The digitization of everything: what does it mean for tech investors?

Posted by Mark Skapinker on Jul 09, 2019

An unprecedented number of new tech startups continue to emerge in Canada, and many of them are pushing the envelope in markets that tech investors never would have considered (or had access to) in the past. 

As Benedict Evans of Andreessen Horowitz told Bloomberg, “stop thinking about technology as something separate and apart from other companies or industries.”

So, how should you think about being a successful tech investor when everything is tech? 

The big opportunity

Just a few years ago — when companies like Intel, IBM and Delrina made computer software and related hardware, offered competing products, and shared a market and customers – it still made sense to talk about a “high-tech industry.” Then, of course, the Internet and mobile changed all that as communication, connectivity and accessibility became key. And more recently, big data and AI is being applied to every industry. 

Today, as tech is being applied into traditional industries, new transformational companies are being created as “non-traditional tech businesses” - these often share the DNA and nuances of traditional tech companies. These companies represent the digitization of almost every aspect of our lives and the economy: home automation, automotive and transportation, health and medicine, agriculture and food, travel, security, entertainment, education, finance, and many more. 

Why is this a relevant and exciting opportunity for investors? 

The companies applying this technology are being valued like tech companies. These massive markets are creating significant value as they offer new solutions to age-old challenges. 

Some examples of these from a high level are:

  • Automotive: Tesla vs gas automobiles
  • Travel: Expedia (and Hopper) vs travel agents
  • Entertainment: Netflix vs movies and TV
  • Marketplaces: Uber vs taxis, Airbnb vs hotels, Stubhub vs scalpers.

Each of these represents a market where a new tech company turns over the traditional market with a digitized solution and creates massive value. 

Now, we are starting to see the next generation of these kinds of businesses, often reinventing themselves with new tech and know-how.

Two examples of "non-traditional tech" market trends we've looked at: 

1. Medical diagnosis

Once upon a time (like five years ago), patients would need a lab-run medical test, and then they’d follow up with a doctor to interpret those results. Sometimes, they would look further and get a second or third opinion and that would be the end of it. 

Nowadays, Big Data and AI are becoming entrenched in this process. We are seeing the emergence of tech products that have the ability to compare the results of medical tests against thousands (or tens of thousands, or hundreds of thousands, or millions) of comparative results where the outcome is known. Using advanced technology, there are significantly more than “one-second opinions” – there are thousands of data points helping interpret the diagnostic results. 

2. Food and agriculture 

Automated indoor farming is a massive market that is being driven by tech. Agriculture remains one of the least digitized and least efficient major industries. Significant innovation across the entire agri-food chain is inevitable for the industry to keep up - and change is underway.

With climate change a reality, the food supply is being threatened and it needs to become more reliable and consistent. Online suppliers like Amazon and Walmart are moving aggressively into delivering fresh produce such as vegetables. Consumers and restaurants are seeking healthier, fresher and more flavourful food. 

The next generation of tech-driven indoor farming is laying the path for consistent quality and supply being supplied in a controlled environment. Over time,  just as meatless meat is becoming mainstream - indoor farms growing vegetables have arrived. These are not hothouses - these are high tech operations using advanced science, robotics and automation. 

The reason that Beyond Meat, Impossible Foods, Plenty vertical farming are being valued like tech companies is simple - they are tech companies. Scalability, cost, transformation and disruption create value. 

At Brightspark, we are actively pursuing opportunities in the Agritech marketplace. Accredited investors are invited to participate. Please visit www.brightspark.com for details.  

And, of course, the same principals are critical for success.

Cutting through the noise

How do you pick the companies that have the best potential upside? 

Across all sectors, our team looks for the best early-stage companies with the same discipline that we have built over our 20 years of investing. 

We look for these 5 core criteria:

  1. Markets where customers are ready to spend; 
  2. Management teams that are domain experts; 
  3. Focused and driven leadership; 
  4. IP as a solid barrier to entry and to competitors; and 
  5. Massive marketplaces

Access tech investment opportunities curated by Brightspark

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