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Accelerated DeepTech Innovation, Practical Applications and Market Maturation Require Equally Sophisticated Approaches in InvestTech and Financial Industry Infrastructure (Markets, Exchanges, Indices and Financial Instruments)
Emerging tech-driven sectors and domains characterized by extremely high rates of innovation and the incorporation of extremely new or otherwise novel advances in science and technology (e..g, SpaceTech, Artificial Intelligence, NanoTech, New Materials, Advanced Biomedicine, etc.) have in recent years come to be known collectively as “DeepTech”. It is an arena attracting extremely large amounts of investment capital, with some of even the individual industries and verticals encompassed by DeepTech comprising in many cases more than €1 trillion each. And while the total market capitalization of the global DeepTech industry is difficult and complex to calculate, we can conservatively estimate it today at more than $10 trillion. It is very clear that each of its sectors are developing at extremely fast and dynamic rates, and it is clear that within the next decade its global market-cap will be measured in the tens of trillions. By the year 2030 or sooner, the ultimate size of these DeepTech sectors will be comparable to (and in many cases exceed or even dwarf) many of the more traditional industries of today, which by that time will be shrinking and declining due to disruption and in some cases replacement by more innovative next-generation technological solutions.
Nonetheless, many of these more traditional industries are today very well commoditized, being the target and focus of a number of specialized trading platforms (and, in some cases, even specialized stock exchanges, for example London Metal Exchange), markets, indices, financial instruments and derivatives. It, therefore, stands to reason that, as many of the various sectors and technological domains comprising DeepTech become extremely large and fundamental components of the global economy, emerging into multi-trillion industries determining the future growth and stability of national economies, we will logically and inevitably see these industries become commoditized in the very same manner as the more traditional industries of today, and witness common recognition of DeepTech as a new asset class. It is not a question of ‘if’ but of ‘when’, and it will require corresponding financial infrastructure. This is one of the topics on which Deep Knowledge Group is now focusing quite closely.
One of the specific industries situated at the very forefront of the entire global DeepTech ecosystem is the Longevity Industry, a highly dynamic sector developing from the synergetic intersection of preventive medicine, AI, wellbeing and the financial industry (including insurance, pension funds and even national healthcare systems), and which itself is already considered a multi-trillion industry even by conservative estimates. While many DeepTech sectors (e.g., SpaceTech) are dependent on truly advanced technology for their continued development, none require this more than Longevity, which is based on technologies beyond the sophistication of even the most advanced rocket science.
In the present article, I will provide further data and insights to give readers a better understanding of just how inevitable the full-scale commoditization of DeepTech is, why the eventual inclusion of its various subsectors and industries as fundamental pillars of the global economy is both logical and natural, and why the global trend of DeepTech industrialization represents one of the greatest opportunities of today not just for tech entrepreneurs, but also for sophisticated investors and financial professionals as well.
The Global MegaTrend of DeepTech Industrialization
We are living in the midst of a DeepTech revolution, with increasing numbers of highly advanced and sophisticated technologies across nearly every aspect of modern life (medicine, science, technology, finance, education, entertainment, etc.) becoming available for everyday use to the average consumer.
DeepTech is a broad industry encompassing all varieties of products and services in which advanced, emerging or ‘Frontier’ technology and science is a fundamental or integral component. Most often, DeepTech sectors seek to use extremely recent advances in science and technology to drastically improve upon a given industry’s current state-of-the-art, or to provide entirely new technological solutions to otherwise unsolved problems and untapped opportunities. It is a rapidly emerging sector of the global economy being on-boarded by increasingly large and diverse sets of investors and corporations, which is yielding the most transformative technological solutions that humanity has ever experienced, and the solutions it seeks to tackle range from the small and individual (e.g., AI-enabled health apps) to very large scale civilizational challenges and opportunities (population health, environmental sustainability, space colonization, etc).
DeepTech’s most defining characteristic is its complexity: it is centered at the interdisciplinary cross-section of innovations in many different fields, and the synergetic intersection of many different types of emerging and Frontier Technologies, where software solutions, data science, and artificial intelligence systems intertwine with physical world objects and processes, ranging from lab equipment, research tools, robotized facilities and 3D-printers to consumer electronics, AR/VR-tools, hi-tech vehicles, advanced materials, blockchain, SpaceTech, human tissues and cells and everything in between.
So many technologies that were once housed in R&D labs are now available on the market as consumer items, cost-effectively made to scale, fully democratized, and available to all types of consumers, from the richest to the poorest among us. The quintessential example is the cell phone - once a high-priced item available only to the wealthy, internet-enabled smartphones are pervasive even among rural populations in underdeveloped countries. 84% of the global population owns a smartphone, and 92% owns a cellphone.
