Activating the money of the wealthy for Breakthrough Technology

There are a lot of breakthrough technologies in space technology, nanotechnology, quantum computers, nuclear fusion, advanced nuclear fission and radical life extension which could really benefit from a few billion dollars per year in investment.

There are a lot of rich people in the world and they are potential angel and superangel investors that could fund breakthrough technology.

                                      2014                2020
Billionaires                           2,325         3,600-4,000
$500 million+                          4,300         6,000-7,000
$100 million+                         45,000         50,000-60,000
UHNW ($30 million+)                  211,000         250,000
HNW ($1 million investable)      12-13 million       15-17 million

Getting 0.1% of world wealth for breakthrough technology could greatly speed technological advances

New Charity Investing Model like Cystic Fibrosis Foundation – invest in research and retain rights from successful breakthroughs

The Cystic Fibrosis Foundation will sell royalties it gets from Vertex Pharmaceuticals Inc. (VRTX) for $3.3 billion to Royalty Pharma, taking a profit from charitable investments made to fight the fatal lung disease.

The Cystic Fibrosis Foundation plans to reinvest the money into new research efforts.

The Cystic Fibrosis Foundation initially gave Vertex about $150 million to do research and develop new therapies. Royalty Pharma will get royalties from Kalydeco and any other drugs Vertex makes that are tied to the foundation’s investment, including two experimental drugs it’s working on. The first, a combination of Kalydeco and the drug lumacaftor that targets a mutation that occurs in at least 22,000 cystic fibrosis patients, is being reviewed for approval. A second is still in development.

Rather than receiving royalties on sales of those drugs over the next two decades, the foundation decided to cash in now so it could have more money to put into research quickly.

While the windfall means more money for research, the drug itself costs more than $300,000 and has been out of reach for some with this fatal disease.

“This was a dramatic example of risk-taking that has paid off in a remarkable way,” said Dr. Francis S. Collins, the director of the National Institutes of Health, who co-discovered the gene behind cystic fibrosis in 1989 while at the University of Michigan.

Breakthrough Technology Investment Trusts

The Center for Venture Research estimates that U.S. angel investors invested $19 billion in 55,000 deals (about 35,000 small businesses) in 2008. Many of the investments were in start-up or very early-stage companies.

In the US Real Estate Investment Trusts were about $670 billion in 2013. This is over 30 times bigger.

There is a shortage of investment for infrastructure and there has been a move to access the vast trillions of private capital via Infrastructure Investment Trusts

Creating investment trusts or special funds for a pool or a category of breakthrough technology could be method to get more money and funding.

Develop more active and breakthrough technology savvy angel investors

David S. Rose, a prominent angel investor, has written a guide that describes the risks and rewards of backing new companies.

Mr. Rose promotes annual returns of 25 percent for angel investors. It’s the kind of number that makes certain people swoon and open their checkbooks. But Mr. Rose makes clear that such returns are possible only with a lot of patience and money.

He said angel investors needed to build a portfolio of at least 20 different companies with stakes in each in the range of $25,000 to $50,000.

Most successful angels also have some knowledge about specific industries to help them find the 20 percent of start-ups that have a chance to succeed — keeping in mind that at least half of them will fail. The investor should limit his angel investments to no more than 10 percent of his overall portfolio, with the rest diversified among the usual asset classes.

By his calculation, an angel would need at least $500,000 to invest a minimum of $25,000 across 20 deals. Add in reserves, and we’re up to $750,000. If that pot of money is supposed to be only 10 percent of an investment portfolio, an angel would then need at least $7.5 million in liquid assets.

To make up for the failures and stragglers, angels should aim for a return of at least 30 times their investment.

Super angel investors are a group of serial investors in early stage ventures in Silicon Valley, California and other technology centers who are particularly sophisticated, insightful, or well-connected in the startup business community.

The 55,000 deals made in 2008 were probably made by fewer than 10,000 active angels and superangels.

SOURCES – Boston Consulting Group, NY Times, Wikipedia, Deloitte, Bloomberg, angel capital association

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