Dr Robert Powell on evaluating and mitigating investment risk

November 30, 2022

A question for us when we’re evaluating an investment is the level of system risk and how we can mitigate this.

When an idea comes to us its prophetic. It hasn’t been developed, the market hasn’t been proven and we’re unsure whether target customers are actually going to want, or buy, the proposed solution. This is why we take a step back and evaluate the systematic risks that could affect the technology or solution which is being proposed.

There’s always risk in developing an idea and getting it to a final product. This risk is a combination of multiple factors - regulatory, market dynamics, technological advancements, and competitive landscape changes.

For example, regulatory changes in the industry or countries where the deep tech solution might operate or be scaled can introduce new compliance requirements or restrictions that may hinder the deployment or commercialisation of the technology. Similarly, evolving market dynamics, such as changes in consumer preferences or that there might be a change in economic conditions, can affect the demand and adoption of the deep tech solution.

Technological advancements and the pace of innovation can pose system risks, and the emergence of new competitors or the consolidation of existing players can alter market dynamics and pose challenges to the success of the deep tech investment.

Understanding and mitigating system risks requires a comprehensive analysis of the external factors and dependencies that can influence the investment's viability and potential returns. We have the checks, knowledge and depth of experience that comes from years of working in deep tech that enables us to take highly educated guesses as to what these risks might be.

Mitigating these risks involves, amongst other things, diversification and having a network of people who co-invest alongside us, and who have the appetite for this level of risk, are comfortable investing in early-stage deep tech and have a desire to make an impact on our future.