years before widespread recognition. For instance, when we invested in AutoFlight in 2020, many doubted the need for air taxis, but we foresaw their potential based on cost-effectiveness, speed, convenience, safety, and environmental benefits. Similarly, our investment in Ascend Elements, despite the small market initially, was based on recognizing the inevitable need for battery recycling as EV adoption increases and gigafactories produce more scrap. Our role as corporate VC or VC is to identify these opportunities early and invest based on comprehensive data and insights, anticipating significant future markets before they become obvious to everyone.
Geopolitics is integral to our first-principle investment thesis, as we consider diverse scenarios for the future. We assess both, a globalised world with minimal country frictions and a world with heightened geopolitical tensions and their impact on technological advancements. In the latter scenario, certain technologies previously hindered by such conditions might find new opportunities to thrive, offering hope for a cleaner planet. This perspective informs our investment decisions, allowing us to build a portfolio that remains resilient across various geopolitical trajectories. Ultimately, our goal is to support technologies that can contribute positively to the world, regardless of geopolitical shifts.
As an investor, you’ve emphasised the importance of two keywords: “fragmented” and “frictionless” in geopolitical contexts. Could you elaborate on what you mean by “fragmented” and how it presents opportunities despite potential challenges, and how “frictionless” factors into entrepreneurs making necessary bets for local markets?
When considering rare materials and their mining, processing, and transportation pathways, if these activities heavily depend on a single country and that nation imposes tariffs or other restrictions on others, there arises a need to explore alternative technological solutions. These challenger technologies, emerging due to geopolitical friction, could stand to benefit from such disruptions. Ultimately, every crisis presents an opportunity, and despite current global challenges, there’s potential for positive shifts towards a cleaner planet.
Given the fragmented nature of the world and the supply challenges surrounding such materials, where do you envision entrepreneurs stepping in to address these issues?
To me, this is perhaps the most crucial aspect I hope to convey in this interview: for entrepreneurs to recognize the immense potential within challenger technologies. While we’ve discussed battery recycling, there’s also considerable promise in recycling materials like copper and platinum group elements. Moreover, technologies such as nuclear fusion, which demand significant societal and human investment, stand as monumental opportunities. Yet, there are numerous other challenger technologies to consider, such as sodium-ion batteries for energy storage. It’s imperative that we don’t solely depend on lithium, especially if it becomes scarce and costly to obtain. Sodium-ion technology, although not currently profitable, holds substantial promise. Given the global landscape and these emerging opportunities, we may soon reach a point where scaling becomes both feasible and profitable. And at that juncture, we add another invaluable tool to our cleantech arsenal.
You’ve highlighted nuclear fusion and sodium-ion technology as crucial areas for entrepreneurs to grasp, particularly given the predominant focus on lithium-ion batteries in India’s discourse. Could we delve into nuclear fusion first, followed by your concept of peak energy, and then explore the sourcing of materials, particularly in the realm of sodium-ion technology?
Starting from foundational principles, we currently rely on wind and solar energy, which are intermittent due to weather conditions. To bridge this gap, energy storage solutions like lithium-ion batteries are used, with potential future applications in sodium-ion technology. Nuclear fission and fusion, on the other hand, offer continuous energy generation. While fission is relatively simple but unsafe, fusion presents a complex yet inherently safe alternative. Looking ahead, nuclear fusion holds immense promise for providing widespread access to clean, continuous, and affordable energy, potentially reshaping global politics currently reliant on fossil fuels. Therefore, considering the future implications of nuclear fusion becoming ubiquitous will be critical for shaping forthcoming investment strategies.
Given your investment in Verdagy and their engagement with Indian companies, particularly in the realm of green hydrogen, what is your assessment of the current landscape for deep tech innovation and entrepreneurship in India?
While I can’t delve into specifics due to our investment in space, we believe green hydrogen holds significant promise for profitable applications that align with sustainability goals. Verdagy, for instance, focuses on deploying green hydrogen in impactful ways that could displace fossil fuel consumption. Similarly, PH7 Technologies, another investment of ours, contributes to green hydrogen solutions through copper and PGM recycling with environmentally friendly methods. By identifying and supporting such initiatives, we aim to facilitate the scaling of green technologies and the recycling of materials essential for sustainable energy solutions.
So, Is TDK Ventures open to collaborating with scientists and existing companies looking to commercialise their innovations?
