By Brady Fletcher
In the investment world, it’s not unusual for new industries to pop up and grab investor interest. Last year, I predicted that the four industries to watch were electric vehicles, cannabis, data security and blockchain. One year on, these sectors have faced both challenges and opportunities and remain well-positioned within the current investment landscape alongside other industries that are new to the scene.
Electric Vehicles
This year, we’ve seen more electric vehicles hit the road, and governments across the world are developing mandates or incentives that encourage consumers to choose electric vehicles as their method of transport. In Canada, for example, British Columbia’s provincial government has announced that all new cars will be zero-emission by 2040.
It doesn’t stop there. In line with government mandates, vehicle companies are increasing their output of electric vehicles. Volkswagen has promised 50 new electric models by 2028, and Harbour Air, a small airline in British Columbia, announced plans to rely entirely on electric planes in the coming decades.
There are also ongoing improvements being made to batteries used by electric vehicles to increase their life span and lower their costs, making them more viable for the average driver. In fact, Deloitte estimates that battery electric vehicles will be as affordable as their fossil fuel counterparts by 2022.
The growth of this industry continues to offer opportunities for sustainably minded investors—as shown in recent funding activity from corporate investors in startups focused on developing electric vehicles and their supporting infrastructure.
Cannabis
Coming into 2019, the cannabis industry has continued to grow as anticipated. In Canada, we saw the legalization of adult-use marijuana nationwide, and in the United States, Illinois lawmakers recently passed a bill legalizing the commercial sale of marijuana. Thirty-three U.S. states have legalized medical marijuana, while 11 have legalized recreational.
To satisfy a growing demand, industry infrastructure—including medical, regulatory, and distribution components—and related proprietary technologies are growing at a comparable rate, opening many potential investment avenues.
Within the cultivation sector, the investment landscape is shifting because companies are now in a position to report results, giving investors better visibility on the state of each business. We’re also seeing signs of the industry hitting its merger and acquisition phase. Canopy Growth recently announced its plan to buy U.S. multistate operator Acreage Holdings, giving investors access to multiple markets.
Despite this progress, however, the North American industry has many hurdles left to overcome. The Canadian provincial governments have struggled to effectively implement their distribution strategies, making it difficult to prevent the emergence of illegal dispensaries. Meanwhile, the U.S. continues to face the conflict between federal prohibition and state regulations. As regulations become clearer, investors will have increased opportunities to contribute to the development of this sector.
Data Security
The cost and threat of cybercrime continues to rise, posing an ongoing risk to organizations that host sensitive information. On top of that, government regulations like the European Union’s General Data Protection Regulation — or GDPR — is holding organizations more accountable for the security of user data.
For the data security landscape, this means that there’s a continued demand for cybersecurity solutions at the enterprise level and beyond. Moving forward, investors should expect to see new security technologies hit the market in response to ever evolving threats. Artificial intelligence, for instance, can be used both offensively and defensively, pointing to an important new battleground in the cybersecurity space.
For better or for worse, the perpetual turbulence caused by cybercrime is bound to prioritize security spending across the board, making it a potential growth sector for investors.
Blockchain
Blockchain is an intriguing space for businesses and investors alike. When it first hit the scene, many predicted that blockchain was poised to revolutionize the financial services industry—in the same way that it supported the launch of cryptocurrency.
Initiatives like Project Jasper put this hypothesis to the test by studying how blockchain impacted payments, but the results showed the technology didn’t quite deliver a positive return on investment. Overall, the industry spiked as people bought into its imagined potential but slowed down in the face of practical challenges.
Now, blockchain has moved beyond finance and is proving more valuable in other industries. The use of distributed ledger technology in applications like asset tracking, information dissemination and public market regulations could offer solutions to persistent problems and open a whole new landscape for investors focused on the technology industry.
Industries to Watch Going Forward
Along with these four notable industries, several others have emerged over the course of the year that should stay on investors’ radars.
- Battery metals: Keep an eye on this sector. As more jurisdictions adopt policies that focus on electric vehicle adoption, it is rapidly becoming mainstream for investors.
- Artificial intelligence: AI has tremendous potential because it’s proving to be broadly applicable. Already, the technology is being used to do everything from detect oil and gas pipeline failures to identify cost-effective mining sites. As AI continues to get smarter, it’s likely to become immersed in several different industries.
- Defense technology: With the prevalence of mass shootings and other types of attacks, there are a number of technologies emerging to address border security, gun violence, and more. With defense becoming more tech-driven, there’s ample opportunity for the development of a whole new space of companies dedicated to solving 21st-century threats.
- Content streaming: Disney is just the latest media giant to announce the launch of a streaming service to compete against the likes of Netflix and Hulu. As content streaming makes up more of the media market share, this industry could be a boon for investors.
A lot can change in a year. Global priorities can shift the public perception of existing markets and bring new ones to light. For those looking for investment opportunities, it’s worth keeping an eye on the sectors that are addressing the problems of today and tomorrow.
Brady Fletcher is the managing director of TSX Venture Exchange, a global platform for facilitating venture stage capital formation. The views, opinions, and advice provided in this article reflect those of the individual authors and do not reflect the opinions or views of, nor are they endorsed by, TMX Group Limited or its affiliated companies.