Formula 1’s Billion-Dollar Deep Tech Opportunity
Written by Chris Tagnon
“Auto racing began 5 minutes after the second car was built” - Henry Ford.
This quote, though it takes creative license with history, encapsulates the intrinsic link between Formula 1 (“F1”) and human beings' innate competitive drive. F1, often referred to as the pinnacle of motorsport, thrives on its competitive ethos, pushing the boundaries of technology and human ingenuity. This relentless pursuit of perfection has cemented its reputation as an incubator of innovation, fostering breakthroughs that extend far beyond the racetrack.
Innovation Through Competition
Throughout history, competition has been a catalyst for innovation. While the Cold War spurred unprecedented advancements in space exploration, F1 has served as a similar crucible for automotive technology. Over the decades, developments in aerodynamics, hybrid powertrains, and composite materials – originally honed for F1 cars – have trickled down into mainstream automotive applications. Features like the semi-automatic gearbox, energy recovery systems (ERS), and advanced telemetry owe their existence to the technological arms race within motorsport.
Motorsport's influence has expanded further in recent years. F1 data systems and tools have found use in applications which range as wide as 5G infrastructure, air traffic control, and intensive care patient monitoring. In the context of the COVID-19 pandemic, Mercedes F1 collaborated with UCL to deliver a life-saving CPAP machine design in only 10 days, which they then supplied to the NHS at a rate of 1000 units a day. More recently, Extreme E has pioneered sustainable off-grid energy solutions by partnering with ENOWA to develop a cutting-edge hydrogen microgrid. Such initiatives highlight the potential of motorsport to act as a large-scale R&D lab and to solve problems that resonate far beyond its conventional purview.
Formula 1 at a Turning Point
F1 now stands at a pivotal moment in its storied history. The introduction of a cost cap in 2021, aimed at levelling the competitive playing field, has inadvertently nudged teams to seek new avenues for investment. Many teams, including Mercedes, Red Bull, McLaren, and Williams, have spun out commercial arms to capitalise on their engineering expertise and global brand recognition.
The potential of these ventures is enormous but largely untapped. Currently, most commercial activities focus on engineering consultancy projects. These include collaborations in other racing categories like America’s Cup, or special car projects such as Red Bull’s RB17, Aston Martin’s Valkyrie, and Mercedes’ Vision EQXX. While these endeavours showcase the breadth of F1’s technical acumen (and are not to the displeasure of car enthusiasts!), they only scratch the surface of what is possible. Teams are beginning to grasp this fact. Mercedes, for instance, has set an ambitious target of generating £100 million annually from its Applied Science division by 2025, up from £30 million in 2021.
Venture Opportunities and Deep Tech Synergies
A glimpse of the potential of F1 in the venture space is already emerging. Red Bull Advanced Technologies’ partnership with Skarper, a startup revolutionising e-bike technology, exemplifies how F1 expertise can accelerate innovation in adjacent industries. By applying F1’s rapid prototyping capabilities, data-driven design processes, and high-performance engineering standards, these ventures can bridge the gap between concept and commercialisation.
This is particularly relevant in Europe’s deep tech ecosystem, which faces significant hurdles in scaling innovations compared to its U.S. counterpart. Europe’s funding gap and relatively limited support for bringing groundbreaking technologies from lab to market have stymied progress in fields like advanced manufacturing, energy storage, and intelligent systems. Here, F1 teams – all of which have a form of headquarter on the European continent, with 7 out of 10 based in the UK – can play a transformative role. With their unmatched ability to iterate, execute, and deliver under extreme constraints, they are uniquely positioned to help European startups overcome critical bottlenecks.
Moreover, F1’s global reach and cultural cachet make it an unparalleled platform to showcase innovation. With millions of fans worldwide and increasing traction in key markets, such as the United States and Asia, F1 provides a prominent stage for cutting-edge technologies to gain visibility and credibility.
Service-for-Equity Models: A Win-Win
One compelling model for F1 teams to explore is a service-for-equity arrangement. In this framework, the commercial branches of F1 teams would offer their engineering expertise, facilities, and branding support in exchange for equity stakes in promising startups. Similar models have proven successful in venture studios, where operational support is traded for ownership. These kinds of partnerships align incentives and foster long-term collaboration.
For F1 teams, this approach aligns seamlessly with their revenue diversification goals. Instead of relying solely on consultancy fees, teams could build a portfolio of equity stakes in high-growth ventures and create a pipeline of future returns. For startups, access to F1’s technological prowess and global visibility could be the differentiator that accelerates their path to market leadership.
Challenges and Strategic Imperatives
The journey to harness this potential is not straightforward. For many teams, the traditional and singular focus on winning races remains dominant. A significant cultural shift is required for these teams to shift to embrace a broader, venture-driven mindset. Another layer of complexity is presented by the effort to balance the intense demands of Formula 1 racing with the resource-intensive nature of commercial ventures. This is especially the case under the financial constraints imposed by the 2021 cost cap. Here, the commercial arms already spun out by teams will be key.
Building expertise in sectors far removed from motorsport, such as quantum computing or biotech, will necessitate investment in talent and partnerships. Collaborations with venture capital firms, academic institutions, and industrial players will be crucial to navigate unfamiliar markets and scale innovations effectively. Additionally, F1 teams must ensure that these ventures align with their brand and core mission, requiring robust governance and strategic clarity.
Proper communication of this expanded vision to investors, partners, and fans is also essential. Transparency in how these initiatives contribute to the long-term success of the teams – both on and off the track – will build confidence and foster support. The challenge lies in integrating these ventures seamlessly into the teams’ operations without diluting their focus on competitive success.
The Road Ahead
The intersection of Formula 1 and deep tech represents a multi-billion-pound opportunity with the potential to redefine both industries. For F1, this is a chance to extend its legacy as a crucible of innovation while securing new revenue streams and reinforcing its global relevance. For the deep tech ecosystem, F1 offers a powerful new ally to tackle the execution gap that has long hindered Europe’s competitiveness.
The road ahead is not without challenges, but the potential rewards are substantial. By embracing models like service-for-equity and fostering a culture of collaboration, F1 teams can unlock unprecedented value for investors, startups, and society at large. As the engines roar on race day, they will echo a broader message: that competition, when channelled wisely, can drive not just cars but progress itself.
Chris Tagnon
Chris is a First-Class engineer, currently pursuing his MPhil at King’s College, Cambridge. He has a diverse background in research, consulting, and entrepreneurship in various sectors, notably energy and battery technology. Having expressed a strong passion for motorsports since childhood, Chris has also gained experience within Red Bull Racing’s Advanced Technologies arm as a vehicle dynamics and performance engineer. He aims to bridge the gap between motorsports and the wider innovation sector by applying specialised engineering expertise to venture development in sectors such as aerospace, energy, or the future of mobility. Chris is a two-time Royal Academy of Engineering scholar, most recently awarded through Sir Lewis Hamilton’s foundation, Mission 44.