Technology Investing is not merely about understanding the technical workings of a technology, but being able to understand the broader context of how this technology can be monetised and turned into a value creation agent––it is about understanding the eco-system of the technology and its position vis-à-vis other competitive and complementary technologies.
 
In the ten years we have been involved in technology investing, we have found four important elements of a successful technology investment.
 
1.    Commercial Relevance
2.    Execution
3.    Competitive Sustainability
4.    Technology Life-cycle
 
Commercial Relevance:  A technology should provide a revolutionary value creation.
Improvements should be in multiples and not incremental percentages. For example, a performance improvement of reducing a task-time from 3 days to 2 days would barely qualify for commercial relevance versus a technology that reduced task times from 3 days to 3 hours. Price reductions should be from $10 to $1 not $10 to $9.
 
In addition, the technology should address a real need with commercial value and not necessarily a whimsical nice-to-have.
 
Execution:  The speed and ease of execution is perhaps an often underestimated aspect of a technology. How long is the turn-around time of the technology? Some biotech initiatives take several years to yield results, while a software project can produce results in months. What resources and raw materials are required for the technology, and what is their availability and cost? Are there any bottlenecks in the execution of delivery?
 
Competitive Sustainability:  Some technologies are notoriously easy to duplicate and can generate copy cats in no time. An attractive technology should not only be proprietary but in practice should be competitive over long periods of time. Proprietary positions need not be based on patents or legal barriers. Other barriers can include proprietary control of necessary resources.
 
The key to mantaining sustainability is also continuous R&D, and being in a techonology that has a continuous growth trajectory. Moore’s law for example states that the number of transistors on an integrated circuit for minimum component cost doubles every 24 months. Having a technology that can simultaneously ride Moore’s law can also lead to sustainable growth.
 
Technology Life-Cycle:  The Hype curve, first introduced by the Gartner Group, tracks technology life cycles. An embryonic technology carries higher risks but greater opportunities for value growth, while a more mature technology, while having a lower risk profile, may often yield lacklustre growth in value. Knowing when to invest and when to exit is both an art and a skill developed over time.



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