Mattias Ljungman, co-founder and partner at venture capital firm Atomico, says that whatever Donald Trump may want you to think, he and politicians like him are not the decisive change-makers of our age.
It is clear that governments cannot solve our greatest problems on their own. Many of the challenges the world faces today have been on the agenda for years. Two of the greatest – climate change and the provision of adequate and manageable healthcare – have been grappled with by governments for decades to varying degrees of dissatisfaction.
For real progress we need to turn to the entrepreneurs employing cutting-edge technology, who are our best hope for change. I am not referring to Mark Zuckerberg and Bill Gates – although they are doing amazing things – but rather a new generation of entrepreneurs and engineers in Europe. They are tackling hard problems, often straight out of Europe’s outstanding research universities, and are now poised to use this technology to change the world.
However, their great ideas and talent will not be enough on their own. Today’s entrepreneurs continue to need capital, but now – more than ever – they also need the benefit of others’ experience. A good venture capital firm has to provide both.
Venture capital is the right approach to fund entrepreneurs tackling the biggest problems – it is a way of injecting capital into promising high-growth businesses at an early stage of their development. While the cost of creating a company has fallen from USD2 million in the late 1990s to just USD5,000 today, tackling big problems means most technology-enabled companies will run at a loss at the beginning. However, an entire venture fund’s performance can be driven by backing a small number of really great winners, so it is a model that allows investors to take on the types of risk required to back truly transformative companies.
Ambitious entrepreneurs with the most disruptive technologies also need expertise to scale up their businesses. Many of our most successful entrepreneurs have tried and failed several times before they got it right, despite having access to capital. Access to experience is critical if they are to have global impact – especially in heavily regulated and fragmented sectors.
Fortunately, there are now generations of experienced entrepreneurs and venture capitalists who understand the pitfalls of entrepreneurship and are available to help. Leveraging this collective and hard-won wisdom to help a new wave of founders is vital if we are to solve the world’s biggest problems, and part of what any good venture capital firm should be helping with.
Healthcare is one area where technology introduced by entrepreneurs is already making an impact. The world’s major regions are expected to see healthcare spending increases ranging from 2.4 per cent to 7.5 per cent between 2015 and 2020, while the US alone spends more than USD3 trillion annually on the sector.
Despite debates on the government’s role in healthcare that rage on both sides of the Atlantic, experience suggests that it will not be governments which ultimately move the needle, but technological innovation. One technology with enormous potential for healthcare application is artificial intelligence (AI), where a variety of European innovators are taking the lead.
Take London-based BenevolentAI, whose team is working with bioscientists to accelerate discoveries in medicine. It has already identified compounds which researchers believe will be effective in treating multiple sclerosis.
Elsewhere, firms are working to make the work of over-burdened medical professionals easier. DeepMind is already applying its techniques to medical research, starting with radiotherapy and the diagnosis of eye conditions. This new intelligence is already better than humans at determining where radiotherapy should be targeted for patients suffering from head and neck cancers. And its ability to interpret eye test results is also improving the chance of catching eye problems earlier, and will soon be able to inform treatment decisions.
Founded in London and expanding into the US, Hinge Health is employing sensors and remote health coaching to improve the treatment of chronic musculoskeletal disorders. As universities across Europe such as ETH Zurich, TU Munich and Imperial College London produce more and more specialists in hard sciences like AI, the upside for government, in healthcare and beyond, is enormous.
Climate change is another example of entrepreneurs providing real solutions. While governments squabble over supranational agreements, entrepreneurs are chipping away at discrete sustainability challenges which are in themselves massive opportunities.
If we take transport alone, Munich-based Lilium has devised an electric vertical take-off and landing jet, which will enable flight without emissions and noise pollution. As it stands, 12 per cent of CO2 emissions from transport comes from the aviation sector, and Lilium’s solution is a bold leap forward.
Back on the ground, 30 per cent of road transport CO2 emissions in the EU comes from freight trucking – where up to 40 per cent of return journeys are empty-handed. This inefficiency is being tackled by Spanish start-up Ontruck.
Finally, while Elon Musk’s Tesla grabs the headlines, European companies like Sweden’s Einride are producing their own electric vehicles, and Croatia’s Rimac is producing electric components for traditional car manufacturers. The more startups like these we can fund and assist, the more we’ll chip away at the existential challenges we face.
While the financial incentive to invest in venture capital remains huge, this is about more than money. As investors with the means to enable change, we have a moral responsibility, as well as a financial one. We need to back and partner with the entrepreneurs who are taking on established industries and tackling some of our biggest societal and environmental challenges in the process. Though the political landscape may seem bleak, we can still look to entrepreneurs to invent a better tomorrow. As an investor, you can play a part in this.
Mattias Ljungman is a partner at Atomico, an international technology investment firm headquartered in London which he launched in 2006 with Niklas Zennström, the co-founder of Skype.