Sometime last year, in one of my many calls with VC investors, I spoke to someone based in Denmark who had reached out to learn more about my research on VC ethics. He explained his investment thesis in detail as well as provided some insights into the history of his fund more generally.
“We have always been strongly focused on social impact at my fund; we invest in things like healthcare and infrastructure and social entrepreneurs who are building solutions to big issues such as climate change. Really, our fund is focused on public purpose technology.”
This was one of the first occasions I encountered an investor explicitly talking about public purpose technology or, PPT. While I had heard the acronym and concept before, I wasn’t quite sure how it related to venture capital. To be completely honest, I didn’t even really know what it meant - which might be the same for many of you.
PPT-companies work on nuclear fusion (Commonwealth Fusion, for instance, has raised $1.8 billion on this journey so far), new and more accessible healthcare (Kry, accuRx, Ada and Bayblon are prime examples) or public safety (Edgybees, for instance, is focused on geospatial intelligence). StateUp’s recent analysis of large-scale public problems being addressed by PPTs right now helps provide a bit more background.
In some ways, I find definitions to be boring. However, defining something helps us to understand it better. Dr. Tanya Filer, lecturer at the University of Cambridge and founder of StateUp, has a simple definition for PPT:
“... technology that addresses big public needs, and the public policies, organisations, cultures, investments and business models around it.” - Dr. Tanya Filer
Dr. Filer goes one step further in the StateUp 2022 report adding, : (PPT), “may be best defined by its intentions and outcomes - serving a big public need - rather than a specific product or customer.”
While some would equate public tech with investing with a specific sector-focus – govtech or civtech, for instance, PPT encompasses a much larger scope.. It shouldn’t be defined by who the technology is sold to alone (govtech is sold to, and is intended to improve, public services), nor what the products are (civtech is widely focused on civic and democratic engagement with governments).
Rather, an important but often undervalued aspect of PPT is its impact – PPT is focused on solving big public needs.
The Rise of PPT
Interest in public purpose technology and the big solutions to big problems that it can provide has seen a sharp increase as of late, driven by a few key factors.
Covid-19 (and the continuous cycle of crisis and resurrection of various healthcare systems, including the NHS in the UK) and the increasing awareness of the imminent impact of climate change have seen the general public and thus governments turning to tech to help tackle these issues.
We have not only been observing a (new) clean and green tech boom recently – arguably something that at least partly falls into the PPT camp – but also an increasing influx of money into impact VC. While there might often be a direct relationship between a subset of clean- and general-impact startups and the government (e.g. as procurer and customer), this need not be seen as a negative.
Now, connecting PPT directly to (a specific kind of) impact VC only shifts the problem. What is impact investing? First of all, when people hear the term ‘impact’, the thought ‘lower returns’ is often associated. While there is a subset of impact investors – that which has historically been labeled social impact investors, and is now perhaps best viewed as Venture Philanthropy – that is indeed sacrificing financial returns, contemporary impact VCs have a different mantra: double- or even triple-bottom-line investing.
Today’s Impact VCs are focused on financial returns (first bottom line), social or environmental returns (second bottom line) and environmental and social returns (third bottom line) together. In this sense, as opposed to conventional VCs, Impact VCs investment criteria are stricter, placing focus on both impact and financial returns.
So how does this coincide with PPT? PPT affects millions if not billions of people (think healthcare or climate tech). Not only are market sizes big – but so are the budgets. While both development cycles (think deep tech), as well as sales cycles, are longer than consumer tech, for example, eventual revenues and profits have the potential to be similarly outsized. PPT often requires more patience but shouldn’t require accepting lower returns.
The reach of regulation
This takes us to a second reason why PPT is a growing sector: regulation is starting to touch on more and more aspects of technology. On the European front, AI is going to see a drastic regulatory wave roll over it soon with crypto soon facing a similar fate. At the same time, governments are again understanding themselves – during and post-Covid in particular – as drivers of economic growth.
The Levelling Up agenda in the UK and the Infrastructure bill in the US are allocating trillions of pounds and dollars respectively, to areas addressed by PPT such as transport and healthcare. Government as one key driver of PPT is pushing ahead already through specific VC-like investment vehicles such as the European Innovation Council, the Future Fund in the UK and the German Zukunftsfonds. Beyond Europe, developing banks around the world are pushing a similar agenda (see the IDB in LatAm for an example).
The tipping point
According to Dr. Filer, PPT is at a tipping point. To help educate and understand this journey, we’ll explore in greater depth the role of two of the major actors in PPT - the State and investors.
We’ll analyse the function these actors fulfill in pushing PPT forward, as well as the dangers associated with their usual practices.
The third installment will focus on the next steps for PPT - and the roadblocks which are holding us back.
Closing out the Tech.eu exclusive series, we’ll hear from two of PPTs foremost experts about its future. I will have a conversation with Dr. Tanya Filer of StateUp and the University of Cambridge and Lyel Resner, who teaches at Cornell Tech and is a serial founder with a strong focus on PPT.