March 8, 2021
In "Angel Investing Tips"
We are on the cusp of major scientific and technological breakthroughs–innovations that will have a meaningful impact on humanity. From eliminating food waste to curing cancer to space travel, there are more and more emerging startups founded on a scientific discovery or meaningful engineering innovation that could have a major impact on the way we live. But how can an angel investor make sense of all that is happening? How can you think about emerging startups in various scientific or technological fields in a structured way?
At Propel(x), we think about investing through the lens of sectors and the underlying technologies that power them. This lens helps us structure our thinking in terms of where a startup fits in the marketplace. We have found that this is the most effective way to help angel investors build a diversified portfolio. But first, a little more about sectors.
The Sectors with the Most Promise:
We founded Propel(x) to help discover and fund the startups that are bringing real scientific and technological advancements to market. We focus on seven distinct sectors that have the most potential for innovation and global impact, as well as for investment returns. These sectors are:
Here’s where things get interesting–and multifaceted. These sectors are powered by key technologies that are changing the status quo. Most technologies impact multiple sectors. For example, advancements in data science and artificial intelligence impact life sciences, agriculture, information technology, and more. Advancements in robotics allow advanced manufacturing, transportation via drones, robotic surgery, and automated agriculture technologies. Synthetic biology technologies impact how we create new drugs, produce more food, find new energy sources…the list goes on.
Below we list the key enabling technologies that are powering the most innovative startups, and we expand these based on investor input as well as emerging technologies.
While this is not an exhaustive list of technologies, currently, we are able to identify at least one startup at each intersection of science and technology. As these technologies develop and expand, the types of intersections that we see will become more and more common. And we encourage you to help us add to this list of enabling technologies!
Using a sector approach to build a diversified portfolio:
Why is being mindful of a startup’s sector and the underlying technologies important to an angel investor? The answer as we indicated earlier is simple: diversification.
Investing across sectors ensures diversification. It’s not uncommon, however, for investors to invest in what they know or what they are particularly interested in. Even if you are only interested in committing to one or two sectors, you can still ensure a good mix by diversifying among the underlying technologies.
Let’s take life sciences as an example. This is a very broad sector, with many opportunities for investment. To ensure diversification, an investor can continue to focus on life sciences while also investing in different technologies. One investment could be in a biopharma company (chemistry as the underlying technology) versus a second that uses robotics to assist or even conduct sophisticated surgical procedures.
We will dig deeper into each of these sectors and weigh-in on the special considerations related to each, as well as the most exciting trends we see emerging in each. In the meantime, we encourage you to think about ways you can diversify your angel investments by being mindful of the sectors you’re investing and the technologies that power them. You can learn more about the importance of diversifying your portfolio by signing up for our five-part angel investment guide here.
If you know of a startup that is breaking ground in one or more of the above sectors, we would welcome learning more about them and helping them on their funding journey.