Season 3, Post 20: A deep dive into deep tech - Heptagon Capital – Production

Not many British businesses can claim to have fostered three unicorns. Oxford Nanopore, Ceres Power and Hinge Health, leaders in genetic sequencing…

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

Disclaimers

The document is provided for information purposes only and does not constitute investment advice or any recommendation to buy, or sell or otherwise transact in any investments. The document is not intended to be construed as investment research. The contents of this document are based upon sources of information which Heptagon Capital believes to be reliable. However, except to the extent required by applicable law or regulations, no guarantee, warranty or representation (express or implied) is given as to the accuracy or completeness of this document or its contents and, Heptagon Capital, its affiliate companies and its members, officers, employees, agents and advisors do not accept any liability or responsibility in respect of the information or any views expressed herein. Opinions expressed whether in general or in both on the performance of individual investments and in a wider economic context represent the views of the contributor at the time of preparation. Where this document provides forward-looking statements which are based on relevant reports, current opinions, expectations and projections, actual results could differ materially from those anticipated in such statements. All opinions and estimates included in the document are subject to change without notice and Heptagon Capital is under no obligation to update or revise information contained in the document. Furthermore, Heptagon Capital disclaims any liability for any loss, damage, costs or expenses (including direct, indirect, special and consequential) howsoever arising which any person may suffer or incur as a result of viewing or utilising any information included in this document. 

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