The construction of the Tesla Gigafactory in Mexico is seen as a significant milestone for Mexican manufacturing.
There is hope that the CHIPS bill, promoted by President Joe Biden to boost semiconductor production in the United States, will also benefit Mexico.
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While new factories and job opportunities are positive for Mexico, a recent report suggests that the country and other Latin American and Caribbean (LAC) countries have even greater potential in the field of deep tech.
The report titled “Deep Tech: The New Wave,” was was created in collaboration with the Inter-American Development Bank’s innovation laboratory (IDB Lab).
According to this report, there is a possibility of a twentyfold increase in venture capital (VC) investment in LAC deep tech startups over the next decade.
While projections like these are subject to debate, the report provides valuable reasoning and data to support this conclusion.
The definition of “deep tech” varies depending on who is using it.
In this report, Surfing Tsunamis, the consulting firm behind the study, adopts the definition provided by Propel(x) CEO Swati Chaturvedi:
“Deep technology companies are built on tangible scientific discoveries or engineering innovations, focusing on solving significant global challenges.
“Examples include medical devices fighting cancer, data analytics for agricultural productivity, or clean energy solutions combating climate change.”
Based on this definition, the report identifies Auth0, a cybersecurity startup acquired by Okta for $6.5 billion in 2021, as the most notable deep tech success story in LAC so far.
However, the majority of startups in the LAC region do not fall under the deep tech category, as they primarily focus on product and business model innovation, with limited technological risk.
According to Surfing Tsunamis’ previous report, deep tech companies make up only around 10% of the regional startup ecosystem.
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Venture capital investment in LAC deep tech represents a small portion of overall VC activity in the region. Nevertheless, it has been growing both in absolute numbers and proportionally.
In 2020, investment in LAC deep tech reached $96 million (0.59% of total VC investment), and by 2022, it increased to $172 million (2.2% of total VC investment).
