The Global Pandemic & Digital Transformation
The COVID pandemic has rapidly accelerated a digital transformation within our society. The crisis not only highlighted substantial complications in the monitoring of medicine and analysis of healthcare data, but also disrupted a steady flow of goods and services. This exposed many outdated business models and supply chains. In far too many instances during the pandemic, businesses had to reassess plans, profit forecasts, and balance sheets. The ongoing stress has many companies searching for better ways to unlock unvalued or undervalued business assets in order to fuel transformation and new business models. Chief among these valuable assets are corporate data, human intelligence and combinations of both.
Real World Big Data for Clinical Research and Drug Development
The global pandemic and the crisis that followed has greatly increased the need for anonymized patient data in the already established and growing demand from clinical research and drug development. Anonymized data means encrypting personal data or eliminating identifiable information so that the collected data source is untraceable. COVID has resulted in an exponential growth of empirical research that relies on big data and the need for high-volume, routinely collected specialized and genetic health records. These data, using artificial intelligence to dissect and distill important trends, facts and other information, have the potential to provide valuable insights to assess health conditions like COVID and treatment effectiveness. While a significant portion of the healthcare data in the world resides within hospital networks, hospital margins are razor thin, making internal investments in data infrastructure difficult. Companies like Syndesis Health, a client of our firm, is a global market leader in utilizing data trust technology to anonymize health data with government grade security. They are moving fast to help hospitals market and monetize the data by licensing anonymized patient records to clinical research and pharma companies. Syndesis Health creates a solution for companies with valuable data by taking on the expense to migrate the data, and then share in a percentage of the resulting revenue with the hospital, its client. Kamil Mehmood, a Director at Syndesis Health, says “The future of healthcare will be data driven. The ability to safely and securely leverage anonymized health data is enabling a rapid acceleration in the development of new innovations that improve health outcomes.” Mehmood adds, “at Syndesis Health, not only are we focused on making these data available for research, but we are also focused on ensuring that the economic benefits created from its use are shared with the hospital networks that are making it possible.”
Accelerating Digital Growth – How CEOs are Catching on in Response to the Pandemic
As the COVID crisis escalated business risk, organizations around the globe desperately raced to maintain supply chain continuity in the midst of worldwide lock downs. CEO demands became even more difficult – forcing many to act decisively across entire organizations and accelerate digital transformation to avoid operational pitfalls and ensure that talent pipelines adapted to new conditions. According to KPMG’s 2020 CEO Outlook, 67% of respondents had to rethink their global supply chain and 77% will continue to build on digital collaboration and communication tools to improve business processes.
Neville Teagarden, Managing Partner of AI Capital, a Colorado based Venture firm that is also a client of our firm, focuses on investing in early growth stage enterprise AI software companies. Teagarden says, “Before launching AI Capital, I held CIO/CTO roles at Fortune 500 companies where I helped my peers find software companies to improve business functionality. My academic training [MIT] and early career involved the development of AI systems.” Teagarden adds, “As human talent was distracted during the COVID period, business technology systems had to become more responsive to dynamically changing circumstances. This has led to an acceleration in the adoption of artificial intelligence, which codifies the human intelligence in businesses. These unfortunate circumstances have created even more exceptional investment opportunities in AI.” Teagarden sees the promise and potential of companies like Syndesis Health and holds a position in the parent company, Agorai, through AI Capital’s funds. Understanding the importance of building resilient, flexible supply chains that can withstand shocks and offer the agility to pivot to new opportunities, are now critical for CEOs to drive growth and remain competitive post-COVID. Teagarden says, “We launched AI Capital because of a growing trend to use Applied Artificial Intelligence to solve company inefficiencies.” As a result, organizations across the globe are rapidly in search of enterprise software tools and AI solutions that can improve flexibility within critical supply chains and act quickly in response to changing customer needs.
The History of Artificial Intelligence – Core Technologies vs Applied AI
Pre-pandemic, AI was already performing a critical role behind the scenes in virtually all of society. The first work that is now generally recognized as AI was performed in the early 1940’s, but only in the last decade – with the rise of open-source, low-cost cloud computing and ubiquitous access to data – have companies and entrepreneurs realized how valuable it can be to solve significant societal issues. As a result, more and more core AI technology tools were developed, acquired and integrated into the cloud and made accessible to developers. Domain experts in any field around the world looking to solve a challenge can now hire developers to apply core AI technologies to improve data understanding, efficiency and business processes. This has led to a rapid acceleration of applied AI enterprise software companies coming to market to solve real-world business challenges at the enterprise level.
