Deep technology has the potential to solve the world’s biggest societal issues. This has not gone unnoticed by nations – Singapore, for example, has injected an additional S$300 million into its Startup SG Equity scheme in its recent Budget 2020 announcement, to support the commercialisation of startups whose businesses are based on innovative research.
However, with multiple layers of technicalities and complexities involved, transformational deep tech can be a tricky venture for investors, especially non-tech ones, to get into. While some practice the “spray and pray” approach by channelling funds into every technology company with hopes for one to become the next unicorn, the same approach might not be feasible for deep tech, given that larger, more “patient” capital is required.
Despite the challenges, deep tech can translate to impactful returns on a global scale. For investors, it pays to understand developments in science and technology. Here are some key trends we have identified.
AI is here to stay
Artificial intelligence (AI) has been trending on almost every investor’s list, so it is unsurprising to see it remain a key investment area in 2020.
While AI has been touted as the be-all-end-all technology of the future, it is still currently limited to managing simple, specific tasks. However, as we are still quite a distance from achieving “artificial general intelligence” — the stage where machines can perform any tasks a human can — a safer bet would be to identify gaps into which AI in its current state of maturity can readily pug.
For instance, AI companies in banking can resolve specific pain points such as speeding up know your customer or anti-money laundering processes.
The resurgence of Medtech and healthcare AI
As societies struggle to cope with ageing populations, demand for quality healthcare will continue to rise exponentially across the world. In fact, the medical technology market in Asia is poised to grow to about $133 billion this year, surpassing the European Union as the second-largest market globally.
We are witnessing medtech companies emerging from “stealth” after years of undergoing proofs-of-concept and clinical trials. One of our portfolio companies, See-Mode, which helps clinicians improve prediction and assessment of stroke and vascular disease through AI, received a Class B medical device approval from the Singapore Health Sciences Authority for its augmented vascular analysis product and is set to close its first commercial contracts.
In 2020, we expect more medtech players coming to the fore, pushing out innovations with successful case studies and putting investment dollars to good use.
Cracking the quantum code
Quantum technology may sound like science fiction, but we believe that it is an inevitable technology. It has the potential to be a game-changer in a wide range of real-life applications — from superfast data processing and computing, defence and security, to managing energy use and production. Recognising this, nations and tech giants like Amazon, Microsoft, IBM and Google are pouring more money into this space.
This nascent sector is both new and expensive, making it difficult for investors to gauge the kind of returns they may see and when. Our view as investors in early-stage quantum companies is to identify those that create an environment which will make quantum computing more accessible to all. The hardware configuration of a general quantum computer is still the subject of debate so unless you have deep pockets, quantum may not be an area the average VC would want to consider.
Sowing the seeds for growth
As a result of climate change and the rapidly growing population, the world is set to face a 56 percent shortfall in food nutrition by 2050. For countries like Singapore, which relies on food imports, finding solutions towards self-sufficiency is critical.
Consumers are also becoming more socially conscious and selective in the food they consume, developing greater appetites for more sustainably produced foods.
These trends are driving demand, leading to greater investor interest in agriculture and food technology startups. We foresee this to be an area of interest in the coming year.
Autonomous vehicles on the move
Thanks to strong support from the Singapore government along its Smart Nation journey, development for autonomous vehicles (AVs) has shifted into gear in the last year with autonomous forklifts being tested in warehouses and autonomous trucks being trialled at the Port of Singapore.
However, there are still many technological, infrastructural (including insurance) and regulatory challenges to consider before we see the mass deployment of true Level 5 vehicles or vehicles with full driver automation. In the meantime, technologies that enhance existing sensors, energy storage, navigation and decision support — components essential for AVs — will offer startups a chance to monetise in the interim period before Level 5 vehicles hit the road.
These components can be deployed as part of existing vehicles and infrastructure, giving them an earlier time-to-market, while the development of a full AV takes place in parallel.
Taking the deep tech leap
Investing in deep tech is akin to investing in the future. Whether it’s in areas of sustainability, mobility or health, we believe that in deep tech lies the path to solving some of mankind’s biggest challenges. The history of technology has proven that those willing to take the plunge early will reap the biggest rewards. That said, as pragmatic investors, we are highly selective as to what areas to place our bets in. It is perhaps more important that a company can to go the distance until its category matures, than for the company to have the brightest, shiniest technology.
Despite its challenges, deep tech is an investment territory with immense potential and opportunities. Those who take the plunge, capitalise and harvest these opportunities now stand to make a positive impact on the world.
Hsien-Hui Tong is the head of venture investing at SGInnovate.