The Shift Back to Deep Tech: Why I Started Phase Shift Ventures
Dennis R. Pape, Founder and Managing Partner
I’ve spent most of my career at the intersection of science, engineering, entrepreneurship, deep tech dual-use commercialization, and venture capital.
After earning a Ph.D. in Physics from Duke, I worked on photonic technologies at Texas Instruments in Dallas and acousto-optics and optical signal processing technologies at Harris (now L3Harris) in Florida. I went on to found and scale Photonic Systems, a VC-backed startup in Florida, and later joined a team at Milcom Technologies launching deep tech spinouts from major DoD primes in Florida and beyond — all throughout the two decades leading up to the dot-com bust in 2001.
Florida’s First Wave of Deep Tech
VC-backed startups of that era built much of the personal computing, mobile communications, and internet infrastructure — the first wave of deep tech innovation. It was a heady time for venture capital, including along the I-4 corridor in Central Florida, where the concentration of aerospace and defense industries fostered a dense ecosystem of technology development, engineering talent, and venture-backed startups — propelling the region into one of the top innovation hubs on the East Coast.
The Shift Away
But after the dot-com bust, venture capital, which had already funded some early dot-com successes, shifted dramatically away from deep tech (and Central Florida) to software startups. SaaS and consumer-focused startups became the dominant venture-backed companies, leveraging the platforms and infrastructure built during the deep tech era. By the mid-2000s, capital for engineering-driven startups had largely disappeared, and consumer internet startups have dominated both the nation’s and Florida’s venture capital ecosystem since.
SeedFundersOrlando and The Early Signs of Change
In 2019, after previously founding and operating a coworking space and launching a tech accelerator, I co-founded SeedFundersOrlando, a member-driven angel investing group that has since backed more than 20 startups — primarily SaaS and consumer-focused companies.
About four years ago, I began to see another shift — a return to deep tech.
An increasing number of deep tech founders, building companies around nanotechnology, AR/VR, cybersecurity, laser communications, optics, hypersonics, ultrasonics, 3D printing, energy storage, advanced materials, radar sensors, medtech, and AI, began seeking early-stage funding from our group.
Why Early-Stage Deep Tech Requires a Different Approach
Early-stage deep tech startup due diligence requires a fundamentally different approach than evaluating SaaS and consumer startups. Success factors revolve around:
Maturity of technology
Technical milestones
IP defensibility
Capital efficiency and non-dilutive funding pathways
Early validation of emerging commercial and government markets
Broad risk assessment
Only a handful of our SeedFundersOrlando members have the technical background, experience, and interest that I do to evaluate these companies and most of these deep tech startups were passed over by our member-driven group.
Early-Stage Deep Tech Funding Requires a Thesis-Driven Approach
SeedFundersOrlando is not unusual in Florida where most early-stage funding groups, including VC funds, have a generalist thesis. When I reviewed the portfolios of Florida VC funds and spoke with fund managers, I found the same pattern: most funds have been structured for SaaS and consumer-facing startups, with risk, capital, and timeline profiles that don’t align well with early-stage deep tech startups. Meanwhile, deep tech founders, particularly those at early stages and those bridging commercial and government markets, continued to struggle to find aligned capital locally.
The Shift Back to Deep Tech
We are now witnessing a broad shift back to deep tech, with startups leveraging advanced technologies to transform industries including aerospace and defense, agriculture, energy, healthcare, transportation, and advanced manufacturing — a shift accelerated by the disruptions of COVID and the war in Ukraine. Across the country, more deep tech thesis-driven VC funds are being formed to fund these startups. Deep tech funding has now doubled to a 20% share of all venture capital funding with predictions that it will double again in the coming years.
Florida’s Deep Tech Opportunity Is Still Here - But Even Better Now
Florida, and especially the Orlando / Space Coast aerospace and defense corridor, continues to offer the engineering talent, scientific expertise, and infrastructure necessary to build world-class deep tech companies, just as it did during the first wave of deep tech venture funding prior to 2001.
But the opportunity in this second wave is even better now. We didn’t have AI during the first wave. Now AI helps deep tech startups to, among other things, mitigate risk, accelerate development, reduce exit time, and increase valuation.
Out-of-state deep tech thesis-driven funds are increasingly recognizing this opportunity. The Space Coast recently saw one of its largest exits with Tomahawk Robotics, a deep tech company founded by former L3Harris engineers and largely funded by out-of-state investors, acquired by AeroVironment (NASDAQ: AVAV) for $240 million in 2023.
Why I Started Phase Shift Ventures
I believe deep tech startups will again reshape industries in this decade and beyond — much as they did when they created the computing, telecom, and internet infrastructure of the 1980s and 1990s.
We are entering a new decade of deep tech opportunity, growth, and capital formation. The next generation of founders solving complex technical problems will need venture partners who understand not just the science, but also the markets, financing models, and commercialization pathways required to scale.
That’s why I started Phase Shift Ventures:
To close Florida’s early-stage deep tech capital gap — and address similar gaps in other undercapitalized innovation regions.
To back technically exceptional founders at the earliest — and most asymmetric — stage of company formation.
To bring capital, expertise, and strategic support — especially to dual-use ventures — enabling founders to grow, scale, and succeed.
To give our investors early access to high-growth deep tech founders and startups leveraging breakthrough science and engineering to deliver attractive, long-term returns.