A note from Newable Ventures Investment Committee (June 2020)
A key aspect of the Newable Scale Up Fund (SUF) investment template is seeking companies which improve the productivity of both their customers and also of individuals, thereby enabling both groups to achieve more with less.
We thought that it may be helpful to put this feature into context at this time.
During the last c.300 years’ invention and innovation has delivered an incredible increase in living standards across populations. This does not occur in a straight line but rather in c.30 year cycles linked to major changes in technology which permit step change improvements in productivity, leading to increased wealth. The world is currently in the early stages of the 4th Industrial Revolution.
What do we mean by “productivity improvement”. For example, in 1830, it took a farmer 250 to 300 hours of work to produce 100 bushels of wheat. In 1890, with the help of a horse-drawn machine, the time dropped to between 40 and 50 hours. In 1975, with the use of large tractors and combines, the 100 bushels could be produced in just 3 to 4 hours.
COVID-19 presents a very challenging landscape for many investors because of its impact on individuals’ lives and across most activities in both the public and private sectors. In some instances, the impact is positive. For example, molecular diagnostics businesses, those individuals able to save time and cost by remote working, etc. But in the majority of cases, the combination of, inter alia, the need for social distancing, increased unemployment, reduced income available for discretionary spending, and the likelihood of a more conservative approach by some individuals to the need for financial resilience, has had a negative impact on industries such as hospitality, property and major manufacturers.
A positive impact of COVID-19 has been to show the lack of resilience built into the processes of many significant activities within the economy – this has been caused by, for example, excessive focus on efficiency through globalisation and just-in-time manufacturing, and inadequate focus on effectiveness under testing circumstances. Against the background of modern manufacturing equipment now available (e.g. CADCAM, 5-axis milling machines, 3D printing etc.), low labour costs are becoming much less important for achieving competitive advantage, particularly in view of the reduced agility in relation to customers’ requirements resulting from geographically dispersed supply chains. The impact of these factors is expected to result in increased on-shoring of manufacturing currently subcontracted to low labour cost countries.
The Newable SUF 3 Investment Committee believes that there are many innovation cycles happening simultaneously, presenting a unique opportunity to invest in converging industries. This enables the portfolio to be well-diversified across technology cycles. We see this convergence in health through the impact of digital health and data science, in agriculture through the use of satellites and drones for crop management, in finance though the use of smart phone applications and AI in decision making, and in biology and health, the emergence of a third wave in gene therapy and genetics. Our portfolios seek to give exposure to multiple cycles of innovation thus reducing the impact of a single technology cycle failing.
The above provides a very attractive backdrop against which to pursue SUF 3’s investment strategy of investing in businesses, which improve productivity and take advantage of the convergence of multiple innovation cycles.
Your capital is at risk if you invest in early stage companies. These investments may not be covered by the Financial Services Compensation Scheme. Please see our risk statement here. Newable Ventures Limited (FRN 843924) is authorised and regulated by the Financial Conduct Authority. Registered in England and Wales | Registered number 10303336 | VAT number 237 9198 23 | Registered office 140 Aldersgate Street, London, EC1A 4HY.