TDK Ventures is eager to engage with scientists who are dedicated to developing solutions for a more sustainable planet. A prime example is our investment in AM Batteries, which initially consisted of two part-time professors. Despite its humble beginnings, AM Batteries has since evolved into one of the premier solvent-free battery process companies.
As India’s first deep tech opportunity, would TDK Ventures consider investing in scientists who have already established companies, or are you open to investing at the idea stage? Additionally, what approach do you typically take when evaluating opportunities in India’s deep tech landscape?
TDK Ventures sees significant potential in investing in scientists, entrepreneurs, and innovators in India, particularly given the emergence of young, talented individuals with global ambitions who are choosing to build companies locally. Despite the perceived delay in entering the Indian market, we’ve already begun investing in three companies last year and are actively seeking early-stage opportunities, typically focusing on Seed and Series A stages.
Our focus at TDK Ventures is to provide support and guidance to entrepreneurs, leveraging our expertise in technology, go-to-market strategies, and fundraising to influence positive outcomes. We believe in fostering what we call “TDK goodness,” where our assistance adds tangible value to entrepreneurs, ultimately helping them validate the significance of our support. With Indian entrepreneurs, our aim is to assist them in refining their technology, establishing a foothold in India, and then scaling their ventures globally.
What insights can you share with scientists transitioning from academia to the commercial world, particularly regarding the concept of scaling up a company? How can they navigate this transition successfully, and how can TDK Ventures support them in this journey?
The biggest challenge for entrepreneurs, and even scientists transitioning into entrepreneurship, lies in charting a scaling path for their ventures. Scaling involves assembling the right team, securing supportive investors, engaging with customers and partners, and navigating complex contracts—tasks that may be unfamiliar to those accustomed to deep technological focus. TDK Ventures and other venture capital firms aim to support entrepreneurs early on by assisting them in setting up their companies, protecting their intellectual property, establishing defensibility, and devising strategies for rapid growth. However, it’s essential to recognize that venture capital isn’t suitable for every entrepreneur. By accepting VC funding, one commits to accelerating growth and seizing significant market opportunities, transforming a project into a venture with potential for substantial societal impact.
What qualities or attributes does TDK Ventures seek in potential corporate venture capital (CVC) partners, particularly those who share the belief in the transformative potential of Deep Tech?
Partnerships are crucial not just for TDK Ventures but for all stakeholders in the entrepreneurial ecosystem. Effective collaboration with venture capital partners who excel at supporting entrepreneurs enhances the success prospects for ventures, benefiting both entrepreneurs and investors alike. While TDK Ventures already has strong partners in India, the goal is to attract more corporations and corporate venture capitalists from around the world to invest in India’s hard tech sector, thereby expanding the network of supportive partners available for entrepreneurs.
What is the perception of India in the global Deep Tech landscape, particularly among potential partners and investors from abroad, as you engage with them?
The world recognizes the quality of engineers emerging from India and acknowledges the country’s strong brand presence and political commitment to infrastructure development. What has changed significantly in recent years is that this brand power is increasingly remaining within India itself, presenting a unique opportunity that may not be fully understood by every corporation. My aim is to persuade more corporate venture capitalists attending the event today to consider the implications of this shift and to encourage their involvement in India’s growing Deep Tech landscape.
How do you advise scientists, engineers, and technology enthusiasts to approach Challenger Technologies in today’s context, drawing parallels with past innovations like Brazil’s adoption of ethanol in 1975 to reduce dependency on fossil fuels?
Challenger Technologies represent innovations that aren’t yet profitable but hold the potential to become so, especially in the context of geopolitical friction. My advice to scientists, entrepreneurs, and innovators focused on green technology is not to be deterred by current profitability challenges. Instead, collaborate with high-tech VCs and CVCs to identify potential markets and applications that could have a significant impact. When the opportunity arises, scale your ventures with their support.
Could you provide specific examples of Challenger Technologies relevant to India and the current world, such as biofuels and nuclear fusion, and how sodium-ion technology fits into this context?
Certainly, sodium-ion energy storage technology is indeed a promising example, especially considering the diverse temperature ranges across India. Given the wide variance in temperatures throughout the country, efficient energy storage solutions are crucial for maximising the benefits of intermittent renewable energy sources like wind and solar and can help address grid stability issues.
