Trends Watch: VC Investing in Deep Tech
- Sep 22, 2022
EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.
This week, Elana talks with Swati Chaturvedi, CEO, Propel(x) and Partner, Newton Fund.
What is your outlook for VC investing in deep tech?
Speaking from my vantage point, we continue to be optimistic about investments in deep tech. These kinds of companies often take a while to get to market, but the world needs technological breakthroughs to survive our growing needs. We need to find new ways to grow and consume food sustainably for an exploding global population, new ways to provide affordable energy for all, new therapies to combat deadly diseases, new ways to transport ourselves without burdening the planet with greenhouse gases, new ways to reach out into space, etc. These are all solutions that can be commercialized by leveraging breakthroughs in science and engineering.
I do want to highlight that investments in these kinds of companies, and in venture capital generally, are very high-risk. These investments are typically illiquid, with long holding periods and no secondary market. There is a chance of losing your entire invested capital. For these reasons, these investments are not suitable for all individuals.
Where do you see the greatest opportunities and why?
We are excited about several areas. First, we see a lot of opportunities at the intersection of computing and biology. In the past decade there has been a huge growth in companies analyzing large volumes of data and extracting valuable information. We continue to be optimistic about these kinds of companies. The other and completely unrelated trend we are optimistic about is climate tech. Things have come to a head in the past few years with greater awareness of the impending climate disaster. Governments are moving into action and as part of the Inflation Reduction Act, the U.S. government approved a big investment in climate change action. The investment is expected to support growth of renewable energy technologies and tax credits for up to ten years. So we expect to see a wave of new climate tech startups leveraging this commitment.
What are the greatest challenges you face and why?
Some of the greatest challenges faced by deep tech startups is that the time to first revenue is long. As an example, a drug company or a new medical device cannot earn any revenues until approved by the FDA. So that can become a journey. Investors, both general partners (GPs) and limited partners (LPs), have to be patient while the startup navigates this journey.
What keeps you up at night?
Let me start with what makes me sleep well at night: the fact that we are backing potentially some of the world's greatest breakthrough technologies that could help improve our future makes me sleep very well. It makes me feel very good that we may play a meaningful role in bringing about positive change in our future by leveraging breakthroughs in science and engineering. Of course, these startups will have their own individual journeys and they will chart their course up and down. We are along with them for the ride on this roller coaster and that does keep me awake sometimes. But by and large, our mission is big and purposeful. And that helps us sleep well.
The views and opinions expressed above are of the interviewee only and do not/are not intended to reflect the views of EisnerAmper.
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Elana Margulies-Snyderman is an investment industry reporter and writer who develops articles, opinion pieces and original research designed to help illuminate the most challenging issues confronting fund managers and executives.
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