DeepTech vs. FinTech: 2 big areas, their risks, returns, and what to consider

I. Introduction: the two-fold world of technology 

The technology sector is widely represented in the investment world, but within it there are two radically different philosophies: FinTech (financial technology) and DeepTech (deep learning). FinTech is predominantly concerned with optimising and digitising cash flows (payments, banking), while DeepTech deals with fundamental scientific and engineering challenges (creating AI algorithms, new medicines).

For investors, these differences mean completely different risk and return profiles. While FinTech often offers rapid and predictable growth, DeepTech is a all-or-nothing a bet that has a high risk of failure but exponential potential if successful. This article analyses the business models, listing dynamics and how an investor should approach the long-term performance of these two sectors.

II. FinTech: scale, margin and regulatory sensitivity

2.1. Business logic, metrics and historical performance

FinTech companies are built on optimising cash flows and digitising existing processes. Their success is based on mastab and user engagement speed. Key metrics (number of customers, volume of transactions, CAC/LTV ratio) show FinTech's direct dependence on market activity.

Historical context: FinTech stocks (Wise, Adyen) enjoyed rapid growth in 2020-2021, when e-commerce and cross-border transactions exploded. But in 2022, as interest rates rose, FinTech stocks often fell sharply. This demonstrated their sensitivity macroeconomic factors subject to.

2.2. Regulatory risk and case study

FinTechregulatory risk is always at the forefront in Estonia and Europe. European Union financial regulations (e.g. PSD2, MiFID) determine how. FinTech can be delivered.

Case Study: the BNPL and regulations: Buy Now Pay Later (BNPL) companies (Klarna) benefited from easy access to consumer credit. However, if regulations (e.g. at EU level) restrict credit provision or require higher risk capital, this will directly affect their profit margins and hence their post-IPO share price. The investor needs to analyse how well the company is prepared for regulatory changes.

III. DeepTech: scientific breakthrough and long-term contribution 

3.1. What is DeepTech? Fundamental cornerstones

DeepTech refers to companies whose value is based on fundamental science, engineering and patented technology. intellectual property (IP). This requires huge investments in Research and Development (R&D) and a long, uncertain route to market.

• Areas: Quantum technology, advanced biotechnology (mRNA, gene therapy), AI core solutions, advanced GreenTech (nuclear energy, battery chemistry).
• Examples: Moderna/BioNTech (mRNA technology), OpenAI/Anthropic (large language models), Northvolt (advanced battery technology) and quantum computing companies.
• Business model: DeepTech sells either a licence for a technology product, a specific solution (e.g. cyber defence) or a completely new product (e.g. a new medicine).

3.2. Finance and IPO dynamics: irregular performance

• Long and expensive T&A: DeepTech firmad on IPO at the time almost always unprofitable, because they require years of expensive research and development. For example, a new medicine needs years of clinical trials.
• Value in IP: An investor does not value DeepTech's stock not for its current earnings, but for its marketing readiness and the value of patented intellectual property on the basis of. When listing DeepTech, it is critical to see what stage of development the research project is at (e.g. whether a clinical trial has been completed).
• Share performance: DeepTech's share price is often volatile and reacts irregularly. Instead of a steady increase, there are price jumps linked to scientific milestones or regulatory approvals. Failure to do so could mean a drop in share value of tens of percent.

Case Study: biotechnology and COVID-19: Vaccine developers (Moderna, BioNTech) showed exceptional DeepTech'i potential. The years-low share price exploded with a scientific breakthrough (proving the efficacy of mRNA). But for many others DeepTech for companies, the price is low post-IPO until a scientific failure (e.g. a clinical trial) can reset the share value.

3.3 IP valuation: metrics at the IPO

In DeepTech's IPO, traditional metrics (P/E ratio, EBITDA) are practically useless. An investor needs to assess:

• The strength of the patent portfolio: How easy is it to copy technology?
• Addressable market size (TAM): Is the solution big enough to justify the large investment?
• Efficiency in the use of capital: How long will the money for R&D last before the new funding round? DeepTech companies need a steady inflow of cash.