The Future is Already Being Built Around AI
A new wave of Applied AI companies has taken off during the last five years across multiple industries from Life Sciences to Healthcare to Food Supply to Energy to Manufacturing. Many companies already show demonstrable metrics on their impact to improve management processes for a business, create more agile and flexible efficiencies, and improve revenues. Illustrating the rapid growth and potential of these types of companies, Teagarden notes that “AI Capital invested in Link3D Inc. At the time of its investment, Link3D was a startup that built business software for additive manufacturing that incorporated artificial intelligence to automate business processes such as CAD/CAM design, job costing, scheduling production, post-production and quality management to streamline production and supply chain management. Its software allowed equipment manufacturers to streamline production and supply chain management.” Link3D software helps manufacturers like Lockheed Martin, Baker Hughes, Fraunhofer, PostNord, GoogleX, and several others scale industrial 3D printing supply chains for medical implants, aircraft parts, and technology components. During COVID, Teagarden says, “Additive manufacturing performed a lifesaving role in printing replacement ventilator valves, for example. Our investment was propitious,” Teagarden added, “the company was acquired just 15 months after we invested.”
Payment Systems & Contact Tracing
With the benefits of AI technology, one significant method of contact tracing during COVID has been through using payment data. Every payment made via a credit card or a mobile wallet collects a lot of data: who is purchasing, what is being purchased, location data, and so forth. This brings up the whole concept of data ethics and the importance of data trusts. As governments took a serious interest in social distancing, they needed a simple method to do it,” says Marcus Magarian, Managing Director at Chatsworth Securities. The analytical data captured through these transactions can tell a story from the collected data. This provides consolidated and unopinionated insights into the customer or population behavior, segregating population groups, observing shopping behaviors of consumers and how it changes.“ Spending patterns for frequent flyer miles or regular cash transactions have tremendous value for companies and governments to understand how consumers spend. “It also clearly shows if a person is more willing to buy a product with cash vs their frequent flyer points; so, through a data trust companies or governments can study these data while protecting the individual’s privacy through a data trust structure,” added Magarian.
Financing Data as a Tangible Asset
As a result of COVID, the need to extract value from data and create additional borrowing
capacity from those data, has taken on a new urgency, as companies, specifically airlines,
fought to shore up liquidity during the coronavirus crisis. American Airlines was among the first
companies to use their data as a tangible asset when the company informed investors in June
2020 that it planned to pledge the AAdvantage loyalty program as collateral for government debt
on a $5.5 billion loan. The AAdvantage loyalty program was appraised to be worth between $18
and $30 billion. United Airlines followed shortly after announcing in June 2020 plans to use its
MileagePlus as collateral for a $5 billion loan, and Delta announced in September 2020 to use
its frequent flyer SkyMiles program as collateral to borrow $6.5 billion.
This creative way to raise cash is only the beginning of a new trend. It also means Wall Street
will be valuing data on a company’s balance sheet. The World Economic Forum estimates the
global value of data to be $3 trillion, yet companies still struggle to access this value or realize it
on a balance sheet. Another client of our firm, Agorai, is one of the first companies focusing on
using Data Trust technology to finance data as an asset, enabling it to be transparently reflected
on a company’s balance sheet. Josh Sutton, Agorai’s CEO, says “When Caesar’s Entertainment
filed for bankruptcy in the US, their data, which had previously not been listed on their balance
sheet, was valued at $1 billion. Data is now the most valuable resource in the world.” Agorai
works with companies that have monetizable data assets either through direct recurring
revenue, impaired revenue or terminal value to unlock value with an intangible asset backed
loan. Frequent Flyer Miles for Airlines, Loyalty Programs for Casinos, Cruises, Hotels and Fan
and player likeness data are just a few examples. The COVID pandemic not only highlighted the
importance of these data, but also unlocked the value. And this trend has only just begun.
By Denise Holzer– Managing Director at Chatsworth Securities, LLC Inc. a Greenwich, CT
based investment bank. Ms. Holzer is a Technology, Artificial Intelligence & E-commerce expert,
with operational experience working at technology start-ups. She Co-Founded Crunchet, a new
app positioned to be a leading global social community in the growing cross-over between
Esports, Sports, Entertainment & Social Impact. Prior to joining Chatsworth, she spent over a
decade at Morgan Stanley. She is a graduate of Tufts University and serves on the board of the
American Society of the University of Haifa.