Where might venture capitalists place their bets in the year ahead?
In December, I asked more than a dozen Boston-based investors to share a technology or business dynamic they’ve been learning about — but haven’t yet put money into.
Two areas rose to the top: generative AI, artificial intelligence software that can create new content; and technology to analyze (and potentially mitigate) the impact of climate change.
Here’s the complete list, which may hint at where we’ll see money flowing in 2023.
Yes, venture capitalists have been playing around with ChatGPT and Dall-E like the rest of us, enlisting free AI software to pen Dickinson-tinged poetry or create cover art for imaginary prog-rock albums.
NextView Ventures cofounder David Beisel says that as AI proves its ability to use big data sets to produce “genuinely novel creations,” his investing hypothesis “is to find applications which empower existing creative professionals to perform their serious work even better: providing tools for user interface designers to visualize, developers to code, architects to build, marketers to sell, industrial designers to make.”
Lars Albright of Unusual Ventures says he’s interested in how generative AI will be applied in the financial services world, in “areas like customer communication, process automation, advisory services, and compliance.”
At Glasswing Ventures, founder Rudina Seseri says that she’s looking at ways to get artificial intelligence into small computers that may not need high-bandwidth connections to the Internet. TinyML, she says, is “a field that explores types of AI models that can be run on small, low-powered devices.” (ML stands for machine learning, a subset of the field of artificial intelligence.) Her Boston-based firm already has several investments in the industrial and supply chain sector, and she says that is “a space I feel strongly that AI will continue to have a significant impact.”
Michael Skok of Underscore VC in Boston says his firm has been talking about “unconstrained AI,” wherein the fields of AI and quantum computing may eventually converge.
Technology for a changing climate
At Boston-based Silversmith Capital Partners, managing partner Jim Quagliaroli says his firm believes that access to “climate change analysis software will be increasingly important” to top executives at companies. “We believe that such software has relevance for measuring supply chain performance and efficiency, with the potential to determine how climate change may negatively impact revenue and profitability.”
At Boston-based Mendoza Ventures, Adrian Mendoza says he has been examining the intersection of climate-related technologies and financial services — for instance, how decentralized finance and blockchain tech might enable new kinds of marketplaces for buying and selling carbon credits.
Making it in the USA
Russ Wilcox of Boston-based Pillar VC says that the rivalry between the United States and China, the ongoing COVID pandemic, and the war in Ukraine have gotten businesses thinking about ways to shorten their supply chains by making products in the United States again. It’s a trend called “onshoring” — versus offshoring. “I’m learning about the latest supply chain tools, automation, and production methods,” Wilcox says, and he is planning to make at least one investment in a manufacturing-related startup. “The main deficit for the US right now is that we have lost a great deal of our manufacturing know-how. We need to rediscover this discipline and precision.”
The field involves designing organisms that can produce things more efficiently via biological processes, like creating cleaner ways to make chemicals for industrial processes. Synthetic biology “has the potential to transform manufacturing across multiple sectors, including biopharma, agriculture, food, chemicals, and other materials,” says Jennifer Lum, cofounder of Biospring Partners. “At scale, syn bio will have a significant impact on industrial supply chains.”
Health tech for emerging markets
At Flare Capital Partners, a Boston firm that invests in health care technology, cofounder Michael Greeley says that a recent trip to Israel spurred thoughts about how “technology is the great democratizing force in health care” and could enable the spread of “Mass General-like care to disenfranchised populations everywhere,” potentially through remote or virtual services or AI-supported diagnostics. Greeley says he’ll be considering “compelling opportunities in the emerging markets.”
New tools for tackling deadly forms of cancer
Darshana Zaveri of Catalyst Health Ventures says she’s tracking the combination of digital technologies and medical devices for treating cancer. Rather than being used to diagnose or monitor progression of the disease, she says, “the field has matured to the point where these technologies are being developed to provide targeted and effective therapies” — especially for types of cancer with high mortality rates.
Stablecoins are a type of cryptocurrency that is designed to stay at a consistent price but can zip fluidly around the Internet. “We’re trying to get smarter on stablecoins, as we think they will unlock a lot of the potential of the blockchain,” says Nick Ducoff of Boston-based G20 Ventures. One example he cites: using stablecoins to reduce the fees involved in making cross-border payments for big-ticket items like college tuition.
With roots at MIT, zero-knowledge proofs are moving from theory to application, say Maia Heymann and James Falkoff at Converge, a Cambridge-based venture capital firm. The field “focuses on how you can prove the validity of a statement without revealing any of the underlying data or computations that went into the statement,” they say, which could be useful in granting access to sensitive data or proving your identity.
TJ Mahony of Vinyl.vc says that as companies seek to gather more data about their customers and prospects online — rather than purchasing it from other sources — we’ll see the emergence of platforms that incentivize people to share data or fill out surveys in return for discounts. These have been dubbed “do-to-earn” approaches. Mahony says they’ve been popularized in the world of Web3 and cryptocurrency, but that they have “much larger implications” for established businesses.