- Venture capital investment in artificial intelligence (AI), massive cloud computing, robotics and the application of molecular and biological science could reshape major global industries.
- “Deep Tech” offers an investment opportunity at least 5-10 times larger than most of venture funding's current focus.
- Strategic investment could offset or reduce the environmental damage caused in these sectors.
Capitalism’s global success has lifted billions of people out of grinding poverty while spurring incredible technological advancements. However, this progress has not been without cost. Abundant energy from fossil fuels, global supply chains and middle-class lifestyles fueled by advancements such as on-demand electronic commerce have created complex and widespread challenges including climate change and a lack of economic inclusion.
We’ve reached a major inflection point and the way forward – toward a more sustainable and inclusive future – requires a significant shift in mindset and behaviour at individual, institutional and industry levels.
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Venture capital can play an outsized role in addressing the economic, environmental, social and technological challenges we face today by returning to its roots of industrial transformation. Venture funding, which decades ago fueled revolutions in technology, has recently delivered more incremental change primarily within the $3.7 trillion IT industry – a relatively small piece of the global economy. But a steady shift is taking effect: the convergence of digital, biological and physical innovations is driving a Fourth Industrial Revolution that’s causing many global industries to undergo the sort of disruption that IT experiences on a regular basis, amounting to tens of trillions of dollars of opportunity.
By investing in artificial intelligence (AI), massive cloud computing, robotics and the application of molecular and biological science, venture capital can reshape major global industries to help offset and possibly reverse the excesses of capitalism – all while generating enormous economic opportunities. Indeed, this emerging “Deep Tech” investment opportunity is at least 5-10 times larger than most of venture investing’s current focus.
Following are three Deep Tech examples across manufacturing, agriculture and energy where venture capital funding can lead to a more sustainable and equitable future.
1. Agriculture: optimizing age-old inefficiencies to transform our food supply
According to the US Department of Agriculture, agriculture, food and related industries contribute roughly $1 trillion to US GDP alone, of which the output of America’s farms contributed $137 billion. None of this would be possible without chemical fertilizer, which, in 2015, supported 3.5 billion people that would otherwise have died.
But as we examine the impact of our past activities, it is clear that chemical fertilizer is in part responsible for some of the most dramatic issues we face today. Manufacturing and distributing chemical fertilizer is quite energy-intensive and chemical fertilizer produces highly potent greenhouse gases (NOX) as it degrades. Additionally, before it can be absorbed, large quantities of chemical fertilizer wash into our waterways creating massive dead zones in our oceans. Continued use of chemical fertilizer looks to be increasingly untenable if we want to stay within the targets set by the Paris Climate Agreement.
Taking advantage of the massive computational advantage created in the past 20 years, we’re now able to produce new approaches to the agricultural process which reduce or eliminate the need for chemical fertilizer. New biological nitrogen-fixing approaches which were not possible even 10 years ago, continuously produce essential elements to grow corn, wheat and other staple crops while increasing yields. Not only can we make agriculture more sustainable, we can also increase the profits of farmers. This will transform our food supply.
2. Manufacturing: Artificial Intelligence, biology and computer-vision-enabled manufacturing
For the past few decades, advanced robotics have become a staple on the automotive factory floor to increase productivity and improve quality in this $4 trillion segment of the $16 trillion manufacturing economy. Beyond car assembly lines, robots are now rapidly expanding throughout the broader manufacturing economy, into distribution and sorting facilities and elsewhere. Zymergen, a pioneer in molecular manufacturing, applies cutting-edge genomics to reliably programme microbes to optimize existing and create new molecules, helping to manufacture specialty chemicals, food and agriculture, electronics and pharmaceuticals. Its novel approach will not only expedite the commercialization of these products but will also make them more sustainable and less costly than those synthesized from petroleum.
3. Electric power: the road to smaller, distributed nuclear power generation
The global energy market today is valued at more than $7 trillion (based on the calculation of energy journalist Robert Bryce and an updated global GDP of ~$90 trillion according to the World Bank World Development Indicators). Electricity accounts for about a third of this. Creating power for the next few billion people – and converting internal combustion engines to cleaner, electric versions – cannot mathematically be solved by solar, wind and hydro alternatives alone. To be certain, the planet needs a massive amount of renewable energy but according to the Energy Information Agency, the US generates only 9% of its electricity from wind and solar.
In the past 60 years, nuclear energy has been many orders of magnitude safer and cleaner than the environmental impact of burning coal and natural gas to generate electricity. Advanced nuclear technologies can make it possible to produce zero-carbon, safe and highly proliferation-resistant nuclear energy without monolithic multi-billion-dollar, multi-year construction projects. Together with the increased use of renewables, this new model for safe nuclear energy can power the world.
For those of us in venture capital, industrial transformation – not the next marketing automation software, food delivery app or networking chip set – offers the biggest investment opportunity of the 21st century. The massive computational resources built in the past few decades – AI for making sense of massive amounts of data, advanced scale-out databases and cheap, ubiquitous DNA sequencing – can now focus on transforming more than $20 trillion of GDP.
As was true in the 19th century for railroads and electricity, the funding and momentum created by venture capital will be critical to the success of the Fourth Industrial Revolution, while offsetting or even reversing the worst environmental impacts of capitalism.