The inevitable rise of DeepTech as a new asset class

Today, there is a sizable gap between DeepTech innovation and sophisticated financial infrastructure available to support investments in DeepTech. Compared to other industries, investment approaches to DeepTech are outdated. Those approaches were originally developed and adopted for simple, slow-moving industries. Therefore, they require legacy system modernisation.

DeepTech must become a recognised asset class on its own, available for all types of investors regardless of their exposure preferences in terms of risk and liquidity. DeepTech will inevitably be commoditised beyond product and service availability to everyday consumers, but also financially commoditised and available for the average investor, both individual and institutional.

Turning DeepTech into a new asset class would unlock trillions in capital, resulting in massive economic opportunities and a positive impact on humanity.

During the 19^th and 20^th centuries, developed economies witnessed the commoditisation of raw materials that were previously bought and sold privately, including precious metals, gold, and oil. Entire standardised markets and exchanges were set up to facilitate the trading of commodities, such as the Chigaco Board of Trade in 1848. This led to many secondary financial products and instruments such as derivatives, futures and indices, which diversified the ways investors hold and trade these commodities, and the types of investment positions they were able to take on them.

In the following decades, this level of financial innovation turned such commodities into distinct asset classes, enabling wider investor access to those asset classes. Today, these commodities became core pillars of the global economy – take the gold standard to the monetary system of countries globally for instance. Many of these traditional industries continue to be very well commoditised, being the target and focus of many specialised trading platforms such as the London Metal Exchange.

As the DeepTech sector evolves into a multi trillion-dollar industry playing a key role for the growth and stability of national economies, it will inevitably become commoditised in the same manner and recognised as a new asset class. It is not a question of ‘if’ but ‘when’, and it will require enabling financial infrastructure.

Commoditising previously unstructured assets on financial markets opens up potential funding to the full scope of the global investment community. It also speeds up the development and maturity of the DeepTech sector.

The world’s biggest investors and wealth-holders are also the most conservative, preferring to invest in highly stable and de-risked markets, and in assets that are highly liquid, tradeable, bankable and exitable. This has meant that DeepTech financing has historically been the exclusive focus area of patient venture capital investors, who are more comfortable with long-term investment horizons and relatively higher risk capital deployments.

This represents a huge opportunity in the development and adoption of innovative and market-ready approaches to DeepTech investment. Examples include IT and data science-backed technologies that optimise investment decision-making, due-diligence, investment strategy formulation and execution. DeepTech infrastructure also includes markets and exchanges, indices, financial products, instruments and derivatives that could enable de-risked, tradable and bankable exposure to high-value, high-impact DeepTech subsectors.

We have witnessed similar long-term trajectories in the commoditisation of IT technologies. A recent example is Silicon Valley’s Long-Term Stock Exchange, a stock exchange built to exclusively list companies with a “long term vision”, which in practice usually means advanced technology companies seeking to address large challenges. Undoubtedly, we will see these same trends across many DeepTech subsectors.

The Longevity industry is at the forefront of the global DeepTech ecosystem. It sits at the intersection of preventive medicine, AI, well-being and the financial industry – including insurance, pension funds and national healthcare systems. While many other DeepTech sectors such as SpaceTech are dependent on advanced technology for their continued development, no sector today requires commoditisation more than Longevity, which is based on technologies beyond the sophistication of the most advanced rocket science.

The only issue is the time it will take these investment and financial technologies, markets, systems and approaches to arrive and scale, and how much progress is lost in terms of economic, social and environmental improvements while we wait for that to happen.

At Deep Knowledge Group, we have predicted many of these necessary developments. For a number of years, we have been working on developing and deploying solutions such as Longevity, FinTech, SpaceTech, HealthTech, GovTech, InvestTech. We have established a specific subsidiary – Advanced InvestTech Solutions – focused on designing new investment technologies and financial products.

We also released a number of open-access analytical reports on Longevity Financial Instruments and Derivatives. In Q1 2021, we have announced our plans to launch the world’s first Longevity Investment Bank.

Anastasia Lit, Director of Investor Relations and Business Development – Europe and MENA, Deep Knowledge Group.