In the increasingly crowded and vivacious business environment in Hong Kong, companies pit wits against each other to stay ahead of the game. To win is no easy feat. In the long run, only companies setting their sights on developing “deep tech” will be the champions, immune to competition, fickle market momentum and ever-changing consumer preferences.
I was prompted to dive into the term “deep tech”, which was foreign to me, when I interviewed Johnny Hon Sei-hoe, founder of venture capital and investment company Global Group, regarding the government’s 2022-23 Budget on innovation and technology (I&T) development. A veteran of the industry for almost 30 years, Hon shared his observations on how desperate the local startups are to get their businesses up and running as fast as possible. They aim to rush the commercialization of research outcomes just to set foot in the market and make money on them. Hon worries that such a profit-driven and nonorganic coming of age will only discourage the startups’ sustainable growth and jeopardize their long-term economic strategy. And what the startups are delivering is merely “shallow tech”.
“Deep tech” describes innovations that push the technological boundaries and demonstrate huge potential to tackle local or global pressing problems. Deep tech often deploys artificial intelligence or machine learning, or other existing but emerging innovative applications, such as biotech, blockchain, advanced material science, and quantum computing.
By comparison, “shallow tech” companies innovate from readily available technologies and can scale up their commodification easily. Mobile app and website development are common examples. So shallow tech is perceived to be a relatively weak and profit-driven effort.
However, investors are enamored of digital, software, and other “shallow tech” companies as it takes only a few months for the mobile apps or other kinds of products to reach the market, and an average of three to five years for the venture capital to see returns, which means an immediately visible profit. Meanwhile, deep tech startups are struggling to elicit investors to reach into their pockets simply because they normally take 10 to 15 years to bring about tangible market value. But what investors have shortsightedly overlooked is that once a deep tech company makes its way to the market with its frontier technology, it may well bring a transformative impact to life-threatening issues plaguing us today. For example, molecular imaging technologies that identify chronic diseases or predisposition, AI-powered systems that accurately predict the spread route of infections or natural disasters based on animals’ behavior, and technologies that help undo the environmental damage that we have caused.
Most importantly, deep tech companies are targeting the niche domain where the technologies they develop are highly patentable, which ensures the investors earn long-term profits. Deep technologies providing an ultimate answer to such problems as greenhouse emissions, pandemic surveillance and control, and medicine and genetic treatment for deadly diseases, will be embraced and replicated with tweaks by other companies, promising sustained profit-making opportunities.
To thrive in the fast-paced and competitive business environment in Hong Kong, companies are tempted to spring onto a fast trajectory of business development, quickening the R&D and churning out products to hit the market.
This is an unhealthy and unsustainable ecosystem that encourages only innovations that are easily copied and outstripped by rivals, but doesn’t fuel problem-oriented state-of-the-art technologies that would eliminate certain crises menacing people’s lifespans and well-being. Bent on having their businesses get off the ground, startups without adequate funding and on a shoestring have to borrow from banks, which disrupts the whole financial sector.
It’s a heartening sign that many of the 2020 Hong Kong Science and Technology Parks incubation graduates specialized in deep tech, including biotech, AI, fintech, robotics and electronics, the CEO of HKSTP said in a report.
The graduate ceremony that year also saw a record six graduates from the Incu-Bio program at the Science Park, which had been home to more than 140 biotech companies.
Local incubations led by HKSTP play a pivotal role in providing a venue for local scientists and PhD students to translate their potentially game-changing deep-tech-focused research outcomes into innovative technology and marketable products.
Government and private funding are equally overriding factors determining if deep tech can be a valid game-changer.
Nevertheless, deep tech startups seem to be stuck in a Catch-22 situation: The early stage of lab-based experiments and prototyping entails generous investment to expedite, but they have to demonstrate their prototype first to draw investments.
The only way around this is for the government and private investors to shift to a futuristic vision without being blindsided by the instant but unsustainable profits.
The author is a Hong Kong-based journalist.
The views do not necessarily reflect those of China Daily.