A wide range of materials have long been used to create and define the performance of the products we use in our daily lives.
Yet industry can no longer assume the routine use of this same group of materials in the years to come. This poses some intriguing opportunities for those involved in corporate venturing across industrial or technology-related markets.
First, shortages and price volatility of some key materials are becoming increasingly common and this looks set to continue. Most of us are aware that in recent years there has been increasing emphasis on the deployment of clean technologies like solar energy.
Many important clean technologies including wind turbines, electric vehicles and solar cells are currently dependent on the use of critical materials, including specific rare-earth metals.
This increasing deployment of clean-tech is leading to concerns in western markets that shortages of these critical minerals could hinder the deployment of clean-tech.
The recent report by the Joint Research Centre (JRC) of the European Commission assessed whether there could be any potential bottlenecks to the deployment of low-carbon energy technologies in the European Union due to the shortage of certain metals.
It found that fivemetals commonly used have a particularly high risk – neodymium, dysprosium, indium, tellurium and gallium. A similar 2011 report by the US Department of Energy high-lighted supply challenges for a similar set of materials – dysprosium, terbium, europium, neodymium and yttrium.
Setting aside the specifics of the materials highlighted above, it is clear that attempts to develop substitutes for critical materials like these may be fertile ground for investment and innovation.
In a recent survey conducted by consultancy PricewaterhouseCoopers, over 60% of senior executives believed increased substitution of critical materials was the correct response for their company to this major threat.
These substitutes may be either alternative materials considered to pose less of a supply risk or redesigns of existing technology to avoid the need for such materials.
A typical example of a start-up pursuing this type of innovation is C3Nano. It is developing carbon-based conductive coatings as a substitute for indium tin oxide used as a transparent conductor in touchscreen and solar cell technologies.
There are wide-spread concerns about the long-term supply of indium. The development of alternative materials or technologies that meets all necessary performance and business criteria has the potential to generate substantial returns for investors.
However, this is very much dependent on the prevailing prices for the incumbent materials. Should those prices be low, the new material or technology will obviously not look so attractive in the market.
Depending on their criteria for success, a corporate venturing fund able to look beyond short-term price movements may be a more suitable investor in such a technology.
The second key trend is that new alternative materials impacting on current usage patterns of materials are emerging from research labs. Undoubtedly, society’s suite of available materials is changing.
What are those in corporate venturing to make of this changing landscape? Graphene is probably the most prominent and exciting of the new materials, although other types of nanomaterial have real potential.
Just seven years after the isolation of the first graphene sheets, the world of graphene is a hot-bed of research, innovations, investment, expectation and probably a little hype as well.
This uniquely strong material has been championed as the "new silicon" in future generations of electronic chips. Some venture capital (VC) investment money is now being aimed at solving the remaining commercial problems including scale-up of production.
Durham Graphene Science (see Global University Venturing for more on this round) in the UK was the most recent company to receive VC money for this purpose.
However, more commonly in the current economic environment, securing sufficient funding remains a challenge. It is here that strategically-minded corporate partners with patience, experience and industry value-chain contacts, may be able to exploit a genuinely exciting opportunity.
One final point to consider: according to a recent report by data provider Thomson Reuters, from being an also-ran in the field 20 years ago, last year China was the largest producer of materials science-related research in the world.
More importantly the quality of this research is increasing, with the Chinese Academy of Science listed as the institution with the highest number of citations (research referenced by other researchers).
While there is a long time lag and huge uncertainty between a piece of applied academic research and an investable opportunity, like most other statistics relating to China, this trend cannot be ignored.