Season 3, Post 20: A deep dive into deep tech
Not many British businesses can claim to have fostered three unicorns. Oxford Nanopore, Ceres Power and Hinge Health, leaders in genetic sequencing, clean air technology and wearables that help with pain relief respectively, have each attracted $1bn+ valuations. They all emerged out of IP Group, a UK-based private equity business which is currently celebrating its 20th anniversary. Much of its success has lain in identifying and then investing in future trends, typically in the form of early-stage partnerships with leading local universities.
Who better, then, to speak to when trying to understand the future? Last week, we listened to a presentation hosted by IP Group discussing the latest trends in deep tech. For the unaware, the term first emerged in the US post-war, when forward-thinking businesses such as Bell Labs (now part of Nokia), Raytheon and Lockheed Martin began to allocate investments to new and unproven ideas. Fast-forward to 2021 and the term has evolved to encompass the spectrum of interlinked technologies revolving around advanced material science, artificial intelligence, blockchain, electronics, photonics, quantum computing and robotics.
The synthesis of these technologies matters since we are moving towards “ubiquity in communications” as one of IP Group’s speakers put in. Consider that while there are 50bn connected devices currently, by 2030 this figure could reach over 1tr. Even if only roughly half the world has access to the mobile internet, there is a growing internet of things. The future, therefore, will not be just about human-to-human communication, but also machine-to-human and machine-to-machine communication, particularly in a world of more autonomous cars.
What this implies is a clear role for improved infrastructure (to carry increased data) and better algorithms (to analyse and interpret the data). Beyond these areas of opportunity, our relationship with data will almost certainly evolve. Think beyond the keyboard or touchscreen to augmented/virtual reality scenarios that have the potential to display data in new ways and for systems to ‘read’ our emotions as well as our written or spoken world. If this world view is correct, then we will almost certainly need more powerful computers too, hence an increasing opportunity set in quantum.
As exciting as all the above sounds, the one other clear message from the IP Group presentation was that “there are definitely some hype fields” and “overvalued businesses,” even if no examples were specifically cited. We concur. IP Group’s counsel was to look for evidence-based success – that new technologies work – and some form of protection (typically in the form of patents). Understanding trends from an early stage of their evolution – what we seek to do in our own work too – is also critical.
18 May 2021
The above does not constitute investment advice and is the sole opinion of the author at the time of publication. Heptagon Capital is an investor in IP Group. The author of this piece also has a personal investment in IP Group. Past performance is no guide to future performance and the value of investments and income from them can fall as well as rise.
Alex Gunz, Fund Manager
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