Last year, The Information proclaimed the software investing playbook has gone from an exclusive recipe amongst VCs to common knowledge among all investors. That, in addition to cheap money, has turned software investing into a low-margin finance game.

Yet, traditional VCs are still stuck with their now low-margin businesses, unable to move forward and invest in the next big thing: deep tech.

But perhaps that’s for the best. After all, unless software investors can unlearn their own playbook, they’ll continue to struggle with the innovator while they slowly go extinct alongside the dilemma of companies they’re so eager to fund.

In other words, the playbook software is dead, not just doomed to fail. Here are three things software investors must relearn before investing in deep tech.

Counting on one or two companies to return the entire fund is not only foolish, it’s a good indication of an investment team that shouldn’t be investing in deep tech.

The market is king. Your founder has no power here

Software investors’ founder-first mantra is simply wrong in the world of deep tech. This type of magical thinking is exactly why their software playbook is doomed to fail.

Deep tech takes decades to bear fruit, not years, and it is virtually impossible for deep tech companies to do a hard pivot. Expecting founders to overcome physical and technological constraints is downright bad investing, especially in an era where cheap money tends to evaporate.

If you’re a software investor looking to invest in deep tech, you need to understand that the market is king here. A charismatic founder cannot be relied upon to “figure it out” along the way and a company’s team is only as good as its ability to exist inside its market.

With pivots out the window, a deep tech company needs to get the market right from day one. A half-baked, superficial hypothesis about product-market fit and go-to-market strategy is child’s play in the world of deep tech.

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