American feminist writer and activist Betty Friedan had once remarked: “Ageing is not lost youth but a new stage of opportunity and strength.” This is also the perspective entrepreneurs and venture capital investors may have to increasingly adopt to tackle issues stemming from ageing and long-term demographic shifts across both the developed and developing world.
For the first time in recorded human history, many can expect to live past the age of 60. According to data from the World Health Organisation, the world’s population aged 60 and older will likely reach two billion people, up from an estimated 900 million in 2015. There are 125 million people aged 80 or older today and their number is expected to hit 434 million worldwide in the next two decades.
What is more, this is hardly a problem of developed and industrialised nations only. It has been estimated that 80% of all older people in 2050 will live in today’s low- and middle-income countries. To put things in perspective, it took France almost 150 years to adapt to a shift from 10% to 20% in the proportion of elderly population. Emerging economies like China, India and Brazil will need to adapt to it only in slightly more than 20 years.
In the UK, the Centre for Ageing Better charity has launched its Healthy Ageing Challenge Framework, which encompasses seven themes to stimulate innovation in a pursuit of longer and healthier lives for all:
- Sustaining physical activity
- Maintaining health at work
- Design for age-friendly homes
- Creating healthy, active places
- Supporting social connections
- Living well with cognitive impairment
- Managing common complaints of ageing.
These broad categories have indubitably received a different degree of attention by investors. In the case of corporate-backed rounds, our data suggests that there is much attention given to innovative therapeutics solutions to both cognitive impairment problems (neurodegenerative diseases) and common complaints of age (ranging from influenza and pneumonia through back and neck pain to hearing and vision loss and certain types of cancer). This is unsurprising, as treatments for many of these ailments tend to be expensive due to their high R&D costs but interesting to the pharmaceutical industry in general. However, as the bar charts here suggests, there may be much less (or no known or disclosed) funding going into the other five areas of interest, at least as far corporate VC rounds are concerned.
Funding initiatives in the healthy ageing space
There are examples of vehicles targeting the space within the realm of corporate-backed funding initiatives and innovation.
The most prominent one that may immediately come to mind is the Dementia Discovery Fund (DDF). This strategic UK-US-focused investment fund was backed by pharmaceutical firms Biogen, GlaxoSmithKline (GSK), Johnson & Johnson, Eli Lilly, Otsuka, Pfizer and Takeda and reached a $350m final close in 2018. The completion of the fundraising came through a $60m commitment from senior citizen’s lobbying group AARP. Other corporate backers included also care provider UnitedHealth, insurance supplier Aegon, diagnostic testing services firm Quest Diagnostics. The UK government-owned British Patient Capital also chipped in. Other limited partners were also labour organisation the NFL Players Association, the UK Department of Health and Social Care, Alzheimer’s Research UK, investment firm Woodford Investment Management and entrepreneur and billionaire Bill Gates. DDF is managed by venture capital firm SV Life Sciences and was first launched in 2015.
More recently in March 2020, US-based venture capital firm Creative Ventures reported it had secured more than 50% of the capital for its second fund sized at $50m. Founded in 2016, Creative Ventures targets companies developing technologies that could tackle societal issues such as labour shortages, ageing populations and reductions in resources caused by climate change. It targets East Asian limited partners (LPs) looking to invest in Silicon Valley, and the second fund’s backers, which include unnamed family offices, cover Thailand, Singapore, Hong Kong and Taiwan. Digital services provider Benchachinda and alcoholic beverage producer Singha contributed to the second fund through corporate venturing vehicles BCH Ventures and Singha Ventures, alongside incubator and VC fund V ventures and entrepreneur Itthipat Peeradechaphan.
In 2016, a corporate venturing unit, dubbed Sodexo Ventures, was set up to target companies with high-growth potential in sectors aligned with Sodexo’s business activities, such as food technology, health and wellness, data, mobility and smart buildings. Sodexo operates in 80 countries, serving an estimated 75 million consumers each day, offering catered food, home care and meal services for the elderly and infirm, and employee benefit administration for incentive schemes such as childcare vouchers.
Two years earlier, in 2014, Link-Age, a US-based operator of senior living communities and ageing research activities, closed a $26m venture capital fund dubbed the Ziegler Link-Age Longevity Fund with investment bank Ziegler. Link-Age Ventures, the company’s corporate venturing unit, funds early-stage businesses developing technology to meet the needs of senior citizens. The fund, which is a 50-50 joint venture, invests between $500,000 and $1m in each startup and its LPs include 70 non-profit senior living providers.
In 2012, Belgium-based bank and insurer KBC launched Start It @KBC, an incubator in Antwerp, together with management consultancy Accenture, Flanders DC, a non-profit organisation founded by the Flemish government, University of Antwerp, technology firm Cronos and mobile provider Mobile Vikings. Start It @KBC targets local startups in mobile and cleantech sectors, particularly those proactively focusing on issues surrounding the ageing population and the digital society. The incubator provides space for startups in the KBC tower for at least a year, as well as support and advice through the early stage and the subsequent development period.
Ageing tech from the perspective of a corporate venture investor
Jonathan Tudor, technology and strategy director at Centrica Innovations, the venturing subsidiary of energy company Centrica, explains that the investment unit he heads started investing in the ageing tech space for two major reasons: “On the one hand, there is the social and consumer aspect of it – as there will be more people above 65 in two decades. On the other, there were the behavioural patterns we got interested in and it was in connection with smart home applications and our core business. We wanted to know whether using data from sensors about the everyday behaviour of elderly customers could help indicate something about their wellbeing. If you can do that, you could save billions to the economy in health care and other costs.”
