Travails and thoughts of a Malaysian deep tech investor

1. Numerous books and finance courses are within reach on investments into the equity markets - be it fundamental analysis, technical analysis - or other capital market instruments.
2. The risk/return portfolio theory be it CAPM or Markowitz sells the hypothesis that these risky investments can be managed and de-risked with the right behaviours.
3. But what of private assets where there are no financial history to work off? The risk profiles enter into a different realm when discussing private equity investments and the corresponding structures to deal with the risks, and it enters into a different realm altogether when assessing venture capital.
4. The theory is that by structuring terms which provides enhanced returns is a sufficient workaround for the thigh risks venture investors absorb. But that also assumes a venture investor fully understands the value of the idea in a future world when they invest, be it at an early stage or when a trickle of a pathway into commercialisation and revenue begins to take shape.
5. Without that capability of forming an opinion of what a future market will look like, on the trajectory of the market adoption of a product or a technology platform and how it competes with existing technology pathways now, means that assumption of risk diversification is rudimentary or theoretical at best. The best form of risk diversification is into the different technology pathways into a market we believe will turn out to grow into a meaningful size that a miss, even by a wide margin, may still mean that a hook on creating a new market, or replacing an incumbent's market share, no matter how small a portion provides a form of validation on the initial investment.
6. Yet, that has been the repeated mistakes we have seen. Just a rudimentary understanding of technology, market and product seems to be sufficient to trigger an investment when a substantial deep dive into each of these distinct dimensions are needed to obtain a clear view of whether an investment thesis could be built that is robust enough to be reviewed and stress-tested. We are not stress-testing on the here and now. We are stress-testing for the adoption of a product in a future market that we have no clear view on.
7. Having said all that, the ancillary patterns to look for are good, if not sufficient enough for a discerning and sophisticated venture investor with the ability to actually enable the tide to align itself to the potential investment. It has worked with a great deal of success before, though perhaps that is also serendipitious that there wasn't an exercise to play the information asymmetry on a novice investment partner that is not deemed to have the right credentials to be playing the big boys game.
8. In a way, selection of a priority market to play in appears to be a good starting point, and one that will continuously need to be iterated or reviewed frequently as new technology pathways are discovered or developed.     
9. It is not an easy risk management game to play when a right decision framework entails getting to a point where the investment thesis points to a confluence of a technology pathway providing a clear, differentiated advantage to a present incumbent within an acceptable commercialisation timeframe and the ability to protect that advantage either through IPs or trade secrets, while at the same time ensuring that the industry regulators, incumbents and market players are not unnecessarily preventing the entry of a new enhanced competition at the very least, but all the more advantageous when we consider entry into markets with a high degree of - and proven history of embracing - innovation.
10. There has been occasions too when business cycle turns within the anticipated timeframe, leaving the investment only with a sense of "only" furthering half-baked scientific and technological effort without getting the returns.
11. That high bar itself is enough to turn people off from going into deep tech investments. But the alternative of not doing it is an even more unacceptable position. 
12. For a society that values economic growth as an indicator of maturity, sophistication and civility, but unwilling to place bets on a scientific endeavour that colours society's adoption of objectivity, experimentation and data-driven decision-making, not putting in place enabling policies or initating innovation efforts, sometimes with the feeble excuse of we can't find people to do this, is extremely frustrating and counter-productive. 
13. There is no other way, but to embrace innovation and the risks associated with doing that.