Early Tech Due Diligence: Key PR Considerations for DeepTech Initiatives

Deep Tech is one of the most promising segments of venture capital, according to the recent European Deep Tech  from Dealroom. Much of what humanity uses today, from electricity and smartphones to cars, was once considered Deep Tech - a scientific or engineering breakthrough that fundamentally changes industries and our view of the world. Aleksei Skorik, the founder and CEO of Nanga Agency, explains the immense value of PR managers working on such projects and how best to manage campaigns.

The products of modern Deep Tech startups are a bit like the Holy Grail; we expect them to solve almost all the problems humanity faces today from climate change to the fight against incurable diseases. For instance, today’s advanced technologies that promise a new future such as artificial intelligence, food biotech, new energy, and quantum technologies should provide answers or so we think.

Like any other technology sector, Deep Tech has its own specific challenges including PR issues. We have been working on such projects for a long time today at the agency, and we have a separate practice for Deep Tech. Our portfolio includes AI platforms, drones, energy, quantum computing, communications, and sensors. We'll discuss a few specifics below, but the field of communications, even in a very young startup, is a complex system with a large number of stakeholders. Therefore, you cannot reduce it to the conditional block diagram: "If DeepTech does this…". Such conclusions are largely speculative and may turn out to be seriously wide of the mark.

Content Overview

• Earlier is better
• Lie to me
• Exit this way
• Final thoughts

Earlier is better

In a typical situation, the founder of a classic technology startup approaches a PR specialist with an inquiry. A classic situation is one in which the mooted product is not based on knowledge-intensive developments and there is no need to work on R&D for many years. The project is at the MVP stage, but the head of the company wants to start promoting it as soon as possible so that he can attract clients and investors. The belief is that money will flow in and all the right audiences will immediately form a queue for the product.

If the PR person has been working in the venture capital market for a long time, he understands that it is too early to move on to promotion:

● The product is raw. Bugs keep popping up/a significant portion of the USP is described in the future tense. Phrase-marker: "A couple of months and we'll finish this feature and become the first on the market with a similar service.” At the same time, a backlog is constantly moving and there is no demand or movement towards said feature.

● Questions about the monetization model, target audiences, and more are not answered. The marker phrase is: "Now it will be like this, but maybe we'll change it.”

In general, this is quite normal for a company at the MVP stage. But it is extremely harmful and premature to enter the market at this point. Either the specialist honestly says that it is better to wait to move forward with PR or he sings a song about warming up the market and earns some money.

If you remember the methodology for determining the level of technology readiness (TRL, see Figure 1), even starting media promotion at TRL-8 is a little early. The right moment to launch is when beta-testing is completed, and the business model is refined.

There are several reasons why haste is unnecessary:

• Even if a journalist prepares a story about a project, a reader confronted with bugs won't mince words when evaluating it. Nor will they return to the product in the future, when it is completed. You only get one chance to make a good impression.

  
  

• Often in the early stages of a startup, the business is transformed beyond recognition. The monetization model, the use of technology, and the audiences can all change. The average journalist will not want to write about a project that might disappear from the radar tomorrow or change beyond recognition. This is a waste of time and energy. A PR person who constantly offers MVP also loses trust among journalists because they are offering something that is an embryonic condition.

Now that all of this is said the irony is that these admonitions could be redundant when it comes to the Deep Tech sector.

You can start media communication in Deep Tech long before the MVP and even at the experimental stage. For instance, TRL 3-4 is the perfect time to start trumpeting the team's successes. The reason is that Deep Tech projects are designed to solve problems that are so global the earlier the company starts interacting with its target audiences the better. If we remember Rogers' model of innovation diffusion, the recommendation would be as follows: focus not on innovators (see Fig. 2) - there will be no problem with them but on the later majority and the laggards.

During the lab prototype and demo stages, the PR specialist, and in scientific communications the Public Information Officer, and his team must work like a small factory. Stories need to be told to different target audiences, of course taking into account different tone-of-voice, vocabulary, and key meanings. Regulators care about one thing, business about another, investors about revenues, and the general public about usage. You have to keep everyone in mind. The more credibility a project achieves by the time the product is released the easier it will be to organize pilots and set up further distribution.

