🌌 Reshaped #56
COVID-19 and European VCs, space investments, energy geopolitics and Silicon Valley intellectualism
Welcome to a new issue of Reshaped, a newsletter on the social and economic factors that are driving the huge transformations of our time.
After a while, I am back with another short “bridge issue” before I restore a more defined schedule for this newsletter.
New to Reshaped? Sign up here!
Some updates…
On Venture Capital
A stunning report by the European Investment Fund explores the consequences of COVID-19 on VCs, PE firms and business angels. The former category seems to have suffered less from the effects of the pandemic, with fundraising mentioned as the most important challenge for the future of the industry. In particular, VCs reported lower changes in the value of their portfolios with respect to both PE firms and business angels (see chart below).
This is consistent with the growth of VC investments across a variety of verticals. A new report by Dealroom (in partnership with Five Seasons Ventures) explore recent trends in the European foodtech industry. VC investments reached €2.4 billion in 2020, with a 33% growth rate since 2015. Investments in distribution and consumption fell from €1.9 billion in 2019 to €830 million in 2020, while those in transformation almost doubled from €666 million in 2019 to €1.1 billion in 2020. However, only a tiny (but slowly growing) percentage of investments goes to food production (€552 million in 2020). This disproportion between upstream and downstream investments in foodtech is a major area of improvement for investors in the field. Hopefully, the new wave of climate tech investments will indirectly benefit the sector.
So what about climate tech investments? According to BloombergNEF, VCs invested $17 billion globally in climate tech startups in 2020. This is a record amount that nonetheless confirms the declining trend of seed and early-stage investments already registered in 2019.
On Space Tech
Last week, the launch of ARKX, Cathie Wood’s space-centred ETF, generated a strange mix of reactions, ranging from enthusiasm to mockery. The fund targets four categories of companies in the space value chain: orbital and suborbital aerospace companies (“companies that launch, make, service, or operate platforms”), enabling technologies companies (“companies that develop technologies used by Space Exploration related companies” such as “artificial intelligence, robotics, 3D printing, materials and energy storage”) and aerospace beneficiary companies (“companies whose operations stand to benefit from aerospace activities”).
The latter, in particular, includes a whole range of sectors like “agriculture, internet access, global positioning system (GPS), construction, imaging, drones, air taxis and electric aviation vehicles”. The vastness of this investment scope caused some criticism, which is in part straightforward — how can a sector-specific ETF include companies from so many different industries? — and in part short-sighted. This was made evident on Quartz by Tim Fernholz, who argues that “the real thesis for space investors, particularly in the near term, is that activity in space around our planet will mainly be adding value back here on Earth”.
This explains his claim that “every company is a space company” — which resonates with Space.com’s James Causey 2019 statement — not only for the current impact of space technologies in many businesses but also for the potential revolution in fields such as internet access — which explains, on the other hand, the presence of Netflix in this ETF. In any case, ARKX seems to follow a stricter rationale than many ESG funds that include all sort of companies because of their — somewhat unavoidable — links with environmental or social impact.
On the other hand, such an initiative can generate huge effects on the space economy in terms of boundaries recognition. Claiming that Amazon, Netflix and other companies that we do not automatically associate with space are actually among its more relevant players can speed up the growth of the sector in the short term and boost investment in space infrastructure1.
Other gems
Energy investments. A new report provides historical data on global energy supply investments (2019 and 2020) and shows two potential scenarios for the future. The sustainable development scenario (SDS) is based on a radical reduction of oil supply and huge investments in renewables. The assumption of using gas as a “bridge” fuel is still unchallenged.
Corporate Venture Capital. A new report by CB Insights shed lights on the state of Corporate Venture Capital. In 2020, CVC investments hit a record $73 billion, with an increasing amount of mega-rounds. However, the total number of deals decreased globally — with a special impact on fintech (-21%) and AI (-10%).
Climate policy. As reported by BloombergNEF, more than half of all global emissions are now covered by some form of net-zero target. Pledges by governments worldwide (light green section of the chart below).
VC intellectualism. On The Baffler, Aaron Timms has a provocative view of “Silicon Valley intellectuals”. Very recommended if you work in the innovation economy. There are many ego-driven phenomena in this field that need to be addressed. Ignoring them is the worst option if we want the VC industry to positively impact the world.
Energy geopolitics. The transition to a greener economy will have geopolitical consequences. In a recent piece on Engelsberg Ideas, Helen Thompson explains how a conflict between the US, Europe and China could stem from the “struggle for sustainable energy”.
The American return to Paris cannot take climate out of the geopolitical realm. Less oil and gas means the United States giving up the partial energy independence procured by shale. More renewables yield economic advantages to China since it dominates in solar energy manufacturing and materials. They will also drive a frenzied competition in mineral mining and control over land where essential components of batteries like lithium and cobalt lie.
Thanks for reading.
If you enjoyed reading this issue, please leave a like (heart button above) and share Reshaped with potentially interested people.
As ever,
Federico
I owe to a friend and reader of this newsletter the idea that, fifty years ago, software companies found themselves in a similar situation, being identified primarily in other types of industrial categories. Years later, some claimed that “every company is a software company”.