A less obvious but even more pervasive and universal example is Artificial Intelligence. Now nearly every smartphone on the planet is equipped with some form of AI, and an extremely large proportion of the products and services we use benefit from the use of AI at one point or another across their development, distribution and use. The ultimate ‘Meta-Technology’ (i.e., technologies which have the power to accelerate the rate of development of either itself or other scientific and technological sectors), there is barely a single domain of human activity and industry (science, medicine, entertainment, education, finance, etc.) untouched or unrevolutionized by AI.
The BIG GAP Between DeepTech Innovation and the Sophistication of Financial Industry Infrastructure (Markets, Exchanges, Indices and Financial Instruments)
Unfortunately, however, the most important factor influencing the rate of DeepTech development, and determining the speed at which its practical effects on humanity are delivered and disseminated (i.e., the DeepTech investment and funding landscape) faces several critical challenges and bottlenecks. Compared to the industries they are funding and supporting, investment approaches to DeepTech and corresponding financial infrastructure are completely stuck in legacy-system approaches originally developed for much slower-moving, lower-complexity industries. There is an enormous gap between the sophistication of the systems, financial markets, approaches and infrastructure used to invest in DeepTech sectors vs. the sophistication of the sectors themselves.
Consensus approaches used for investment and financing haven’t really innovated for decades if not longer, and this not only makes successful investment in DeepTech difficult and risky, it also severely limits levels of funding for DeepTech companies. This is not just about the need for more sophisticated, AI-enabled and data-driven approaches to investment strategy formulation and target identification, analytics, benchmarking, forecasting and due diligence required to manage this extreme complexity. It is equally about the systems supporting and executing investment in the first place. The world’s biggest investors and largest holders of wealth are also the most conservative, preferring to invest in highly stable and de-risked markets, and in assets which are highly liquid, tradeable, bankable and exitable. This has meant historically that DeepTech financing has been the exclusive arena of venture capital firms, whose investors (LPs) are more comfortable with long investment horizons and lock-in periods, and high levels of risk.
These is an enormous untapped opportunity for the rapid development and adoption more innovative and market-ready approaches to DeepTech investments (IT and data science-backed technologies that optimize investment decision making, due-diligence and investment strategy formulation and execution), markets and exchanges, indices, asset classes and financial products, instruments and derivatives that could enable the kinds of de-risked, tradable and bankable exposure to high-value, high-impact DeepTech sectors that will be required to enable the participation of large-cap, conservative institutional investors, retail investors and financial institutions. We at Deep Knowledge Group are naming such modern approaches as InvestTech (Advanced Investment Technologies). Hence, we have established specialist subsidiary focused on the designing new investment technologies and financial products Advanced InvestTech Solutions.
Deep Knowledge Group has both forecast many of these necessary developments, and has been actively working on their development and deployment already for a number of years (AI, Longevity, FinTech, SpaceTech, HealthTech, GovTech, InvestTech, etc). While much of that work has not yet been authorized for general release, a number of our publicly disclosed predictions and developments in the Longevity space in particular can be reviewed for additional context, including 2018 prediction of Longevity stock exchanges, indices and financial instruments and derivatives, their Q1 2021 announcement of plans to launch the world's first Longevity Investment Bank profiled by fDi Intelligence Magazine (a central part of the Intelligence portfolio on the investment products and services from the Financial Times), and release of a number of open-access analytical reports on Longevity Financial Instruments and Derivatives produced by InvestTech Advanced Solutions, Deep Knowledge Group’s dedicated investment analytics and financial engineering subsidiary specializing in the development of DeepTech-focused financial instruments, advanced investment de-risking tools, and sophisticated investment analytics and data management solutions for modern data-driven investment recommendations, tangible analysis and due diligence for DeepTech startups and real-time financial analytics and consulting for publicly traded corporations in a variety of DeepTech sectors.
The Rise of DeepTech as a New Asset Class
DeepTech needs to become a recognized asset class in itself, available to all types of investors regardless of their exposure preferences in terms of risk and liquidity, and commoditized not only in the sense of mass-market product and service availability to the average consumer, but also financially commoditized in terms of its availability to the average investor, both individual and institutional.
Making this a practical reality would unleash nearly limitless trillions in otherwise-inaccessible capital for the global DeepTech ecosystem, resulting in massively accelerated rates of practical DeepTech impacts on some of the biggest challenges and opportunities facing humanity, and on the rates at which DeepTech is able to improve the human condition and facilitate further growth and stabilization of national economies.
