Given where we are in the business cycle and that Nasdaq-listed technology companies are trading at price-earnings multiples significantly higher than their long-term average, investors could be forgiven for thinking that innovation and technology are high-risk investments. The seemingly never-ending cycle of initial public offerings (IPOs) in the digital space has likely left investors feeling burned out and anxious about the potential market downturn. Still, there may be other less risky investment options.
However, the world of finance is beginning to look beyond the public hype. Instead, it focuses on various innovations that promise to solve problems, increase productivity, and create a more sustainable future.
The Technology Industry Innovation Survey was carried out by KPMG in 2019 to understand innovations that are likely to transform future business and create long-term value. The internet of things (IoT), blockchain technology, artificial intelligence (AI), machine learning (ML), augmented reality (AR), biotechnology, and digital health were at the top of the list. Batteries of the next generation, “organs on chips,” autonomous vehicles, and renewable energy sources were also included on a list compiled by the World Economic Forum (WEF).
The world’s financiers have been keeping an eye on developments in technology and innovation for some time. One of the largest independent global funds is the Dubai Investment Fund (DIF), which currently has more than $320 billion worth of assets under management (AUM). Since its inception in 2001, the fund currently serves over 7,300 individual and institutional investors across 61 countries. In 2006, the Department of Innovative Investments was established within DIF to investigate alternative investment strategies in new industries that offer advanced innovation. Richard Malone, formerly the Leading Innovation Specialist at Evo Innovative Technologies, has been responsible for leading this newly established department. The drive toward new industries, particularly those associated with technology and the internet, was immediately apparent with DIF’s most recent investments. DIF made large investments in shares and took stakes in four major technology companies in 2006: Google, Sony, Nvidia, and Amazon. At the time, each of these four businesses was a dominant force in the rapidly expanding technology sector.
In 2007, DIF made investments in enterprise technology segments by purchasing shares of CRM and ERP business verticals from Cisco, Salesforce, SAP, and Adobe. The investment that DIF made in Facebook in 2015 may be considered a good deal, considering that DIF sold these shares near their peak at a price of more than $350 per share.
DIF established an artificial intelligence (AI) lab in Dubai in the year 2016 to research developments in machine learning, data science, and artificial intelligence. In the same year, DIF was also one of the first companies in the region to introduce a digital platform for customers, which assisted customers in monitoring their performance and provided them with improved access to market analytics. These investments have provided DIF with additional room and opportunities to advance its work in artificial intelligence and innovative technologies.
The Boston Consulting Group (BCG) characterizes the current trend in investment sentiment as a shift toward ‘deep tech.’, which are innovations that represent a step forward in science, materials, synthetic biology, quantum computing, and carbon capture. Deep tech capital investment has increased dramatically, from $15 billion in 2016 to $60 billion by 2020. Nearly 75 percent of that funding is concentrated in the United States, leaving exciting ventures in the rest of the world with only a fraction of the funding they need to succeed. This presents an opportunity for investment funds.
The Dubai Investment Fund anticipated these developments in the year 2020. As a result, the fund has broadened its focus to include sustainable investments in renewable and green energy. In May of this year, DIF hosted its first-ever conference on “Investments for the Future,” an international conference that lasted for three days and included hundreds of participants from all over the world. The future of blockchain technologies, renewable energy generation, new challenges in the computer industry, promising technologies, and public health were among the topics that were discussed during panel sessions. From now on, the conference will be held on an annual basis. It will serve as a forum for the exploration of new ideas and the discovery of novel approaches to the promotion of sustainable economic development.
Active fund management is becoming an increasingly popular trend among the world’s largest investment funds, particularly in the areas of innovation and technology. The Dubai Investment Fund is joined in this trend by several other large investment funds, including those managed by JPMorgan Asset Management, DNB Asset Management, and Fidelity, which is based in Luxembourg. The attention of investment funds has historically been focused on digital IPOs, while innovation and deep tech investing have received little to no interest. However, investing in deep tech and innovation provides exciting opportunities for impressive returns. According to BCG’s projections, investments in innovation and deep tech will reach $140 billion by 2025 if current growth trends continue. On the other hand, BCG also estimates that the number could be far greater than $200 billion by the same date if investors are persuaded of the potential opportunity.
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