As the coronavirus outbreak shut down the world, we effortlessly moved to digital shopping, remote working, video streaming for entertainment, WhatsApp-based grocery ordering, telemedicine using mobile phones and schooling from home.
Organizations and people adapted quickly in the face of unprecedented adversity, helped by a powerful cocktail of computer power, cheap and sustainable electricity, almost free bandwidth, gargantuan data lakes, next-generation software platforms and human ingenuity. These enablers will also help us develop a host of AI (artificial intelligence)-driven applications to solve some of our deepest challenges.
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Climate change modelling, the visualization of global warming and triggering corrective actions are examples of what is possible. That day is not far where a device examines you, tests your blood, diagnoses your illness and prescribes medication without a doctor being involved, and perhaps more accurately.
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Investors have noticed, and deal-making in the AI and machine learning (ML) sector has reached a frenzied level, with an average of more than one deal announcement a week for the last three years, according to the research platform VCC Edge. The average deal size indicates a preponderance of early-stage backing as companies in this sector are still building scale. 2020 saw an average deal size of a shade over $3.2 million. Unicorns will emerge soon.
Renewable energy, especially solar, is now cheaper than fossil fuels in India. Most recently, a solar power plant was auctioned at ₹2 per unit of electricity, whereas fossil fuel-based electricity costs a minimum of ₹2.6 to ₹3 per unit. Equally important to note is the fact that 14 companies had bid, of which eight were around the ₹2-mark; clearly, an important milestone in the viability of solar power has been hit.
What does this mean? It’s tonic for our polluted environment, and an enabler for far-flung rural and mountainous areas, and anywhere the grid does not reach. The government’s push for more solar power has attracted investors. Though 2020 has been muted, 2019 saw over $2 billion being invested across 10 different deals, which followed $1.8 billion in 2018 also across 10 deals. An example of early-stage investment in the sector was the recent funding of solar panel cleaning robot maker, Nocca Robotics. IAN Fund put in $1.67 million in the company.
When pollution is the discussion, can electric cars be far behind? The jugaad inherent in the electric rickshaws is there for all to see in urban India. They are a whole new class of entrepreneur-led last-mile transportation. The next big wave has been electric two-wheelers: while the biggies like Bajaj Auto launched the electric Chetak, the investment dollars have flown into startups such as Ather Energy and Revolt Motors. 2019 was the landmark year of 19 deals worth $323 million; this year also saw Ola transform into an electric vehicle (EV) manufacturer with SoftBank backing. It is now setting up one of the largest two-wheeler plants in the world.
In the context of sustainability, watch for opportunities as innovation occurs in water purification technologies, next-generation air purifiers and the like.
There is also some very interesting work going on in the engineering and science institutes, which is spawning cutting-edge startups. Agnikul and Eplane have emerged from IIT Madras: the former sends satellites into space at low cost and is now a partner of Indian Space Research Organization (Isro). The IITs and other institutes are all running incubation programmes successfully. You should track them.
Smart and nano materials are on the way. Elon Musk’s solar roof tiles are a great example of innovation that marries traditional building materials with solar panels. The ultra-light yet ultra-strong material, Graphene is already widely used in products as disparate as bulletproof vests and artificial skin. Many more materials that respond to external stimuli such as temperature change, moisture change and electric currents are in the process of being commercialized. Imagine, for example, clothing which heals its own tears, or changes fabric structure depending on the ambient temperature.
Finally, my focus is on the food we eat and how it reaches us. Agri-tech is coming, and it will be big. Innovation in farming techniques, modern warehousing, the transformation of supply chains and digital market mechanisms for agri-price discovery are only some of the attractive areas. A report from Maple Capital Advisors projected $500 million of investments in this sector through 2021. Notable deals in 2019 and 2020 included Tiger Global investing $89 million in Ninjacart, and AgroStar raising $27 million.
Private equity investments have climbed $28.5 billion in 2020 from $9.49 billion in 2016, according to VCC Edge. It started with e-commerce. This was followed by funding of the consumer services companies and the likes of Urban Co., Dunzo and others were born. SAAS has been hot, with deep-tech companies now engaging the interest of investors; witness the emergence of companies as diverse as Freshworks and Mimyk (health-tech) all backed by private investments. However, the smartest investors across all stages of the investment life cycle, from seed to late-stage, are now seeking alpha in the sunrise sectors. You should look to do the same.
Jaideep Mehta is chief executive officer of Mosaic Digital.
