When discussing startup investments, particularly in deep tech or frontier tech, a few assumptions often surface. They are labelled as high-risk, capital-intensive, and require years to show results. While these points hold some truth, they simplify the realities of investing across sectors. The common comparison with D2C (direct-to-consumer) startups often paints a picture of lower risk, faster returns, and less capital requirements. A closer look reveals that building any scalable business requires thoughtful planning, resources, and time, irrespective of the sector.
Understanding Startup Success
Startup success is a blend of measurable achievements and strategic milestones. Quantifiable success involves reaching significant benchmarks such as $100 million in Annual Recurring Revenue (ARR) and becoming profitable. Meanwhile, qualitative success revolves around achieving product-market fit and scalability, ensuring that the business is sustainable in the long run.
In venture capital, the ultimate metric is cash-on-cash return or DPI (Distributions to Paid-In Capital). While high valuations might indicate growth potential, they only translate into real value when converted into returns through IPOs, mergers and acquisitions, or secondary market sales. Whether it’s deep tech or D2C, these foundational principles underline that raising funds is just the beginning; sustainable growth and tangible outcomes define true success.
The Real Costs of Building a D2C Startup
D2C startups are often seen as easier to build. Their products are typically market-driven, and the initial capital investment can be lower than that of deep tech ventures. However, while creating a product might be cost-effective, selling it can be another story. In a saturated market, standing out often means spending heavily on sales, marketing, and customer incentives, all of which push up customer acquisition costs (CAC) and can impact profitability.
But it’s not just about the cost of acquiring customers—it’s also about retaining them. Especially when a product’s competitive edge (MOAT) is weak, like in D2C or B2B SaaS models, retention becomes a critical factor. Historically, many investors have treated customer acquisition as the key to success, assuming that once you’ve brought customers in, the profits will follow through upselling.
However, this only works if the service—and therefore customer retention—is top-notch. To achieve this, a significant investment in retention strategies is necessary, and those costs need to be factored into the overall business model.
For instance, Zepto raised $1.8 billion to fund its quick commerce business, which is more than twice the amount Rocket Lab raised to develop rockets and launch satellites into space. This highlights the significant financial demands D2C companies face, even when compared to high-tech industries like space exploration.
Deep Tech’s Expensive Beginnings and Scalable Advantage
Deep tech ventures often start with high capital requirements and longer development timelines. Their focus is on building defensible technology that solves critical problems. Once developed, the technology offers a competitive edge that reduces CAC. Customers seeking a solution unique to that startup often face limited alternatives.
For example, OpenAI invested heavily in its early years to develop cutting-edge AI models. Today, its tools are widely adopted across industries, addressing productivity and accessibility needs. This level of impact reduces the reliance on marketing spend, as its technology addresses specific, large-scale problems.
On the other hand, blockchain’s slower adoption highlights the importance of solving a significant, immediate problem. While it has many use cases, the lack of a single, pressing application has hindered its widespread implementation.
Timelines and Growth Patterns
Startup growth often follows different trajectories depending on the sector. D2C businesses tend to grow steadily, focusing on incremental improvements in customer acquisition and profitability.
Deep tech ventures often show limited growth in their early years as they refine their technology. However, once the product is market-ready, growth can accelerate significantly. Consider SpaceX, which spent years perfecting reusable rockets. Its eventual market adoption has positioned it as a leader in the aerospace sector.
Despite these differences, the notion that deep tech requires significantly longer timelines compared to other sectors can be misleading. Unicorn data suggests that most startups, regardless of sector, take at least seven years to reach maturity. Zomato, a notable D2C success story, took 13 years to go public and only turned profitable 16 years after its founding.
Risk in Context
The perception of risk varies between sectors but isn’t exclusive to deep tech. D2C ventures face market risks, such as shifting consumer preferences and increasing competition. Deep tech, meanwhile, must manage technological and regulatory challenges.
For example, MedTech startups often require years to obtain regulatory approvals, which can extend their timelines. However, once approvals are secured, they benefit from a strong position in the market. A recent example includes semaglutide-based diabetes treatments, which dominated the market once regulatory hurdles were cleared.
In contrast, while D2C startups like HealthKart have seen growth, they have also raised significant funds—$153 million in a recent round—to stay competitive. High competition in D2C often requires continuous investment to maintain market share.
Factors Driving Success
What drives success in startups depends heavily on their focus. For D2C ventures, success often comes down to identifying products that people want and scaling profitably. It is about understanding demand and staying ahead of the competition by delivering value.
In deep tech, success is tied to creating technology that solves problems better than anyone else. It is about developing something so unique that it builds a protective moat, making it hard for others to compete.
Both types of startups need significant resources, but they use them differently. Deep tech pours resources into research and innovation, while D2C focuses on reaching customers, building a brand, and keeping them loyal. Each path has its own challenges, but the end goal is the same—building something that lasts.
Lessons for Investors
Investing in startups isn’t a one-size-fits-all game. Every sector has its own dynamics, and understanding them is key to spotting opportunities. Startups that address real, pressing problems naturally stand out—they fulfill a need that can’t be ignored, making it easier for them to gain momentum. However, even the best ideas need the right conditions to scale. A growing market offers that environment, providing room for expansion and a steady stream of potential customers. Equally important is a startup’s ability to stand apart, whether through an innovative business model or unique technology, which creates a defensible edge in the market.
Strategic partnerships often become the quiet force behind a startup’s success. Collaborations like SpaceX teaming up with NASA or EaseMyTrip working with Paytm highlight how partnerships can help reduce costs, access specialized knowledge, or enhance service delivery. These alliances aren’t just about sharing resources—they’re about solving big challenges more efficiently.
Take EtherealX, India’s reusable rocket startup, as an example. By collaborating with Beyond Gravity (RUAG Space), a leader in payload fairings, EtherealX has managed to lower development costs and tap into critical expertise. This approach mirrors how other deep tech and D2C startups achieve scale—by finding “unfair advantages” through partnerships that make growth smarter and faster.
For D2C and SaaS companies, the focus is often on cutting customer acquisition costs or improving retention strategies. In deep tech, it’s more about minimizing development costs and leveraging niche expertise. A great example of this is OpenAI’s partnership with Microsoft. By utilizing Microsoft’s cloud infrastructure, OpenAI slashed its operational costs while embedding itself into a powerful ecosystem that boosted its reach and retention.
Ultimately, successful startups tend to combine problem-solving, market opportunity, and the right collaborations. These elements create a strong foundation for sustainable growth, whether the goal is to revolutionize space exploration, AI, or consumer markets.
Startups are complex, and their success depends on several interrelated factors. Both D2C and deep tech have their challenges and opportunities, and investors should evaluate each on its merits.
The myths surrounding startup investing oversimplify the realities of building scalable businesses. Deep tech might involve higher initial costs, but its defensible solutions and lower CAC can deliver strong returns. D2C may appear less risky at first, but its high competition and market-driven challenges can make growth equally demanding.
The path to startup success—whether in deep tech, D2C, or SaaS—requires careful consideration of long-term potential and a willingness to adapt to evolving market conditions. Each sector has its nuances, and informed decisions, rather than assumptions, make all the difference.