Like it or not, Silicon Valley has a big effect on technology trends. Sometimes start-ups attract criticism for focusing on silly apps and less-than-impressive technology applications, but there's no doubting the value venture capitalists provide in seeding new markets, industries, and ideas. Of course, new technology trends are rarely fueled solely by start-ups. Established and deep-pocketed companies can move conversations and entire industries, too, even if they're generally slower to respond and adapt to change. That means individual investors -- like you! -- can buy stock in some of the same ideas leading the portfolios of the best-known venture capitalists. Here's how General Electric Company (NYSE: GE), Intrexon (NYSE: XON), and Monsanto Company (NYSE: MON) can help.
The Internet of Things
Tim O'Reilly, founder of O'Reilly Media and the man who popularized the term "Web 2.0," recently called out Silicon Valley for failing to give enough thought not to silly applications of the Internet of Things, but the systems that will result in industry-shaking changes in health care, commerce, and manufacturing. In other words, he's had enough of smart fitness bands and smart toothbrushes.
Well, perhaps O'Reilly should take a closer look at General Electric's ideas and investments in the Industrial Internet. The technology has the potential to add up to $15 trillion to global GDP and boost average incomes in the United States by up to 40% by 2035, according to the company. And while it may seem years away to individual investors, those numbers weren't part of a hyped-up press release.
General Electric recently opened its first flexible factory in India, which will manufacture everything from wind turbines to aircraft parts, automatically order supplies when inventory gets low, and optimize operations with the habits of its human workers. Meanwhile, the software behind the machines, called Predix, is expected to generate $1 billion in revenue this year from customers using it to monitor aircraft, power plants, telecom networks, deep-sea oil wells, and more. It will also be used to monitor the next-generation gas-fired turbines General Electric delivers to customers in the next several years.
If the company is going to successfully transition away from its dependence on financial services -- and quickly -- then the Industrial Internet will play a major role.
Companies working with synthetic biology aim to develop tools that make biology as predictable to build as traditional engineering disciplines, and then use those tools to change the world. Tools and services are being deployed at a rapid pace, which has allowed the world's biotech hubs in Silicon Valley, Boston, and London to nurture more and more companies every year. At the end of 2009 there were roughly 75 companies working in the field. That number swelled to nearly 200 by the end of 2014 and, by my count, has grown by at least another dozen companies just four months into the current year.
Individual investors can take part in the trend through Intrexon, an organism company looking to develop biology-derived products ranging from cancer drugs to food, from artsy toys to pet-cloning services (really). Healthcare has stolen most of the headlines in the past six months, perhaps because it's the most comprehensible source of growth, but costly and lengthy clinical trials put any potential blockbuster therapeutics years away. No matter: CEO RJ Kirk has made a long line of strategic acquisitions in various industries to add value opportunities in the near and long term.
For instance, in July 2014 Intrexon acquired Trans Ova, the leading provider of bovine reproductive technologies, or products and services used in cattle breeding such as embryo transfer and livestock cloning. While investors were busy fantasizing over the potential of cancer drugs, Trans Ova quietly accounted for 85% of Intrexon's total product and service revenue for the year.
It could get better. Kirk said he wouldn't be surprised if the platform generated $100 million in 2015. Throw in future growth from Arctic Apples and methane-eating bacteria, and Intrexon looks like a long-term steal at just $4 billion -- even if most of that contains health care hype at the moment.
Technology will be increasingly important to the future of agriculture. Of course, enhanced genetic traits won't be the only way for farmers to increase yields. Dozens of start-ups are attacking agriculture with automation, data analysis, and planting consulting services, all designed to make it easier to seed, spray, buy insurance, and plant the best seeds for an individual farm.
If you're thinking about assembling a list of the most innovative start-ups in the field, you may need to start with Monsanto's acquisitions. The agricultural leader acquired The Climate Corporation in 2013 to gain a foothold in agriculture analytics and risk management and expand the opportunities available for its Integrated Farming Systems software platform. Since then, Monsanto has bolstered Climate Corp.'s firepower by acquiring the data science leader 640 Labs and the soil testing division of Solum. More good data means more quality services provided to farmers.
Similar to General Electric with the Industrial Internet, Monsanto is moving fast today to capitalize on its head start in digitizing agriculture. The company is pursuing a freemium software business model that includes low-cost services through Climate Basic and premium offerings through Climate Pro and FieldScripts. Goals for 2015 include increasing the number of Climate Basic active users to 45 million -- a 50% jump compared with 2014 -- and to begin building a runway that will enable Monsanto to convert customers of basic offerings to premium offerings.
So far, so good. Monsanto's Climate Basic and premium offerings ended 2014 (its first year) covering over 50 million acres and 1 million acres of farmland, respectively. That may be impressive, but Monsanto believes the potential opportunity for the platform is closer to 1 billion acres. Biotech crops have carried the company this far, but digital agriculture may very well be the most important platform in the not-so-distant future.