Technologies that Will Drive Innovation and Investing in 2015

At Harris and Harris Group (H&H), a considerable amount of our time focuses on tracking the latest science and promising new technologies. To improve our chances of succeeding in early stage investing, we regularly meet and discuss new scientific discoveries that have been announced, with an eye to identifying investment opportunities that will mature over the next three to seven years.

In the past, this exercise has led us to some exciting investment areas that are now in the main stream. For instance, when we saw the platforms being developed for wearable technology and the “Internet of Things” a few years back, we became very interested in the underlying technologies that enable wearables. Wearable technology is going to enable us to continually sense multiple different things that we can monitor on mobile platforms. Two enabling technologies we believed would be critical for the advancement of wearable technology and the Internet of Things included low-power consumption electronics and waterproofing. In our portfolio, Adesto and HZO are developing products in these areas, respectively, and their growth is mirroring the increase in demand for wearable technology.

Another example of how this exercise has led us into important new investments is in the area of the microbiome. The microbiome is the aggregate of microorganisms in a given environment, usually the soil around plants or the human gut. Over the past few years we have made multiple investments in work related to the microbiome. AgBiome aims to harness the plant microbiome for the development of novel crop protection products and trait discovery. ProMuc is developing synthetic mucins, the active ingredient of mucus. It is in the mucus environment that much of the microbiome resides, and impacting that environment may lead to better treatments. Finally, early interest in immunotherapy permitted us to focus our single cell analysis portfolio company, Enumeral. Enumeral successfully raised capital and is now public.

For the future, here are some technologies and trends that have struck me as potentially transformative and, perhaps, could potentially represent good investment ideas. I will now discuss what trends to watch for in 2015 and beyond.

First, I believe we will continue to see the rise of the microbiome in human health. There are tremendous developments taking place in our understanding of the human microbiome. Pills are being developed to get good bacteria into our system to treat gastrointestinal issues. Pre-biotics and pro-biotics are going through a renaissance, with better science informing each field. Our own portfolio company, Metabolon, is actively involved in commercializing discoveries from the interaction of the microbiome with human health. It turns out far more diseases than previously known may result from human interaction with the microbiome inside each of us. Our bodies — and the animals and plants we eat — are more than just our own cells and our own DNA. Each one is its own ecosystem of bacteria and other microorganisms, all living interdependently. The health of our microbiome has a big influence on our own health.

In the healthcare and life sciences markets, I believe there will be some new tools permitting us to do more things in vitro (in glass or outside the body) rather than in vivo (in the living or inside the body). For example, as an extension of 3D printing, we will begin to see 3D biology, which includes the printing of organ tissues on a chip. Additionally, more medicine is moving to silicon. If one can better replicate the heart on a chip, then one can run more toxicity and efficacy studies on those chips. We are in the very early stages of moving some analysis away from animal studies to the lab on a chip concept.

This will naturally lead to a lot more in silico research design, which uses advanced computational techniques and machine learning to conduct medical science and research with computers rather than with test tubes or animal studies. Big data, for example, will move into other life science applications such as in diagnostics, drug discovery, and the selection of the most effective medical treatments. We’ve already seen machine learning move into driverless cars by Google. Now, I believe we will see big data and algorithmic learning move into life science applications as well.

The consumerization of medicine is another trend I see potentially playing out over 2015 and beyond. There is a continual march to eliminate intermediaries and to go directly to consumers. Apple, Amazon, and Facebook are prime examples of successful direct-to-consumer businesses that have eliminated the middleman. That concept is expected to start creeping into the healthcare space. As our society becomes more medically literate and educated regarding our own health, we are becoming much more familiar with healthcare. This is empowering consumers to understand healthcare and make more of their own healthcare decisions. That’s a powerful trend that will be enabled by other developments I noted earlier, such as wearables and big data.

Cell therapy technology will continue to progress. Cell therapy is therapy in which cellular material is injected into a patient, usually intact living cells. A recent example has been the injection of T-cells capable of fighting cancer cells through cell-mediated immunity, an area called immunotherapy. Over the coming years, I believe we are going to see novel materials for cell differentiation, new analysis tools for validating and characterizing cell therapy and novel manufacturing methods for cost effective cell production, all which will make cell therapy a highly viable new tool for disease management.

There are two other important emerging areas in the life sciences. I believe both areas will emerge over the coming years. The first is the rise of very small implants, electroceuticals, that will permit patients, diseases and organs to be monitored from within on a continuous basis. The second is the rise of our ability to both reduce most things to chemistry and synthetic biology and, when necessary, to create synthetic forms. I believe that in addition to creating synthetic organs, we will also see more developments like the synthetic meat that taste like steak. Science fiction may certainly start becoming reality.

Finally, I would be remiss to talk about the future of technology without mentioning energy. Energy will also be a major economic driver over the coming years. Whether or not you agree with fracking in the U.S., the widespread availability of cheap natural gas may be the primary driver of growth in our economy over the coming years. It is a wonderful thing for a country to have low energy prices, and that’s going to be a great tailwind behind a lot of other parts of our economy. It is also the head wind for many European economies, as their energy prices are too high to permit growth.

But, how do you undertake cost-effective, environmentally friendly fracking? I think there are big opportunities in making the natural gas industry more environmentally sustainable. As an example, France has substantial reserves of natural gas that could be tapped through fracking, but those reserves are primarily located under Paris and Provence. In order for countries to access cost-effective energy, we need to develop dependable, environmentally friendly ways to capture that gas and oil.

These are some of the trends we are watching for the coming year. We have invested in portfolio companies in some of these areas, but not all of them, yet. We plan on exploring some of these areas in more depth in future posts.