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What CEOs Need to Know About Deep Tech ?

Business Automation

The advancement of technology will lead to massive shifts. Which companies are in a position to profit from the potential?

For the majority of businesses it is a matter of whether technology advancements will impact their operations is a matter that of the time, and not when. The other question for incumbents is whether they’ll be drivers or victims of the transformations technology will bring.

There are a myriad of reasons for why deep technology is beginning to make profound progress. One of the largest and most urgent is the growing demand to adopt more sustainable business practices. We have seen that in a variety of sectors, environmental sustainability (net-zero carbon emissions for instance) can’t be achieved without the aid of modern technologies. It is also known that getting there ahead as soon as a new technology trend is emerging can bring enormous benefits (witness Tesla taking on electric automobiles or Pfizer, BioNTech, and Moderna investing in RNA vaccines).

As some of our colleagues mentioned in Fortune, the amount of new companies that are disrupting this longstanding advantage provided through scale is rapidly growing. With the rapid expansion of high-risk venture capital investment small businesses often succeed by focusing on solving crucial large-scale issues and utilizing the emergence of technology in the digital realm (such like AI or cloud computing) as well as emerging technological developments (synthetic biological systems and engineered materials for instance). This is the core of the deep tech revolution.

There is no surprise then that an increasing number of prominent venture capitalists shift their attention on technology rather than software attracted by the possibility of solving the greatest challenges that face the world, while earning money in the process.

BCG as well as Hello Tomorrow have estimated that venture capital financing for deep tech startups grew between $15 billion and nearly $60 billion by 2020. The first 8 months of 2021 venture capital funds put $77.5 billion into high-tech startups as per MIT’s venture fund, The Engine.

A growing number of famous venture capitalists are shifting their attention on deep tech instead of software attracted by the possibility of solving the greatest challenges that face the world, while earning profits doing it.

Here’s our guide on how CEOs can evaluate the importance of deep tech for their own companies.

Identify the Opportunities

An excellent way to begin is to take a cue from startups and adopting a solution-focused approach. Instead of focusing on particular technologies in themselves It is more effective to consider the most pressing issues and needs in the business world and economy that the new technologies could address. Venture capitalist Mike Maples calls this “backcasting” which is the process of beginning with the future you imagine and then working backwards to imagine the steps to take to get there.

The think organization RethinkX employs this method to demonstrate how the global economy built upon sustainable food systems and energy sources and mobility might look like in 2035. Its research focuses on the notion that technological changes to agriculture or mobility could affect the entire global economy, increasing sustainability, while fundamentally changing value chains and disrupting existing systems and their players. As an example, a change to proteins made with high-precision fermentation (a “microbrewery” for meat that is made from cells) as well as vertical agriculture drastically alters the demands for water use as well as shipping and energy.

Since combating global warming is one of the biggest challenges we face, we analyzed the opportunities for deep tech solutions in six sustainability-related areas.

Sustainable Buildings and Materials. Buildings and construction account 38 percent of all global emissions from processes and energy 10% of which comes from construction and materials, and 28% coming from the energy used in building operations.

 What is the likelihood of building materials being sustainable produced and the structures had superior functions including improved power efficiency, self-healing and energy-efficiency? New materials and manufacturing technologies today offer pathways to this kind of high-performance. Innovative intelligent construction systems that combine advanced sensors as well as advanced components, cutting-edge computing and AI can help reduce energy use. Making these improvements at a size requires the rethinking of current construction methods for raw materials and components , as well as retrofitting old commercial and residential structures.

Clean Energy Systems. The increasing acceptance of sustainability goals is prompting an evolution in the energy industry, storage and distribution. The majority of emissions of greenhouse gases (GHG) emissions are derived from energy production, and approximately 85% of worldwide energy generation is powered by fossil fuels.

