At the Knowledge Frontier

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As seen in Global Corporate Venturing, December 2015 issue.


Many speakers predicted the emergence of "truly intelligent machines" – a harmonious combination of software and hardware that will make our lives vastly different.

As I prepared my 2016 predictions column, I found myself thinking about remarkable new technologies I learned about this year and decided to focus on how "frontier tech" industries are poised to change our lives. Frontier tech is a catchy name for the emerging wave of industries, or reinvention of industries, made possible by the advance of technologies that have the potential radically to affect how we live our lives – on Earth and in space. At Silicon Valley Bank, we define the category to include robotics and drones, artificial intelligence, virtual reality (VR), augmented reality (AR) and space-related businesses.

While drones and VR may have caught consumers' attention in 2015, frontier tech is so much more than eating a drone-delivered pizza while streaming the latest reincarnation of Star Trek through your VR headset. In November, SVB sponsored a frontier tech event in Boston, which brought together some of the best minds in the business to discuss the biggest opportunities and challenges ahead.

At the conference, my colleague Steve Allan, head of SVB Analytics – a non-bank affiliate of SVB – explained where we were headed. As Steve says, we have been through many "false dawns", but now "it is still early on … we are in the best position in 50 years to accomplish the vision". He says we are on a knowledge frontier.

Among the highlights:

•  The infrastructure is now in place to support the "new dawn" of frontier tech. Data collection and is getting faster and cheaper. Software is catching up with the hardware, enabling data processing in real time or nearly so.

•  Because the goals are so big and ambitious, we are already seeing a vibrant web of partnerships among start-ups, corporate players and VCs to pool investment and expertise. While corporates account for about 20% of all venture investments, Steve reports that the percentage is double in frontier tech industries.

•  Frontier tech is very early in development on the hype curve, but industries are accelerating quickly and becoming integrated in daily life. Historically, it takes 10 to 15 years for companies to get through the curve – frontier tech companies are making it in half that time. And while most frontier tech uses today are specific point solutions with limited functionality, they have potentially huge future platform opportunity. While typically a platform-potential company comes along every seven or eight years, we have seen three emerge in frontier tech in the past year – SpaceX, Magic Leap and OneWeb.

While we talk about industries within frontier tech, they are often interconnected and highly reliant on each other to drive innovation. For example, artificial intelligence enables most of the new technologies. At the Boston event, many speakers predicted the emergence of "truly intelligent machines". They envision a harmonious combination of software and hardware that within the next five to 10 years will make our lives vastly different, impacting everything from food and energy consumption to medical treatment to how we learn and socialise.

To help get a handle on where we are headed, Steve and his team created a maturation index – a rating matrix that takes into account market opportunities and challenges, such as regulatory oversight and scaling barriers. Frontier tech is still early in its potential, especially when compared with technology overall, but measuring current progress in relation to future market opportunity highlights the vast game-changing potential of the underlying technologies.

Among the highlights for the future:

•  SVB Analytics forecasts that investment in frontier tech industries – not including space, which requires outsized investments – will increase fivefold by 2020. Over the next five years, AR/VR and drones are expected to reach compound annual growth rates (CAGRs) of more than 50%, while space and robotics are forecast to post considerably lower growth rates.

•  While money is flowing into VR now, driven in large part by burgeoning consumer interest and high-profile acquisitions, Steve and other industry observers predict AR has much bigger market potential overall. This is because VR is likely to remain more of a niche – gaming, entertainment, possibly education – whereas AR, with a projected five-year CAGR of 266%) can become integrated with our daily lives, akin to the adoption of mobile.

•  Drones are unlikely to have the same market growth potential as robotics. While a hot commodity now, drones are nearing technology maturation. Robotics, particularly in industrial settings, are well established, so the five-year CAGR is just 10%. But robotics, both for consumer and industrial use, have a substantially larger potential market over time.

•  Looking past 2020, the biggest game-changers – and best long-term investment opportunities – will come in space, AR and affective computing – the human-computer interaction in which a device has the ability to detect and appropriately respond to its user's emotions and other stimuli.

Listening to the experts, it is clear we are just at the beginning in developing the technologies that will have the most meaningful impact, and, of course, technology, funding, scaling and adoption challenges still loom. Getting a machine to emulate our neural networks, for example, is not for the faint-hearted. Said one Boston speaker: "The more you work in robotics, the more you appreciate how good humans really are."


About the Author

Tracy Isacke joined Silicon Valley Bank in 2014 and leads the company’s Corporate Relationship Management Team. As Head of the group, Tracy is responsible for Silicon Valley Bank’s relationships with corporate venture funds, corporate development teams and innovation groups at some of the world’s largest companies and emerging technology and life science startups.

Prior to joining SVB, Tracy was EVP New Business Ventures at Telefónica Digital where she identified investment opportunities in Silicon Valley, Israel and Europe with potential to accelerate Telefónica’s business. She also drove an international Global Partner team to deliver unique partnerships and Direct-to-Bill opportunities for Telefónica across 25 operating businesses in Europe and Latin America.

Tracy joined Telefónica in 2006 initially as Head of Enterprise Sales in the UK and then leading the acquisition of Jajah in Mountain View. She set up and grew the office in Silicon Valley and led the acquisition of San Francisco based TokBox, as well as several investments on behalf of Telefónica including Boku, and Box and key partnerships including Evernote, Pinterest and Rhapsody.

Tracy started her career at Xerox, rising to be one of the first female members of the UK Board. She then spent four years getting a taste of what life is like in an early stage company, working in a venture capital-backed start-up that went on to achieve a successful exit.

Born in the UK, Tracy has lived in Italy, Israel and now lives in Los Gatos, CA, with her husband and family.