A new era for SILK Ventures

We launched SILK Ventures in 2016 with a clear mission: to invest in the next generation of global tech companies and support them to build an enriched, healthier and more sustainable world. We mobilised the cross-border participation of entrepreneurs, investors and corporates from Europe to China, and joined SASAC Shenzhen to set up a fund. This enabled us to become the first European VC to be approved by Chinese regulators under the new Pilot Scheme for foreign-owned asset managers.

But the world has changed dramatically since we started this journey. The global health crisis has accelerated the digital revolution and exacerbated economic divisions, leaving us with as many opportunities as challenges ahead. Enormous systemic inefficiencies have been laid bare by the pandemic coupled with a cocktail of geopolitical pressures, making it timely to rethink and evolve our strategies for investing.  

It has been our foundational belief that technological cooperation between governments and innovators is the sine qua non of a future that powers and protects the health of people, the efficiency of societies and the sustainability of our planet. As we continue our mission to invest in the tech vanguards of the future, our journey going forward will be independent from SASAC, so that we can expand our reach beyond the boundaries of geoeconomics.

The sustainability generation

Over the past four years, we have consistently focused on financial innovation, resilient digital infrastructure and predictive healthcare. This won't change – if anything, Covid-19 has shown us just how critical these areas are to the future of our societies. But we’re also noticing the rise of a new generation of innovators with a conscience – those building systems for controlling greenhouse gas emissions, ecological depletion and waste – and we seek to expand into these prime growth areas.

Financial inclusion: We identified Revolut in 2016 as an important disruptor in the financial services space, and invited it to participate in our accelerator programme in China. Today, the fintech is valued at $5.5.bn and is benefitting over 12 million customers with its democratised financial services. Other startups have also recognised this societal challenge before it became the emergency it is today. As our worlds suddenly moved online as a result of Covid-19 lockdowns, the 31% of adults worldwide who are unbanked have been left with a critical problem – after all, the internet does not take cash even for basics like food. Fintechs can provide the solution.

Resilient digital infrastructure: Over the past decade, economic growth has been based on a fragile model that is built for efficiency (and maximum returns), but not for resilience. A sustainable world requires an “antifragile” economic system that supports alternative paths to deployment and the capacity to rapidly pivot. Going forward, companies will have to prioritise resilience over cost-saving, while governments will need to ensure that the personal data private companies are building their services on returns equitable dividends to society.

From blockchain to 5G, China has excelled in digital infrastructure. The country has reimagined currency at the central bank level with the introduction of a national digital currency (DCEP) and has unveiled its vision of becoming a blockchain-based government. As the UK is also exploring a central bank-led digital currency, we expect attractive investment opportunities to emerge in this space.

In 2018, we invested in Zamna — a startup that has built a blockchain-based identity layer and verified over 40 million passenger identities for airlines and governments to date. In a pandemic environment where the temptation for individuals to misrepresent their identity credentials - like health status - will be high, and the cost of getting away with it even higher, digital infrastructures like Zamna can ensure trusted data reconciliation.

Predictive and personalised healthcare: The convergence of hardware and data technologies, the falling cost of data acquisition and genome sequencing, and engaged regulators, are all forecasters for a generation of successful healthtech companies. The pandemic is fast-tracking the maturity of AI in healthcare, bioengineers are pushing medical devices to the edge, while the needs and spending power of the silver economy – the third largest economy in the world – are further accelerating the advancements in nanoscience and genomics in an attempt to solve the longevity riddle.

During the pandemic, Huma has demonstrated to both governments and healthcare providers the power of AI in healthcare. Its remote patient monitoring solutions are now being deployed by the NHS and other European healthcare systems in the fight against Covid-19. Huma has also partnered with corporates such as Apple and Tencent, universities like Cambridge and big pharma firms like Bayer to build an AI platform that turns data generated by our bodies into digital biomarkers for predictive health insights.

The pandemic is also expected to accelerate the occurrence of mental health disorders, with the WHO estimating that diagnoses of depression will double as a result of the lockdowns. Data already shows a 38% increase in prescriptions for antianxiety and antidepressant medication between February and March 2020, while SARS taught us that quarantines can increase instances of post-traumatic stress disorder by up to four times. Another of our portfolio companies, InnerCosmos, is developing digital pills that will be revolutionary in treating depression and other major mental health disorders.

Governments, corporates and startups: the trinity of value creation

The Covid-19 pandemic has exposed government weaknesses and provided the ultimate stress test for our healthcare systems. But it has also revealed a new generation of pragmatic leaders: those who are willing to reimagine regulatory policies and forge collaborative partnerships between governments, Big Tech, academia and innovators to find solutions. We believe that, going forward, governments will act as a conduit for the deployment of innovation at scale.

Meanwhile today, 77% of Fortune 100 companies, from Big Tech to pharma and media corporations, are investing in the world of fast-growing startups – and the companies they back are completing profitable exits at higher rates and going bankrupt at lower rates compared to those without corporate investment, as they enjoy access to R&D resources and distribution channels through corporate partnerships. We are already starting to see industries shift towards a collaboration-based model which requires the big and small companies to work together in the pursuit of impact at scale.

Since 2017, we have collaborated with China’s SASAC, identifying startups that could benefit from partnering with the 97 state-owned corporations under its supervision. We will continue this strategic partnership, even though our investments will be independent. And while the so-called ‘Golden Era’ of China-UK relations is being reset as a new Cold War with the West seems to be heating up, we continue to believe that forging the right relationship with China is vital for the UK’s interests and global competitiveness.    

Considering the velocity and scale of technology-led transformation happening in the country, we may find the “next normal” emerges from China. In Beijing alone, more than 1.8 million food delivery orders are placed every day. Consumers are starting to demand healthier options, inducing the rise of the meatless society. China’s electric vehicle market is already four times that of the US, giving Chinese market leaders the opportunity to become world leaders in developing and manufacturing EVs and charging infrastructure. China will continue to be a source of innovation and a partner in solving some of the biggest challenges of our time.

Meanwhile, European tech differentiates itself by creating profit-with-a-purpose: here, there are over 500 startups tackling the UN’s Sustainable Development Goals as a core part of their mission. The 150+ European “unicorn” startups are inspiring a new generation of businesses to launch and providing exciting work for the 6 million professional developers that circulate between Big Tech and younger startups. The ecosystem is maturing so rapidly that, if it continues on its current growth path, it is thought that Europe will overtake the US as the lead hub for tech investments by 2022.

A global, collaborative future

In times of political uncertainty and the re-ordering of economic powers, the homeostasis between sustainable individuals, sustainable societies and a sustainable planet should be the common goal shared by all. Issues such as climate change will not be resolved by Western powers alone. A globalised economy so bifurcated that Europe does not touch China is so expensive that it is unattainable. It is imperative that we work together around converging interests and let tech innovators provide a common language for developing solutions to global challenges that do not discriminate between borders.

Predictive and personalised healthcare is no longer an aspiration – it is a non-negotiable. Financial inclusion is no longer the future – it is essential today. Sustainable digital infrastructure should have been built already – the second-best time is now. These urgent necessities require the active involvement of global stakeholders across the board, from scientists and startups to corporates and governments. SILK Ventures is ready to invest in the technology vanguards that are tackling global challenges in a manner that is sustainable and enriching. Are you?