What if we could access plenty of clean, renewable energy at any moment? The energy systems are rapidly evolving as technological advances in integrating power sources such as batteries, materials sensors, AI provide new opportunities to local, modular power generation and storage and real-time, adaptive distribution of power. As batteries and solar energy penetrate the market, we’re witnessing new distribution and production models emerge, starting from Dynamic Demand Response to Distributed Microgrids which challenge the traditional model of power distribution networks and power plants.

Efficiency in Mobility. Roughly 16% of all global GHG emissions are related to transportation which is 30 percent of total transportation comes from freight, 12% coming from roads as well as 2% of shipping and 2% from aviation. Electricity and decarbonization along with advancements with AI as well as autonomous cars can create both existential risks and huge potential for disruption for the players across shipping and transportation.

What if, for instance, the value chains of transportation and logistics were separated and redefined? Would improving battery chemistry and performance, paired with the advancements of AI as well as sensors completely transform logistics and transportation? Could the current combination of manned rail, air and roads (trucking) transform to a better and autonomous transportation and distribution system that includes everything from e-bikes to self-driving trucks for long hauls?

The slow progress of EV charging infrastructure as well as the insuccess yet in drone delivery demonstrate the fact that simply introducing new technology is not going to bring about a major change.

Sustainability in Manufacturing, Materials and Construction. Eight global supply chains, that include food construction, fashion electronic, mobility (and their energy use) comprise 50 percent of the CO 2 emissions, with raw material extraction and refinement causing the bulk of CO 2.. What if we were able to use upcycled materials in conjunction with biomass to replace nearly all natural materials? What if localized, flexible manufacturing facilities were able to achieve similar economies of scale of the largest manufacturing facilities? This would speed up the current transformation of supply chains across the globe and creating ripple effects in logistics, and could have large-scale positive social effects.

This is already happening with the emergence of new synthetic biology platforms and materials have been integrated in modern manufacturing processes, and offer an opportunity to overcome the long-standing challenges of the efficiency, scale as well as sustainability. However, the existing value chains encourage substitutions that be competitive in terms of price and performance instead of opening up new applications and capabilities.

Green and Efficient Agriculture. Animal-based products account for almost 60% of the agricultural GHG emissions. And as the population grows, the demand for these food items is predicted to grow by 70 percent in 2050. Production in agriculture based on plants must increase at 50%, if we wish to produce enough food to meet the needs of the projected worldwide population in 2050. While at the same time the agricultural sector has to reduce its emissions by 70% in order to achieve the goals of global warming.

 What if a blend of synthetic biotechnology and regenerative farming could be used in conjunction to tackle both of these issues? New technologies that enhance nutritional quality and customize it, make proteins more sustainably, increase yields of plants, and decrease food waste might offer methods to reconsider the system of global agriculture however, they also require a new vision that extends from the farm to the table, which is in line to that of the Green Revolution of the 1960s.

Clear Water and Sanitation. Around 3.2 billion people live in areas that suffer from water shortages or scarcity in 2050. By then, water consumption is projected to increase up to 55% especially in developing countries. In semi-arid regions, like the regions of California the effects of drought and the growing demand from agriculture, industry, and populations have overtaken conventional supply methods. Desalination technology as well as materials science and synthetic biology could provide methods to maximize both economic and social benefits. However, as the ongoing debates regarding salt desalination across southern California show, systems for water use storage, distribution, and use and the issues relating to salt discharge or brine are also to be considered even if desalination was cost-free and energy abundant.

Sizing the Opportunities

We estimated the overall potential market value of these opportunities in nine pertinent industries: transportation and logistics, aerospace and automotive energy, chemical and basic substances, agriculture and food services as well as consumer packaged goods and cosmetics Engineering and construction, industrial products, as well as clothes and fashion. Because each opportunity has a distinct degree of influence in every sector We used an application-centric approach to assess possible value deep technology could bring to the table, taking into account with the scale of the industry as well as its importance to sustainability, as well as the possibility for deep tech to address (or or alter) the balance between the sustainability and profitability.

 The potential impact of each industry may not be obvious at first due to interdependencies between systems; the impact of a profound tech-driven change in one area could be a ripple effect into a variety of other sectors.

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