According to the Inter-American Development Bank, we are experiencing a Big Bang of Deep Tech Innovation. This surge in technological advancement is reshaping industries and economies across the globe, and Latin America is no exception. The region is witnessing a remarkable transformation, driven by deep technology - a term that encapsulates a range of advanced, science-based innovations. From artificial intelligence to quantum computing, these technologies are not only pushing the boundaries of what's possible but also offering solutions to some of the most pressing challenges of our time. In this blog post, we delve into the world of deeptech, exploring its various facets, the current state in Latin America, and the potential it holds for the future.

1. What is Deeptech

Deeptech, short for deep technology, refers to a category of advanced technologies that are based on scientific breakthroughs and have the potential to create significant impact across various industries. Unlike traditional technologies, deeptech solutions are characterized by their complexity, high level of innovation, and the use of cutting-edge scientific knowledge.

Deeptech encompasses a wide range of fields and industries, each with its own unique set of technologies and applications. Here are some of the key areas within deeptech:

Artificial Intelligence (AI): AI involves the development of intelligent machines that can perform tasks that typically require human intelligence. This includes natural language processing, computer vision, machine learning, and robotics.

Internet of Things (IoT): IoT refers to the network of interconnected devices that can collect and exchange data. This technology enables the seamless integration of physical objects with the digital world, leading to advancements in smart homes, industrial automation, and healthcare monitoring.

Blockchain: Blockchain is a decentralized and transparent digital ledger that securely records transactions. It has gained popularity due to its potential to revolutionize industries such as finance, supply chain management, and healthcare by providing secure and tamper-proof data storage.

Biotechnology: Biotechnology involves the use of living organisms or biological systems to develop new products and processes. This field encompasses areas such as genetic engineering, pharmaceuticals, agriculture, and biofuels.

Quantum Computing: Quantum computing utilizes the principles of quantum mechanics to perform complex calculations at an unprecedented speed. It has the potential to solve problems that are currently intractable for classical computers, leading to advancements in fields such as cryptography, optimization, and drug discovery.

Advanced Materials: Advanced materials refer to substances that possess unique properties and functionalities. These materials have applications in various industries, including aerospace, electronics, energy, and healthcare.

Robotics: Robotics involves the design, development, and application of robots to perform tasks autonomously or with human assistance. This field encompasses industrial robots, medical robots, autonomous vehicles, and drones.

Spacetech: Spacetech, or space technology, is an emerging area within deeptech that focuses on the development and utilization of technologies for space exploration, satellite-based applications, and the commercialization of space. It encompasses various disciplines and applications, including satellite technology, space exploration, space communications, space manufacturing, space tourism, and space debris management. Spacetech innovations have the potential to revolutionize industries such as telecommunications, navigation, weather forecasting, and Earth observation, while also driving scientific research and expanding our understanding of the universe.

These are just a few examples of the diverse areas within deeptech. The common thread among these technologies is their potential to disrupt industries, drive innovation, and create new opportunities for growth.

2. Current State of Deeptech in Latam

The current state of deeptech in Latin America is rapidly evolving, with the region experiencing a surge in technological advancements and innovation. While LatAm may not be traditionally associated with deeptech, it has been making significant strides in recent years. Governments, private investors, and entrepreneurs are recognizing the potential of deeptech to drive economic growth and address societal challenges. Startups and research institutions in LatAm are actively working in areas such as artificial intelligence, internet of things, blockchain, biotechnology, quantum computing, advanced materials, and robotics. These advancements are not only transforming industries within the region but also attracting attention from investors and collaborators globally. With a growing ecosystem of deeptech startups, supportive government policies, and a pool of talented researchers and engineers, LatAm has the potential to become a hub for deeptech innovation in the coming years.

According to the IDB, Deeptech is bringing a new wave of innovation to Latin America:

1. Growing Ecosystem: The LatAm region boasts 340 deeptech startups with institutional funding, involving 15 local funds and accelerators and 65 international ones. 14 LatAm countries have Deep Tech startups with institutional funding.
2. Value Creation and Investment: The value of the LatAm deeptech ecosystem is estimated at $8 billion, including three startups valued over $500 million and 98 over $10 million. The capital raised by these startups is around $2 billion.
3. Attractive Returns and Growth: The ecosystem shows promising returns, with a leading global venture fund focused on Deep Tech reporting 22-30% net annual return. There has been a 44x growth in deeptech VC investment in LatAm between 2020 and 2022.
4. Talent and Cost Advantage: LatAm offers a significant talent pool, with a cost advantage of 5-10 times compared to developed markets. There are around 871,000 people engaged in STEM R&D, and approximately 10,000 people working in LatAm deeptech startups, with around 5,000 involved in R&D.
5. Impact and Potential: The deeptech sector in LatAm has the potential for long-term growth, estimated at 100 times, with an expected increase of over 4% in GDP from private R&D and 7% from generative AI in the next decade. Additionally, there's potential for $100 billion in additional annual exports of knowledge-based services leveraging AI in 10 years.
6. Broad Implications: Deeptech innovation in LatAm is seen as a way to bypass traditional development obstacles and unlock unprecedented possibilities in economic growth, social equity, and environmental sustainability. Examples include the broad adoption of solar energy to decrease electricity costs and enhance quality of life in remote communities.
7. Sectoral Distribution: The majority of LatAm deeptech startups (61%) are in Biotech, followed by AI (11%). Other emerging sectors include nanotechnology, Cleantech, spacetech, advanced mobility, robotics, advanced manufacturing, health tech, and advanced materials.

