To truly move the needle on achieving UN Sustainable Development Goals (SDGs), consumers and enterprises need to embed new innovative technologies in their everyday life. And while sectors such as delivery of healthcare and financial services have been ever popular in the impact space, we are witnessing a generational shift in how startups are employing AI and DeepTech to solve a complex business problem and in most such cases, multiple SDG goals get addressed as a natural outcome.
Let me give you an example of this - Our portfolio company Locus uses AI to automate the fleet routing process in complex logistics businesses. The benefit to their customers is obvious as it helps them reduce the delivery costs significantly. But often overlooked benefits include increasing the earning capacity of delivery personnel as they can make more deliveries and serve more customers. This helps fulfill UN SDG 8.5. Another corollary is that usage of optimized routes identified by Locus leads to a lower fuel usage and hence lower carbon emissions. As a result, UN SDGs 8.4, 11.6 and 13.1 are targeted and one of their large global customers has even taken carbon credits on account of using Locus in their workflow.
Internally at pi Ventures, we have mapped how AI and DeepTech will advance various SDGs (shared in the figure below) and this will be a strong area of focus for us in the future.
To explore this thesis further, we hosted a session with a set of experts that included Ruchira Shukla from IFC World Bank, Chirantan Patnaik from CDC UK, Florian Kohler from Obviam, Kate Collins from The Bridgespan Group and Krishnakumar Natarajan from Mela Ventures to get their perspective on the role of AI/DeepTech in implementing UN SDGs. And the unanimous feedback from the panel was that AI/DeepTech will be ubiquitous in every product and service and will drive the next generation of solutions to the world’s problems. Ruchira summed it up best when she said “DeepTech is inevitable and so is its impact. It is happening sooner than we think considering the pace of innovation is accelerating. The earliest innovators and investors will benefit massively”. By leveraging on significant scientific and engineering innovations, these technologies can solve extremely challenging problems faced by the world and create impact on a massive scale.
We have seen how technologies like AI can bridge the massive supply-demand gaps that exist in the world within education, healthcare, food, and financial access areas, among others. By democratizing the learning from the data, goods and services can be made accessible and affordable to a large audience. Wysa is a perfect example of this as it uses a sophisticated AI chatbot to provide access to mental health to the masses at an affordable cost thus fulfilling SDGs 3.8 and 3.c.
Another major trend pointed out by the panelists was that the majority of such solutions are also likely to come primarily from Asia especially India due to the availability of technical talent, first-hand experience with the problems and lower cost structure. A prime example is CropIn which uses data and AI to help farmers buy, grow, and sell better thus enabling greater financial outcomes for them. This is only possible because India has the largest agricultural database in the world which can be leveraged to create such a product. Edtech startup Byju’s uses AI to deliver personalized digital learning to millions of students thus overcoming the paucity of educators especially in remote areas.
Until now, DeepTech was funded primarily by government and research due to the long gestation period of these technologies but we can see private investors now entering the arena on account of shrinking commercialization timelines and favourable regulatory framework. The panelists felt that venture capital, as an asset class, is best suited for DeepTech investments for multiple reasons. Firstly, traditional forms of financing are not available for early-stage tough tech due to lack of revenue and slower customer adoption. Secondly, a VC portfolio approach has the correct risk-reward profile as the returns and success of these technologies both follow the Pareto principle. And according to Chirantan, “The mental models that a VC uses, to evaluate and invest in DeepTech opportunities, help the entrepreneur find the correct product-market fit, go-to-market strategy and drive adoption.”
Climate change is one of the single biggest challenges facing humanity right now and correctly, there is emphasis on responsible and reduced consumption. But changing human habits is extremely difficult and it will be easier to replace current goods and methods by more sustainable alternatives driven by DeepTech. We are seeing this play out in EVs with better batteries by Tesla and in plant-based meat alternatives with Beyond Meat. While innovative climate-only innovations will continue to prosper, the panel was of the opinion that ClimateTech will be pervasive, will cut across all sectors and climate impact will be a metric to measure the success of each investment in addition to financial returns.
When asked which are some of the biggest global challenges that the panelists look forward to getting solved by AI/DeepTech, the answers were diverse spanning Climate change, Precision Medicine, Bias Removal, Data Privacy and Protection, and Food & AgTech. And this is consistent with the thesis that we have internally built on the different ways DeepTech will advance UN SDGs.
India’s score on the UN SDG Index has increased from 48 (2016) to 62 (2020) and the world average has increased from 58.4 to 66.8 during the same timeframe. Apart from increased focus by governments, institutions, and individuals towards achieving the UN Sustainable Development Goals, we at pi Ventures definitely believe there is a correlation between the proliferation of DeepTech in the last 5 years and the global improvement in SDG scores. Our target is to continue to back such DeepTech innovations which create a more sustainable inclusive economic growth for all led by Indian startups and our ambition is to see India at the top of UN SDG Index.