Tudor also said the Centrica conducted an ad-hoc ethnographic study on customers aged 60-65, as this demographic group seemed more prone to adopt smart home technologies for the elderly in the coming decades: “They generally use smartphones and are much more comfortable with technology than people above 80.” This statement underscores an important point in terms of technology adoption among the elderly – those will be of age 80 or older in the coming decades will be much a more tech-savvy demographic than the octogenarians of today.
Centrica wanted to explore and pilot the idea of using data on behavioural patterns to ensure the elderly’s wellbeing – for example, use sensors data to detect if an elder has fallen over and been hurt. Centrica ran a contest for startups themed as a specific challenge in 2018 dubbed the Active Ageing Challenge. Tudor recalls: “We wanted the startups to come with their product and run a demo. There were well over a hundred applications. We selected three companies and ended up investing in two of them.”
Above: Jonathan Tudor, Centrica Innovations
One of them was Sweden-based company Minut, founded in 2014, which has developed a smart home alarm that detects motion, monitors noise, temperature, humidity, and mould risk, ensuring the home is safe. Another one was the Israel-based EchoCare Technologies, which develops a non-wearable, elderly-care, home monitoring system that automatically alerts safety and emergency situations. Tudor shared that EchoCare´s founder was the oldest they had ever worked with, a retired radar engineer who was looking after his mother-in-law. “She hated having a camera to watch her, so he developed this solution which essentially can count how many people there are in a given room and whether anyone has fallen over.”
When asked about potential privacy concerns regarding smart home tools, Tudor shares an insight from the study Centrica ran with the target demographic: “People do not like lenses of any kind, even if they are for infrared waves or something else. Anything that looks remotely like a camera could distrusted and people will not accept it. So, the more covertly you can extract data to determine their wellbeing, the better.”
Another example of a company leveraging data is UK-based Green Running, which specialises in high-frequency disaggregation and data analytics in the energy sector. “Essentially what they could do is find out through data if a particular device is plugged in or the lights are on and detect anomalies which may indicate something has happened to elderly people who have their routine, which shows in their energy usage patterns.”
The ageing tech space before and after Covid-19
In the world before the pandemic, much investment has gone into therapeutics for a variety of conditions, as noted above. As the common complaints of old age are not going to disappear in the post-pandemic world, investors´ interest in them will likely remain.
As for smart home and other solutions, Tudor concedes that the pre-Covid-19 focus was placed “largely on data sources” and exploring behavioural patterns reflected in them. However, he believes this will change and more focus will be placed on ways of connecting, communication and interface, particularly in a time when “people cannot really visit relatives”. He cited the successful consumer adoption of community apps like NextDoor, which defines itself as “neighbourhood hub for trusted connections and the exchange of helpful information, goods, and services”.
In Centrica Innovation’s portfolio, there is one company that appears to have seen “phenomenal growth” during the lockdown as Tudor explains. Founded in 2014, Hello Alfred has developed what it calls “a human-driven, home-operating system focused on changing the way people live in cities.” What it offers is housekeeping and other services for people living in urban multiunit dwellings. Hello Alfred is currently available in 21 major cities spanning across the US. “They were very successful before the Covid-19 crisis but the lockdown gave them a boost,” said Tudor.
What is holding healthy ageing tech back?
As an investor knowing this space, Tudor does not believe there is a dearth of solutions or startups willing to apply solutions and technology to the problems associated with ageing. “I think there are other things that are holding it back. It is about a confusion of how reliable these solutions are. If you have sensors in the home of an elderly person and they do not detect they have fallen over when they in fact have fallen over and hurt themselves, there is a two-fold problem. On the one hand, you have the potential legal liability and, on the other, it is also about credibility and how robust such solutions have to be.”
When asked about the UK´s specific position to tackle problems in the ageing tech space, Tudor takes a more global stance on the matter: “I do not necessarily see it as a UK problem only. Populations are ageing all over the world. I do not know if specific government policies would trigger more innovation in the space. There are plenty of areas, such as sustainable energy where they really have…” Tudor seems to believe international and cross-border cooperation in technical innovation is key to tackling such problems and incentivising startups to work on them. He pointed as an example portfolio company Minut, which had participated in a hardware accelerator called Hax, giving the founding team access to experts in both Silicon Valley in the US and Shenzhen in China and helped them come up with a working prototype of their solution. Thus, international economic cooperation and even division of labour is likely key in this context.
Increasing private investment
The key to alluring private investment to the wider space of elderly care and ageing, especially in its most underfunded subparts, may lie in making investors see and think about the economics of the problem. Forces driving long-term demand appear to be in well in place, however coldblooded such an analysis may sound.
In the UK alone, the ageing population issue is particularly acute. According to a study of Newcastle University and the London School of Economics and Political Science, cited by the BBC, the fastest growing demographic group in the country is elderly people over 85. Their number is projected to more than double by 2035, increasing by 1.5 million. Of particular interest are the most vulnerable groups of over-85s requiring help throughout the day with tasks such as dressing, bathing and going to the toilet. By 2035, their number is expected to almost double and reach 446,000.
In the US, long-term care expenditures for people aged 85 or older are expected to reach $346bnby 2040. According to estimates of the US Department of Health and Human Services, the number of individuals using paid long-term care services (including home, residential care or other nursing facilities) will likely reach 27 million people by 2050, up from $13 million in 2000.
Given that both venture capital and corporate venture capital funds have a relatively longer investment horizons of seven or more years, communicating with them and bringing their attention to the economic opportunity arising from these issues may be crucial.