3. Investment Opportunities in Latam Deeptech

Latin America's diverse markets provide a platform for deeptech solutions in areas such as healthcare, agriculture, finance, and energy.

3.1 Market Potential of Deeptech in Latam

The market potential of deeptech in Latin America is influenced by various factors that shape the ecosystem and determine the growth and adoption of advanced technologies.

1. Investment and Funding Landscape

Access to capital is a critical factor in driving deeptech innovation. The availability of venture capital, angel investors, and government funding programs plays a significant role in supporting the growth of deeptech startups. The development of a robust investment and funding landscape in Latin America, with a focus on deeptech, can attract more capital and fuel the development of innovative solutions.

2. Research and Development Infrastructure

The presence of strong research and development (R&D) infrastructure is essential for deeptech innovation. Universities, research institutions, and technology hubs that foster collaboration between academia and industry can provide the necessary resources, expertise, and talent pool for deeptech startups to thrive. Strengthening R&D capabilities and promoting knowledge transfer can enhance the market potential of deeptech in Latin America.

3. Regulatory Environment

The regulatory environment plays a crucial role in shaping the deeptech landscape. Clear and supportive regulations that foster innovation, protect intellectual property rights, and facilitate technology adoption can attract both local and international players to invest in deeptech ventures. A favorable regulatory framework that balances innovation with ethical considerations can unlock the market potential of deeptech in Latin America.

4. Talent and Skills Development

Access to a skilled workforce is vital for deeptech innovation. Developing a talent pipeline with expertise in areas such as artificial intelligence, data science, robotics, and quantum computing is crucial for the growth of deeptech startups. Investing in education, training programs, and initiatives that nurture technical skills and entrepreneurial mindset can help bridge the talent gap and unlock the market potential of deeptech in Latin America.

3.2 Key Areas of Innovation in Deeptech in Latam

• Advanced Computing / Quantum Computing:

This area involves the development of powerful new computing technologies, including quantum computers, which use the principles of quantum mechanics. They are expected to perform certain types of calculations much faster than classical computers, potentially revolutionizing fields like cryptography, materials science, and complex system modeling.

Latin America is actively engaging in the field of advanced and quantum computing. For instance, conferences like CARLA 2023 focus on advanced computing trends in the region, and there are initiatives like Quantum Latino, which is a significant event in the quantum community in Latin America. Additionally, the Latin America Quantum Computing Center in Salvador, Bahia, aims to promote the adoption of quantum technologies.

• Advanced Manufacturing:

This refers to the use of innovative technologies to improve products and processes in manufacturing. It often includes automation, robotics, 3D printing, and advanced materials, aiming to increase efficiency, reduce waste, and create more complex and customized products.

Latin America is experiencing growth in advanced manufacturing, with countries like Costa Rica forming successful manufacturing consortia. The region is expected to see significant growth in smart manufacturing, with advancements in technologies like 3D printing and robotics.

• Advanced Materials:

This area focuses on developing new materials with enhanced properties or functionalities. These materials could have applications in various industries, including electronics, aerospace, healthcare, and renewable energy, offering improved performance, sustainability, or new capabilities.

Latin America could become a major player in the advanced materials market, with countries like Mexico and Brazil being key contributors. The region is exploring various advanced technologies, including the development of new materials.

• Aerospace, Automotive, and Remote Sensing:

Innovations in these fields include the development of new types of aircraft and vehicles, including electric and autonomous vehicles, and advancements in remote sensing technologies used for earth observation, environmental monitoring, and other applications.

In Latin America, remote sensing is crucial for monitoring land-use and climate change interactions. The region is also advancing in the automotive sector, particularly in the development of automotive cameras and unmanned aircraft systems.

• Artificial Intelligence (AI) and Machine Learning (ML):

AI and ML are at the forefront of deeptech, with applications in natural language processing, computer vision, and predictive analysis. They enable computers to learn from data, find correlations, and make predictions, impacting various sectors like finance, healthcare, and transportation.

Latin America is progressively embracing AI and ML technologies. These technologies are being applied in various sectors, including higher education and urban development, with a focus on energy efficiency and data analysis.

• Life Sciences:

This area includes biotechnology, pharmaceuticals, and medical technology. Innovations in life sciences are leading to new treatments, drugs, and diagnostic tools, significantly impacting healthcare and the treatment of diseases.