What specific sectors does TDK Ventures prioritise for investment in India, considering that technology can be sector-agnostic?
Anil Achreta, our Investment Managing Director, will provide detailed insights into our sector focus in the next podcast of yours. However, to address your question, TDK Ventures prioritises investments in digital transformation and energy transformation. Specifically, we are interested in technologies that address the increasing demand for energy and support the transition to green energy solutions. This includes innovations related to electric vehicles, home electrification, data centres, hyperscalers, and generative AI, all of which contribute to the growing energy demand globally.
Can you elaborate on your perspective regarding generative AI in the context of deep tech and its implications for the future of technology?
When we talk about AI that can generate text or have conversations, it requires special technology to work efficiently. We’re investing in companies that are developing faster ways to use this AI. They need different kinds of technology, like better computer chips and ways for these systems to communicate. Our investment in companies like Groq (https://groq.com/), renowned for their exceptional speed in running large language models (LLMs),underscores our commitment to advancing this technology. Groq’s capabilities surpass those of existing chipsets, enabling rapid responses and unlocking new possibilities for generative AI applications.
How do you view the opportunity for entrepreneurs when meeting people in India, considering the changing climate and the ambitious drive to develop technology that benefits not only India but the entire world?
Certainly, what’s remarkable is how India’s entrepreneurial spirit has evolved beyond just improvisation (Jugaad) to now encompassing innovative solutions rooted in technology and hard tech. The abundance of talent choosing to remain in India presents a unique opportunity to develop solutions that not only benefit the planet but also position India as a leader in sustainable technology, particularly within the global south. By prioritising profitable green technology advancements, India has the potential to emerge as a powerhouse in green energy and lead the way in addressing environmental challenges on a global scale.
Given India’s nascent stage in entrepreneurship and the need to be early in investment, what are your thoughts on strategically selling a company to a large corporate as a way to participate in the deep tech story and contribute to societal benefits? Additionally, how did you personally scale a company?
To foster success in hardtech and deeptech in India, we need more entrepreneurs to achieve significant exits, creating success stories that attract both local and foreign investors. These success stories create a snowball effect, drawing in more entrepreneurs and investors to support the next generation of innovators. Additionally, successful entrepreneurs often embark on new challenges, becoming serial entrepreneurs who contribute to the ecosystem’s growth. For instance, our investment in Arun’s Exponent Energy, a serial entrepreneur who previously founded Ather, exemplifies the value of supporting such individuals.
Would you say that with the maturity of the deeptech sector in the US, Japan, China, and Europe, India is now poised to experience a similar evolution in this domain?
Yes, indeed. We firmly believe that India is at a pivotal moment where its deeptech sector is set to shinemade the strategic decision to invest early in this promising landscape.
Could you share with us your personal journey and what influenced you to delve into the realm of deeptech and climate tech? Were you guided by familial influences or did you independently recognize the need to contribute to society during your travels? We’re interested in learning more about your background and what drove you to pursue this path.
My personal journey into cleantech and energy transformation is relatively recent. It was sparked by the collaborative efforts within TDK Ventures, where our team delves deep into technology and its fundamental principles. Through this process, we identify technologies with significant potential for scalability and impact. This realization has given me a sense of purpose and belief in our ability to make a positive difference, particularly in the face of climate change challenges. Working alongside my team, within TDK, and alongside our co-investors and the entrepreneurs we support, we feel empowered and excited to tackle climate change head-on.
Could you share any specific books, movies, or art that have influenced your journey into cleantech over the past decade? How have these sources of inspiration shaped your perspective, and would you recommend any for others seeking similar insights?
One book that deeply influenced my perspective on team dynamics is “The Five Dysfunctions of a Team” by Lencioni. It emphasises the importance of trust, conflict, commitment, accountability, and ultimately, achieving results within a team dynamic, with trust being the foundational element often misunderstood. Trust isn’t just about individual trust but trusting the team collectively, fostering an environment where vulnerabilities and mistakes can be openly shared. This leads to constructive conflict, essential for healthy team dynamics, followed by commitment and accountability. At TDK Ventures, we prioritise radical transparency and encourage open dialogue, even amidst disagreements, which has been pivotal in our interactions with over 7000 startups. This book offers valuable insights into building high-performing teams and is a must-read for anyone seeking to enhance team dynamics and achieve impactful results.