Investment opportunities to watch through the eyes of an investor

December 22, 2022

Amid a rapidly changing geopolitical landscape, high levels of inflation and rising interest rates, global Venture Capital (VC) is bracing itself to weather the storm of uncertainty. The year began with international venture funding totalling an estimated $195 billion. However, this reached a six-quarter low, with the crisis in Ukraine leading many investors to halt new financing rounds amid the global turmoil and uncertainty. Despite this, on the back of raising $700 million of financing in 2022, the Middle East North Africa (MENA) region is proving that venture capital investment opportunities remain for those who can innovatively tackle the world’s most significant challenges. Where do those opportunities lie, and how can investors and start-ups leverage collaborative expertise for economic sustainability?

Med Tech and BioTech

The Covid-19 pandemic spotlighted the med-tech and biotech sectors, rapidly accelerating the development of digital assets, traceability tools, augmented reality (AR) and virtual reality (VR) solutions to health and diagnostics. Experts estimate that the pandemic helped move the healthcare industry forward around five years or more following a rush of investment to help save costs and lives through accurate diagnosis and treatments. Medicine is moving fast, as is the technology used to support it.

With med-tech and biotech offering significant returns in terms of financial investment and societal impact, Crescent Enterprises reaffirmed its commitment to the VC ecosystem by last year allocating a further $150 million to our venture investment strategy and carve out a separate pool for biotech and deep tech to foster early, transformation, and innovative technologies.

We are incredibly excited about the genomic space, with Prime Medicine, which was recently listed in the NASDAQ Global Market, as an example our investment in the space. This US next-generation biotech firm aspires to alter medical practices by curing more than 90% of known disease mutations with prime editing. This technology edits genomes to facilitate the flexible rewriting of DNA sequences and can generate genetic code in precise locations. It is revolutionary for the med and biotech sectors which should be continually supported with investment and scaling expertise to ensure innovation and ingenuity are cultivated to capacity.

Besides, we are very interested in the microbiome space, as emerging research has shown how dysbiosis in the gut microbiota could be the driver of many diseases, from gut inflammation to chronic diseases, including depression, obesity, type 2 diabetes, and certain types of cancer. Though it is considered a frontier space by traditional biotech VCs, we are bullish on the wide range of indications it could serve and the potential, notably in the Immuno-Oncology space, where it could enhance the response to immune checkpoint inhibitors treatments.

Tackle Climate Change through Deep Tech

Deep tech is another area of investment that will continue to spark the interest of investors worldwide, with many buying into the disruptive and transformational power of emerging technology. We have been monitoring the quantum computing sector for some time, as it will be a game changer for humanity, similar to the transformational shift caused by the widespread adoption of the internet in the 90s. Several technologies are currently under development, and it is difficult to say which one will win the race. Still, we are convinced that we will use quantum computers and algorithms in the next decade or two.

From a more short-term perspective, many up-and-coming companies are working to increase computational power. For example, we are excited to be recent investors in Fathom Radiant, a company developing disruptive AI hardware based on optical technologies that will enable extensive training models by providing significantly better computing bandwidth at a lower price point.

The best deep technologies address problems we currently have or may have in the future. One of the biggest challenges we now face is climate change, and deep tech is the source of solutions to many of our carbon cramps. For the foreseeable future, the climate crisis will create opportunities for deep tech investment to develop sustainable solutions, especially those related to the transport and energy sectors.

Already we are seeing deep tech transform our daily lives, from electric cars reducing our impact on the environment to efficient air conditioning driving clean energy innovations. We are also seeing more and more nuclear fusion opportunities and small modular fission reactors that could transform how we produce energy.

Embrace the Connectivity of Fintech

Market research by Mordor Intelligence predicts that AI in fintech alone could grow by a CAGR of 23.17% by 2026, reaching an estimated US$26.67 billion. Aside from AI, Forbes identified embedded finance, blockchain technology, cross-border e-commerce and super app platforms as key trends shaping the infrastructure of fintech. Last year, we invested in LayerZero, an Omni-chain interoperability protocol that allows decentralised applications (dApps) to build across multiple blockchains efficiently. As technology evolves, so will the demand for safe and seamless financial transactions, integrated app services and an enhanced customer experience, all now being introduced to the market by companies like LayerZero.

Looking at fintech through a wider global lens, the market is expected to reach US$332.5 billion by 2028, with venture capital investment, interest and private equity driving the innovation. Without a doubt, start-ups that innovatively seek to address the world’s greatest challenges, such as firms focused on fintech, biotech and agritech, will continue to prove attractive for investors, even in the current climate. However, while more caution is applied to new funding rounds, for now, an opportunity exists to prepare for future investments.

As an investor, I believe now is the perfect time for investors and those seeking funding to look inwardly, assess their investment strategy, and carefully consider internal processes and policies related to corporate governance. And with the current reset and corrections in valuations, the next 18-24 months can be an opportune time to deploy capital. The last 30 years have shown that a recessionary environment as well as the years immediately following a recession, tend to be the best vintage years. At Crescent Enterprises, we’ve been patient in deploying capital and will continue to be so, but our horizon is a long term one and we will continue to steadily deploy capital for the right opportunities.

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