IV. Investor psychology and long-term strategy 

4.1. Impact on market sentiment

In IPOs, FinTech and DeepTech are often valued on the basis of market sentiment, not just financials. During boom periods (such as 2021), both sectors received unrealistically high valuations.

• FOMO (Fear of Missing Out): In FinTech IPOs, the price is often driven by FOMO, especially when it comes to well-known consumer brands.
• Scientific Hype: In DeepTech, investor psychology is driven by potential world-changing solutions which can mask the real risks.

4.2. Strategy and risk diversification

• FinTech: Investor should approach FinTech IPOs with a critical eye, expecting immediate price pressure after Lock-up period. Global consumption and interest rates need to be monitored.
• DeepTech: The investor must accept that most DeepTech bets fail, but one successful project can compensate for all the losses (e.g. 1 Moderna instead of 10 failed biotech stocks). Risk diversification is vital here.

In terms of listing and long-term stock performance, FinTech and DeepTech are opposites.

DeepTech: All-or-Nothing Strategy

When DeepTech is listed, the share value is often the highest potential, rather than available income on top. Investors need to be prepared to bet, knowing that the stock could be 0 if a scientific project fails. A successful strategy is diversify risks various DeepTech between companies and assume that only some of them will succeed, but cover the losses of the rest.

FinTech: Optimisation strategy

In the case of FinTech, post-IPO performance is often... fast and predictable, but margins are under constant competitive and regulatory pressure. For example, the growth of European e-commerce has boosted FinTech stocks, but new regulation on payment fees could squeeze revenues. FinTech investors need to be dynamic and ready to react quickly to market changes.

V. Case studied

5.1 FinTech: From euphoria to harsh reality

FinTech IPOs over the past four years were characterised by a massive boom in 2021, followed by a painful correction. One of the most notable examples is the London Stock Exchange-listed Wise (2021), which stood out in terms of its profitability; although its stock has experienced high volatility, the company has been able to prove the resilience of its business model. In contrast, US giants such as Robinhood (2021) and Nu Holdings (Nubank, 2021) has shown two facets of the sector: the share price of Robinhood fell rapidly after the IPO as retail activity faded and the interest rate environment changed, while Brazilian digital bank Nubank has managed to recover from an initial fall and show strong growth in its customer base.

Overall, the FinTech IPOs of the past four years have taught investors that high growth without a clear profitability path is no longer enough - many of the 2021 "stars" are trading today 40-70% below their all-time highs.

5.2 DeepTech: Scientific breakthroughs and long waiting times

The last four years have been full of dramatic ups and downs in the DeepTech sector, where success depends directly on technological milestones rather than quarterly sales results. The sector was set in motion by biotech giants such as BioNTech (listed a little earlier but topped out in 2021), whose share price movement on the back of the mRNA success showed the huge potential of DeepTech. At the same time, quantum computing companies such as IonQ (2021), which was listed via the SPAC trade, has shown the riskier side of the sector: the stock has moved up and down according to how close it is to real commercial use. There have also been big moves in the energy sector, with battery technology developer QuantumScape (2020/2021), whose share price went through a vertiginous rise and then a long fall when it became clear that mass production would take longer than expected.

DeepTech IPOs over the past four years have confirmed that they are purely "long view" investments, where the share price can remain under pressure for years until the technology reaches final validation.

VI. Conclusion: two strategic approaches 

DeepTech and FinTech represent two opposing investment paradigms: Development (DeepTech) vs. efficiency (FinTech). FinTech is ideal for those looking for strong operational growth and willing to tolerate macro and regulatory risks. DeepTech, on the other hand, requires a long horizon, patience and a willingness to put money on the line for great but uncertain potential. For both, the key to success is a thorough due diligence in the context of their specific business models.