A software company raising a seed round can point to recurring revenue and let the market argue about the multiple. A DeepTech company at the same stage usually has no revenue to multiply. It has a prototype, a patent filing, a test result and a plan for the next eighteen months. When founders or investors import software benchmarks into that situation anyway, the round gets priced on a number that doesn’t exist and the founders usually pay for the gap in equity.
DeepTech accounted for 32% of all European venture capital investment in 2025, more than double its share a decade earlier, according to the 2026 European Deep Tech Report published by Lakestar, Walden Catalyst and Dealroom. The capital is there. The pricing logic is often still borrowed from software.
1. Why software multiples misprice DeepTech
A revenue multiple assumes the revenue exists and that the main open question is how fast it grows. Neither holds before a DeepTech company signs its first contract. The risk an investor carries at that stage is technical: whether the technology works outside the lab, at the cost and scale the business plan assumes. The same report notes that DeepTech investor criteria shift with each round, from technical validation at seed to commercial traction later on. Pricing a seed round on commercial metrics asks it to answer a question the company isn’t yet expected to answer.
2. What a seed investor actually prices
What gets priced at seed is how much technical risk has already been retired and how credibly the next tranche of capital retires the rest. The Technology Readiness Level scale, the 1 to 9 framework used across Horizon Europe programmes, gives founders and investors a shared vocabulary for that conversation. A company moving from a lab demonstration to a prototype tested in a relevant environment has changed its risk profile in a way an investor can underwrite, even with zero revenue.
Intellectual property matters for the same reason. A patent filing on its own proves little. A clear account of what is protected, who owns it and what a competitor would have to do to work around it tells an investor whether the technical lead will still be a lead when revenue arrives.
3. Control starts before the first round
Research spinouts account for a third of new European DeepTech startups since 2015, per the same report. For these companies, part of the cap table is set before any investor arrives, through the terms agreed with the university or research institution that owns the underlying intellectual property.
The UK’s Independent Review of University Spin-out Companies looked at this directly. It found that a high university equity stake reduced a spin-out’s chances of raising venture capital because investors read it as over-control and a limit on their returns. Its survey of spin-out founders found that 14% didn’t hold a majority of their own company at founding. The recommended starting point, accepted in the government’s response, is a university stake of 10% to 25% for life sciences spin-outs, with exact terms depending on the wider deal.
The principle carries well beyond the UK. Founders who start with a minority position enter their first negotiation already diluted and every later round compounds it. A strong seed valuation argument can’t repair a founding cap table that investors already consider unworkable.
4. Non-dilutive capital changes the maths
DeepTech founders have a wider set of financing options than most software founders: venture equity, grants and private credit all appear in the report’s mapping of the sector. Public programmes exist precisely because private capital hesitates at this stage. The European Innovation Council’s Accelerator, for example, can combine a grant with an equity investment for technologies around TRL 6 to 8 and targets innovations considered too risky for private financing alone.
The consequence for pricing is sequencing. Measured in control, equity is the most expensive capital a founder raises. It should pay for the milestones that grants and public programmes won’t fund, and each grant that retires technical risk before an equity round strengthens the price of that round.
5. Today’s price depends on who funds the Series B
A seed valuation is also a promise about the next round. The 2026 report is direct about Europe’s gap: beyond Series A there isn’t enough capital in Europe to fund these companies locally, so they raise smaller rounds, sell or take capital from overseas. More than 80% of European DeepTech exits run through M&A and, by value, most of that M&A goes to US acquirers.
A seed price set without asking who will lead the Series B, and on which milestone, often leads to a flat or down round later. That round dilutes the founders more than a lower but defensible seed price would have.
6. Where a token fits and where it doesn’t
A token has a place in a DeepTech structure only when it has an operating job tied to the technology itself, for example governing access to a data set or to compute capacity the company operates. In that case token holders are users of a real resource and the token’s value tracks that use. Without such a link, a token adds a second instrument for investors to diligence and retires no technical risk, so the honest answer is to leave it out.
A DeepTech round priced on retired technical risk is easier to defend in diligence and leaves the founders holding more of their company. Making that argument explicit before the first investor meeting keeps the discussion on milestones, where it belongs.
Frequently asked
How is a pre-revenue DeepTech startup valued?
Investors price how much technical risk has already been retired and how credibly the next round retires the rest, rather than applying revenue multiples. The Technology Readiness Level scale gives both sides a shared vocabulary, and a clear intellectual property position shows whether the technical lead will hold.
Does grant funding change a DeepTech valuation?
Indirectly. Grants and public programmes such as the EIC Accelerator, which can combine a grant with an equity investment, fund technical milestones without diluting the founders. Each milestone retired before an equity round strengthens the price of that round.
Why do university equity stakes matter to investors?
The UK’s Independent Review of University Spin-out Companies found that high university stakes reduced spin-outs’ chances of raising venture capital because investors saw them as over-control. It recommended 10% to 25% as a starting point for life sciences spin-outs.
Sources and references
- Lakestar, Walden Catalyst and Dealroom, The 2026 European Deep Tech Report.
- UK Government, Independent Review of University Spin-out Companies, with the government response and Annex D, survey of spin-out founders.
- European Innovation Council, EIC Accelerator programme.
- European Commission, Technology Readiness Levels, Horizon Europe General Annexes.
- AYAKO Partners internal analysis.