What is deep-tech valuation and how does it differ from SaaS?

Full Explanation

Deep-tech (semiconductors, battery tech, aerospace) has fundamentally different economics than SaaS. Differences: 1) time-to-revenue (5-10 years vs. SaaS 1-2 years), 2) capital intensity (£50M+ R&D before first revenue, vs. SaaS £2-5M), 3) regulatory risk (approval timelines, safety certifications, government contracts), 4) manufacturing scale (unit economics depend on volume — marginal cost drops dramatically at scale but startup may be uneconomical). Valuation implications: deep-tech discount rates are 20-30% (vs. SaaS 12-20%) because of execution risk and long development timelines. Time-to-profitability might be 10 years instead of 3. This favours revenue multiples over EBITDA multiples (EBITDA will be negative for 8 years in a deep-tech scenario). For intangible asset valuation: deep-tech relies heavily on IP (patents, trade secrets, regulatory approvals). Valuation methods: Cost Approach (how much to build this technology?) and Greenfield (how long to commercialise?) are more relevant than Relief from Royalty (no comparable licences exist). For founders raising Series A for deep-tech, realistic timelines and risk profiles are important: investors understand deep-tech development is long; mis-representing it as SaaS-speed growth destroys credibility.

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