The specific approaches that I have in mind could be implemented in a market-ready manner very quickly, and have many historical precedents. During the 19th and 20th centuries developed economies witnessed the commoditization of a number of raw materials that were previously bought and sold privately, including precious metals, gold, and oil. Entire standardized markets and exchanges were built to facilitate the trading of commodities (the Chigaco Board of Trade in 1848, the London Metal Exchange in 1877, etc.), and this led to a number of secondary financial products and instruments such as derivatives, futures and indices, which diversified the ways that investors could hold and trade these commodities, and the types of investment positions they were able to take on them.
In the decades following, this innovation turned such commodities into distinct asset classes, enabled exposure to those asset classes for investors, and eventually ensured that these commodities would become core pillars of the global economy - even to the point of gold being used as the basis for the international monetary system, whereby national currencies were backed by national stores of gold.
This is the power of financial commoditization. Commoditizing previously unstructered asset classes on financial markets opens up the size of potential funding to the full scope of the global investment community and the largest holders of wealth, creates massively accelerated industry development and maturation, and in relevant cases makes those asset classes critical and fundamental pillars of entire national economies. We can very easily see how a number of DeepTech sectors (e.g., Longevity, SpaceTech, NanoTech, FinTech 2.0, GovTech, Smart Cities, AI, Metaverse technologies, etc.) will come to be fundamental pillars determining the future stability of national economies, as well as critical components of national strategies across population health, education, and prosperity. And, indeed, we can see today how certain DeepTech sectors like AI are already secured in this position, with many of the highest-GDP nations actively competing in the global AI race, and making AI a central feature of their future development strategies.
Recent Precedents for Tech Commoditization
We have witnessed similar long-term trajectories in the commoditization of IT technologies. As the global tech sector transitioned from an expensive and R&D stage industry into an age of universal ubiquity, being integrated into countless consumer-grade products and services available to the average citizen, we witnessed the emergence of specific financial industry systems and infrastructure seeking to impart many of the financial characteristics of commodity-as-asset-class onto the tech sector, and numerous technology sector-specific marketplaces and stock exchanges (e.g., the NASDAQ-100, which is dominated by IT and tech sector companies, and which arose in the mid-1980s in response to the IT revolution) having emerged over the past 50 years to enable specific exposure to tech markets for investors. A more recent and relevant example is Silicon Valley’s Long-Term Stock Exchange (LTSE), a stock exchange build to exclusively list companies with a “long term vision”, which in practice usually means advanced technology companies seeking to solve very large challenges and manifest very large opportunities at the intersection of the biggest issues facing global humanity, and the human condition itself.
Without a doubt we will see these same trends happen for many DeepTech sectors, including not just the emergence of specialized stock exchanges and indices for public DeepTech companies, but also the rise of the next generation of financial products, instruments and derivatives (of the kinds that have been very common in commodities markets for many years) that increase the kinds of de-risked and liquid exposure to DeepTech markets that investors have access to, and the range of investment positions they can take on them.
The Ultimate Inevitability of DeepTech Commoditization
The only issue, then, is how long it takes for those investment and financial technologies, markets, systems and approaches to arrive and become adopted-to-scale, and how much progress in terms of improving the human condition and solving some of the biggest challenges and opportunities facing global society and national economies is lost, and wasted, while we wait for that to happen.
In many ways, doing what I can, to accelerate the inevitable emergence of this more relevant and modern DeepTech InvestTech ecosystem has become my professional life mission. Hearing about the ways in which Deep Knowledge Group predicted and forecast these developments and is actively working towards their development and deployment, from its Founder and General Partner Dmitry Kaminskiy, was the decisive factor influencing my decision to join the team in an investor relations and business development capacity in 2020.
The Deep Knowledge Group always presume the long-term vision and disruptive technologies to revolutionize the current map of the traditional investments approach. We support innovative DeepTech projects and explore ways to facilitate their investments of them. We also encourage the modern advanced investors' community to draw attention to the new technologies, new vision and the new types of commodities - the new technologies and industry in the DeepTech world to invest in. Those individuals who will change their attitude to the investment approach will for sure benefit from the new 5th Industrial Revolution to come.
We have many exciting projects, developments and plans in this arena scheduled for public disclosure and launch over the coming year that I would like to share here for added context, but which are not yet approved for full public disclosure at this time. Please feel free to subscribe to my feed and watch this space over the coming months for further information and exclusive insights on many of these upcoming developments, and if you would like to know more on a private informational basis, or wish to learn more about how you can become professionally involved in accelerating and advancing these critically important matters forward for maximum societal impact, please feel free to reach out to me directly.
About Deep Knowledge Group
Deep Knowledge Group is a consortium of commercial and non-profit organizations active on many fronts in the realm of DeepTech and Frontier Technologies (AI, Longevity, FinTech, GovTech, InvestTech), ranging from scientific research to investment, entrepreneurship, analytics, media, philanthropy and more.