Creative Investing: New Paths for Venture Capital and Private Equity

On 17 June 2022, IFT assembled a panel of experts in finance and technology to discuss how the landscape of investment must change to meet the challenges of the times. IFT PhD student Millie Deng recaps what we learned.

The Covid-19 pandemic has been a turning point for humanity, bringing world economies to a standstill and highlighted our vulnerabilities. The Russia-Ukraine conflict has further amplified uncertainty and instability. Venture capital and private equity are engines of change and growth in terms of the way we invest in businesses. But these investments, particularly of Venture Capital (VC), are vulnerable to volatility as they follow economic up and downturns.

The last three years have showcased this dynamic like perhaps no other period in history. And yet, despite the universal and potentially long-lasting economic, social, and political impacts of Covid-19, 2021 was actually a record-breaking year for VC. The International Monetary Fund was able to raise its projection for economic growth in 2021 from 5.5% to 6%, and project 4.4% growth in 2022. This was partly based on how well the pandemic continues to be controlled, and the effectiveness of global economic policies to cushion the damage to the markets. Now, we must ask how we continue to recover, while reconfiguring existing systems to be resilient to shocks.

Speakers at a recent IFT event spoke of the need, above all, for collaboration, entrepreneurial spirit, and creativity to build solid foundations to handle shocks like pandemics, climate change, and war. With a background in European-Asian investment relations, JingJing Xu of FuelVentures spoke of the importance of better linking between these markets. She suggested that VC’s all-time high of $176.4 billion at the end of last year (Q4 2021), was in part supported by collaboration between markets; the European market has diversified not only to work closely with the American market but to build relations within the Asian market, helping the valuation of European companies to grow. For Jing, international collaboration and “bigger picture” thinking are key characteristics for a successful investor. As global investor relations improve and strengthen, however, she acknowledged there is work to be done to develop a coherent vision for international investment, so that diverse investment initiatives can align and mutual support one another. Her perspective on success is encapsulated in the diagram above.

Sir Alan Wilson, Research Director at IFT and Director of Special Projects at the Alan Turing Institute, reflected on industry know-how, but from the perspective of interdisciplinary knowledge exchange. He noted that sharing knowledge about fintech and the wider economy in open fora could support policymakers to plan innovation into fiscal and investment policy decisions at an earlier stage, meaning governments could react faster, communicate earlier, and consider ethical complexities for the good of all citizens. Sir Alan suggested that opportunities for transparent dialogue between industry and the academy are critical to identifying and achieving applicable outcomes from research to solve global problems. This is at the heart of IFT’s mission; an innovative centre at the nexus between industry and academia, which can keep pace with the fast-moving nature of finance.

Finally, Professor Piero Formica highlighted the need for curiosity and creative investing in VCs. Innovation is changing, accelerating and pervading, fuelled by digital technology and scientific advances, but also by a motivation to help solve pressing global challenges like the climate crisis. He believes that new generations of learners are path creators, at the forefront of radical change. Creativity and vision are vital for investors who are confronted with those young path creators, to ask what they can do to support them. Entrepreneurial start-ups may well be the key to action and innovation at sufficient pace and scale to address and reverse the shifts leading us into crisis. Other potential agents of change, like governments, multilateral institutions and large private sector organisations, need to move fast to meet the tight deadline for solving these crises.

All of our speakers spoke with hope that global challenges can be turned into innovation-led opportunities. Now, we must think creatively, collaborate and share knowledge to support skilful and responsible sustainable investment to mitigate global crises.

Thank you to all our speakers and attendees. Click here to view the IFT events programme, or join our mailing list to receive updates.