Tech investing: New engines of value

Mark Pflitsch, CEO & Founder, Terra Quantum

James Harding, Co-Founder & Editor, Tortoise

Some of the world’s most influential CEOs, innovators, investors and academics joined Bank of America’s third annual Breakthrough Technology Dialogue at Goodwood in the UK in July, for a series of immersive discussions exploring the cutting-edge technologies set to reshape the future.

“Breakthrough Technology Dialogue has become a key component of our calendar over the past three years, reflecting our thought leadership in the technology space, our ongoing cycle of technology investment, and our ability to bring together such a heavily vested and highly influential group," said Bernard Mensah, President of International, Bank of America, who hosted the event. 

Some experts noted the focus on artificial intelligence (AI) may have partially blinded investors to other promising technologies and growth areas.

For example, John Chambers, founder and CEO, JC2 Ventures and former CEO of Cisco Systems, pointed out that global spending on cybersecurity has failed to keep pace with the growth in technology-driven threats. He expects investment in cybersecurity to increase over the next few years to meet these challenges.

Sir Peter Beck, CEO of rocket manufacturer and space launch service provider Rocket Lab, noted the space economy was poised to create tangible business opportunities. He advocated a selective approach to investment in the sector, as barriers to enter the market are high due to the knowledge, technology and costs required.

Rocket Lab’s business case is based on more firms seeking a one-stop solution to support a growing number of space-based ventures, instead of trying to build their own capabilities or seek out technologies and services from multiple specialists.  

“We’re trying to build an end-to-end space company,” Beck explained. “Our customers don’t want to purchase and maintain spacecraft – they just want a service. That’s what large space companies are going to look like in the future.” 

Quantum computing is another area in which, although the potential commercial and security applications are clear, the industry seems to be five to 10 years away from delivering the kind of scale and value investors expect. However, people from leading quantum companies at the Breakthrough Technology Dialogue shared reasons for optimism.

Markus Pflitsch, CEO and founder of Terra Quantum, which specialises in providing quantum computing as a service, noted that even if precise business models were in flux, quantum algorithms would vastly extend the scope of possibility in functions like big data analytics, portfolio optimisation and risk model simulations.

“We’re in a product phase where quantum computer chips aren’t ready yet to deliver their full capabilities,” he cautioned. For now, he sees the solution as hybrid techniques that use leading-edge chips to simulate quantum capabilities. “With those we don’t get the full potential of the quantum curve, but we’re already getting 15 times faster optimisation and up to 200 times faster simulations.”

While more cautious about the potential of hybrid or smaller quantum systems, Jeremy O’Brien, co-founder and CEO of PsiQuantum, said there was already an understanding among governments that building quantum computing capabilities is necessary, given their implications for improved security and economic growth.

And while mass commercialisation of the technology may still be some time away, he noted PsiQuantum – whose core mission is building the world’s first commercially viable quantum computer – was developing a large quantum computing site in Australia that should be operational by 2027. 

“We’re working with aerospace, automotive, finance, pharmaceutical, chemical, material and semiconductor companies, to collaborate and find the best use cases for quantum computing,” he said.

Public and private investors will also need to combine forces to enable the mass adoption of another frontier technology with potentially transformative implications for growth: fusion energy.

While net energy gain from fusion has only been realised in the laboratory, a macro-scale breakthrough that enables economies to tap into what could be a clean, waste-free and safe form of energy remains elusive, said experts at the Breakthrough Technology Dialogue.

“It’s really hard to make fusion energy economically viable,” admitted Dr. Kim Budil, director of Lawrence Livermore National Laboratory in the United States. However, she also pointed out that more than $6 billion (USD) had been invested in fusion startups, and that some are making ambitious claims to put power on the grid quite soon.

One of the members of this ecosystem is First Light Fusion, a UK-based firm that has already designed a concept for a fusion-based power plant, according to co-founder and CEO Dr. Nicholas Hawker. 

The evidence from the Breakthrough Technology Dialogue was that risk appetite remains robust, though investors and innovators are realistic about what still needs to be done to unlock the true value of innovations like generative AI.

Whatever the perceived setbacks, leading investors at the event were convinced the AI space still represents one of the largest value creation opportunities in recent history. Some even raised the possibility that AI is under-, rather than over-hyped.

However, seasoned investors attending the Breakthrough Technology Dialogue did advocate a change in the way the AI opportunity is approached. Rather than focusing on the technology itself, they advised investors to look to the way firms are applying it and the value that generates.

John Chambers noted the established tech giants leading investment in generative AI are among those who could be most disrupted by it, but that they are also the best positioned to take advantage of it thanks to their large resources and readiness to embrace change.

Reflecting on these themes, Rodrigo Ortiz-Gomez, Transformative Technology Group executive and national software lead at Bank of America’s Global Commercial Bank, agreed the real AI winners would be “companies that aren’t just investing in AI to say they are doing it – they’re investing because it aligns with their business model and provides a competitive difference.” 

“Whatever your product or service is — focus on how to integrate AI into that. Companies which can immediately benefit from AI are those with a deep understanding of their customers,” he advised.

With AI poised to automate and accelerate so many functions, people in the industry are betting on when we will see the first billion-dollar company with just one employee. The more important question on Ortiz-Gomez’s mind is about the possibilities of using AI within existing company structures.

“If one person can potentially build a billion-dollar business from scratch, just imagine what a small team with the right resources, culture and leadership could build and achieve,” he said. 

The Breakthrough Technology Dialogue highlighted that many of the most successful companies of tomorrow are likely to be those succeeding today and those that demonstrate the ability to act quickly and adapt to the opportunities provided by breakthrough technologies.

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