2021 Industry Observations
Published in
4 min readJan 22, 2021
AI is still everywhere
- AI and Machine Learning are still at the forefront of technology innovation in startups. However, the shift of focus has moved away from algorithmic or technical optimizations and towards their applications and measurable benefits. In other words, it’s less critical that companies are using or developing the next Deep Neural Network, but more importantly, that they are using the right algorithm to solve their specific industry problem.
- Just utilizing AI in your workflow or product is no longer a differentiator. Its value is ultimately measured by proof of its impact on the end-user (i.e., savings, speed, outputs). When we evaluate companies that tout their use of AI, we make sure to not only focus on the technical aspects of their technology but to make sure we spend time understanding their application and industry.
- We don’t envision the impact and permeation of AI slowing down. As we’ve frequently said from the beginning, every company will be utilizing some form of AI within their respective industries. With the cost and availability of these tools becoming widely available, there will be little reason not to use them to enhance your processes where appropriate.
Healthcare and Biotech aren’t slowing down
- Global Healthcare venture investing continues to reach new highs (1st Half of 2020 matched a record high of 2019, according to SVB), which has benefited our Applied Biology portfolio (in both investment and partnerships).
- The rapid development of the COVID-19 vaccine in under one year, an unheard-of feat in the history of modern medicine, has highlighted the major advancements in biotechnology (Next-gen sequencing, mRNA therapies, therapeutic delivery modalities, CRISPR, microfluidics).
- At the same time, it has highlighted new opportunities for technology to fulfil the challenges we faced (new modalities, clinical trials, manufacturing, supply chain). We also must not forget all the other critical and chronic disease indications, which unfortunately took a back seat as global resources and efforts shifted towards developing vaccines and antivirals. The pandemic highlighted the vulnerability of these patient populations. There needs to be continued investment and efforts to treat these patients as the pipeline of therapies and therapeutic modalities have shrunk.
- Given the cycles of capital investment, we are optimistic that the current wave of exits in healthcare will lead to a continued influx of investment in this space. We believe this will create positive momentum for the next wave of innovations and venture investment in Applied Biology.
- Seed funding in Applied Biology remains strong and continues to grow. We have seen a burgeoning community of peer investors in this space, many of who frequently collaborate and co-invest. Given these startups’ typically higher capital requirements (Seed rounds generally are $2–5M), co-investing with aligned funds has become the norm.
- Later stage investments (Series A and Beyond) are still highly consolidated by a small number of funds due to the higher capital requirements ($10M-30M). Traditional Biotech has started crossing over towards tech-driving companies, but they remain cautious. Exits in this space will drive additional capital and funds, and we believe the hot IPO market for biotech may possibly be a driver.
Sustainability is making a comeback
- Climate tech has continued to gain traction with renewed interest among the venture capital community. The industry seems to be recovering from the fallout of the last wave of cleantech investors. Additionally, sustainability is coming to the forefront of corporate interests, many of which have publicly pledged sustainability and carbon neutrality/negative goals (a few notable ones include Microsoft, Google, Stripe and United).
- Innovation areas of interest have moved away from novel energy generation or storage, but towards technical innovations along with existing processes in building sustainable energy solutions. Solar has now hit a point of maturity where Photovoltaics are now cheaper than new gas or coal plants. The choice towards sustainable energy infrastructure is now purely economic as signalled by Blackrock’s $2.5B sustainable energy fund.
- Lithium-based energy storage continues to lead the way as we push to get <$100/kWh. Silicon-anode batteries may be the next-gen, but innovations will continue to focus on process optimization. We see opportunities in continued innovation in materials and manufacturing processes.
- We see mobility as a potential investment opportunity over the next few years as a proportion of the new WFH and remote workforce becomes permanently remote. As a result, this shift will impact the future of air quality, smart cities, and transportation technologies.
- Synthetic Biology seems to be at the forefront of building a more sustainable economy focusing on green manufacturing. It’s unclear whether this is driven by the life science/biotech sector, but it’s clear that the consumer demand and recent successes in meat alternatives (Beyond Meat, Impossible Foods) have largely also been significant factors. Regarding food tech, we express concerns that the shift in sustainable foods moves away from organic whole foods towards processed scalable synthetic foods. It’s also unclear whether this trend is transient due to consumers’ fickle nature, but we continue to watch this area closely.