Latin America is becoming a hub for life sciences innovation, with significant contributions in biotechnology, pharmaceuticals, and medical technology. Countries like Brazil represent a large portion of the life science market in the region.

• Spacetech:

This encompasses the use of technology for space exploration and activities related to outer space. This includes the development and use of satellites, spacecraft, space stations, and technologies for launching, operating, and communicating with these space assets.

SpaceTech in Latin America, particularly in Argentina, is gaining momentum and recognition. Argentina is a key player in the region's space sector, with initiatives like LIA Aerospace, the first space startup in Argentina and Latin America focusing on the design, production, testing, and operation of launch vehicles. The country, along with others in Latin America, is part of a growing movement towards developing space capabilities, including satellite launches and space exploration, marking a significant step in the region's technological advancement in SpaceTech.

4. Challenges and Risks in Deeptech in Latam

While Latin America holds the potential for deeptech innovation, there are several challenges and risks that need to be addressed to fully capitalize on the opportunities.

1. Limited Access to Capital

Access to capital is a significant challenge for deeptech startups in Latin America. Compared to more established tech ecosystems, the region faces limitations in terms of available venture capital, angel investors, and funding opportunities. This lack of capital can hinder the growth and scalability of deeptech ventures, making it essential to develop mechanisms to attract investment and foster a supportive funding landscape.

2. Lack of Infrastructure and Resources

The deeptech ecosystem requires robust infrastructure and resources to thrive. Latin America faces challenges in terms of research and development facilities, technology hubs, and access to cutting-edge equipment. The limited availability of these resources can impede the progress of deeptech startups and hinder their ability to compete on a global scale. Building and strengthening the necessary infrastructure is crucial to overcome this challenge.

3. Skills and Talent Gap

The shortage of skilled professionals in deeptech fields poses a significant challenge in Latin America. The region needs a workforce with expertise in areas such as artificial intelligence, data science, and robotics to drive deeptech innovation. Addressing the skills and talent gap requires investment in education, training programs, and initiatives that foster the development of technical skills and entrepreneurial mindset.

4. Regulatory and Legal Hurdles

Navigating complex regulatory frameworks and legal hurdles can be a challenge for deeptech startups in Latin America. Unclear or outdated regulations, intellectual property protection issues, and compliance requirements can create barriers to innovation and hinder the growth of deeptech ventures. Streamlining regulations and creating a favorable legal environment that supports deeptech innovation is crucial to mitigate these risks.

5. Market Adoption and Customer Readiness

The adoption of deeptech solutions in Latin America can face challenges related to market readiness and customer acceptance. Educating potential customers about the benefits and applications of deeptech, addressing cultural barriers, and building trust in new technologies are essential to drive market adoption. Tailoring solutions to local needs and demonstrating tangible value can help overcome these challenges.

5. Future Outlook and Trends in Deeptech in Latam

1. Increased Investment in Deeptech: Latin America is witnessing a rise in investment in deeptech startups. As the region's ecosystem matures, more venture capital firms, angel investors, and government initiatives are recognizing the potential of deeptech and allocating funds to support its growth.

2. Emergence of Deeptech Hubs: Deeptech hubs are emerging in Latin America, fostering collaboration, knowledge sharing, and innovation. These hubs bring together startups, research institutions, corporates, and investors, creating a conducive environment for deeptech development and commercialization.

3. Focus on Social Impact: Latin America has a strong focus on addressing social challenges. Deeptech solutions are being developed to tackle issues such as healthcare accessibility, education, sustainability, and poverty alleviation. This trend reflects the region's commitment to using technology for positive social impact.

4. Cross-Sector Collaboration: Deeptech in Latin America is witnessing increased collaboration between different sectors. Industries such as agriculture, healthcare, energy, and finance are partnering with deeptech startups to leverage advanced technologies and drive innovation in their respective fields.

5. Government Support and Policies: Governments in Latin America are recognizing the importance of deeptech for economic growth and competitiveness. Supportive policies, funding programs, and regulatory reforms are being implemented to foster deeptech innovation and attract investment in the region.

6. Rise of AI and Data Analytics: Artificial intelligence (AI) and data analytics are gaining prominence in Latin America. Startups are leveraging AI algorithms and data-driven insights to develop innovative solutions in areas such as healthcare diagnostics, financial services, customer experience, and personalized marketing.

7. International Collaboration and Expansion: Latin American deeptech startups are increasingly looking beyond their borders for collaboration and expansion. Partnerships with international companies, participation in global accelerators, and access to international markets are enabling Latin American startups to scale their deeptech solutions globally.

These trends and future outlooks indicate a promising trajectory for deeptech in Latin America. With increased investment, supportive ecosystems, and a focus on social impact, the region is poised to become a hub for deeptech innovation. By leveraging advanced technologies and fostering collaboration, Latin America can drive economic growth, address societal challenges, and position itself as a global player in the deeptech landscape.