Thesis

Our thesis is that in the Sixth Wave of Computing, the walled garden of venture will open, disrupting the status quo, disintermediating the incumbents, and yielding a new generation of open innovation and investment platforms that directly access global ecosystems of technology, talent, and capital.

Over the last 200 years, three exponential innovation platforms, electricity, the telephone, and the internal combustion engine, rapidly and completely transformed life on earth. Today, four new exponential innovation platforms are simultaneously mainstreaming; artificial intelligence, edge computing, quantum computing and nanobiotechnology. Each platform is a multi-trillion dollars in the making. The opportunities are explosive, and they’re feeding one another.

Whereas the Fifth wave of Computing—the mobile internet—was defined by lightweight apps and services, the Sixth Wave of Computing is characterized by exponential technologies that promise unimaginable innovation, and corresponding breakthroughs in science and engineering.

Multinational and government authorities are investing into this macrofinance-led innovation wave at unprecedented levels, to increase competitiveness, activate economic growth, create jobs, and attract outside capital. Global spending on R&D has reached a record high of almost US$ 1.7 trillion. The upward trend will continue, as countries, through their commitment to the UN’s Sustainable Development Goals, have pledged to substantially increase public and private R&D spending as well as the number of researchers by 2030.

Venture investment hit an all-time high of US$ 207 billion in 2018. The mega-round (over US$ 100 million) is the new normal. There are now over 300 unicorns (valued at US$ 1 billion or more), and 14 decacorns (US$ 10 billion). This has generated a bubble, as well-capitalized investors compete for limited dealflow, driving up valuations. Studies indicate that the majority of private tech stocks have excessive valuations. There is an estimated US$ 1 trillion of subprime paper valuation in the market.

Meanwhile, large organizations, despite fighting an intense competitive battle for talent, are slowed by organizational complexity, developer resource constraints, and existing product-lines. Unable to innovate at the rate and pace of startups, they are embracing strategic investment and M&A at record levels. Corporate venture investment hit an all-time high of US$ 52.95 billion in 2018.

Although venture capital activated the innovation machine, it remains unevolved by technology, for the most part, unscientific, spread betting, based on ‘gut feel’ and personal network. Returns are far weaker than lower-risk asset classes like private equity. Yet the capital keeps rolling in, led by the performance of the venture oligarchs that generate an estimated 90 percent of sector returns.

Bringing together AI, capital, and the platform economy, we manage technology as an alternative asset class, a group of securities that although not conforming to the traditional asset classes of stocks, bonds, or certificates, nonetheless exhibit similar characteristics and behave similarly in the market.

Read More