Lie to me

One of the problems faced by technology PR specialists is the difficulty of verifying the technology and with it the expertise of the team. Multidisciplinary PR agencies have it harder: in fact, they only have a couple of setup calls or meetings to decide if they are ready to get involved and take responsibility for what they bring to the outside. In Deep Tech's case, how do you even evaluate a product that doesn't exist or is so complex that it seems beyond understanding unless you have a Ph.D. in applied science?

For instance, AI platforms can turn out to be offices where regular employees work in strict secrecy, big data may be just a small sample of data, and the drones in the video can just roll down the slide.

Of course the share of scams today is not comparable to crypto projects that attracted investments on ICOs a few years ago but they still occur. So what can you do to reduce your own risks?

We sign an NDA and start our own equivalent of tech due diligence:

• Prepare a detailed Q&A and thoroughly ask the СTO about the technology stack, ask to show the backlog, and demonstrate how the product works.
• Assess the team's expertise: the Hirsch index, the number of articles published in international journals, the citation rate, and the affiliation of the co-authors of the publications.
• By agreement with the founder, we involve external experts who can verify product development.

It may seem we are digging too deep. But this is how we work with deep technology. For instance, you have to be prepared for the fact that the potential project may have been inspired by the early success of ScaleFactor, which for six years passed off Filipino accountants as artificial intelligence.

During one conversation we had with a potential client team it turned out that the project as a whole lacked the infrastructure for the claimed technologies. In another example, a technical specialist was unable to answer how the claimed high efficiency of the AI solution was evaluated. If an entrepreneur is not trying to hide something, he will tell you about his product in great detail. Moreover, he will be happy to share his success, because behind any victory there are many defeats.

For a PR executive if you feel that something is wrong it is better to sensibly assess your own reputational risks. You should not rely on patents when checking a project - they are written in different ways, and there may be no sense in them. A founder's media exposure is also not a guarantee of success. Reputation in the market is a plus but it's better not to rely on it solely.

For a Deep Tech project manager the more you try to hide from a PR manager, the less effective your joint work will be. If you feel that the PR manager is not pulling his weight, offer another chance or look to change. Most importantly don't lie or withhold important information. You both have the same goals.

Exit this way

Life is always more diverse than any set of rules so for some people some recommendations work, for others they do not. This thesis perfectly illustrates the fact that not all Deep Tech projects live for years on investor money. Some may be able to reach operating profit fairly quickly and even forgo additional dilution of the funder's share if there is no need to continually fund R&D and there are no plans to exit the project.

However, in the vast majority of cases, Deep Tech is about constant investment in new hypotheses, refinements, increasing production for a healthy cost structure, expansion, and team growth. Here the PR specialist must understand if the project depends on external funding, no matter what tasks it faces today, investment PR will be a red thread through each of them.

The venture model assumes that the investors in the project make money either on the company's IPO or on its sale to a strategist. The option when a portfolio company simply generates some kind of profit is viewed by venture funds as not very successful because it is not clear how to get out of such a business. Yes, dividends come on the shares, but the fund will not distribute those shares to its investors. Its job is to further sell the shares, for example, to a fund at a later stage and return 3x, 5x, 10x, etc. of the investment. This is possible when selling either the entire company, or the investor's share to secondary investors, or an IPO, which is essentially a private example of selling to an unlimited number of people.

The PR person needs to know this because often Deep Tech startup founders from the very beginning are focused on exiting after a certain period of time. And even if today the PR manager's task is to show the product the focus should be on investment PR. In accordance, markets, messages, platforms, formats, announcements of attracted funds or absence of the same, speakers, and so on need to reflect jurisdictions.

If you do not keep this in mind, the tactical PR coverage may in the long run have a negative impact on the company's capitalization. Or it could lead to reputational damage at the time of fundraising if external communications for instance don’t take into account the geographical region of the future investor and the cultural context. For example, active newsjacking on acute social topics may well have a negative impact on communications for conservative foundations in the Middle East.

Final thoughts

In conclusion, working with Deep Tech and knowledge-intensive projects is always a powerful experience. But in addition to your knowledge and skills in communications, innovation management, and investment, you must be prepared to dig back into biology, chemistry, physics, and other native university disciplines to really understand the DeepTech project you get involved in.