Apart from the conventionally encountered investment risk factors, there is also an additional set of risks embedded in technology start-up investments. These risks are causated by various underlying factors. Some of these risk drivers are discussed in brief below.
-- A general empirical fact is that, ceteris paribus, the "Potential Value" of a new Technology as well as its "Lead Time to Commercialization" are both likely to have high positive correlations to how advanced the new Technology is vis-a-vis the prevailing state of the art. Put more simply, more advanced technologies can deliver better returns (higher "potential value") but also carry more risks (due to the longer "lead time to commercialization").
-- The above time-to-market related risks are further multiplied by our preference for extreme early stage investing in new-technology driven start-ups. This is in line with the Valuation Time-effect model which predicts, inter alia, that valuations tend to become relatively accurate only close to (and of course beyond) the commercialization transition (the market launch). This risk-multiplier is all the more important in our case since many new technologies have a long time-to-market, and we prefer to invest as early as possible in the pre-commercialization stage -- which is well before the technology-market interface can generally be expected to have developed recognizable/analyzable contours.
-- Since, as mentioned above, we generally try to invest well before the technology-market interface contours are recognizable/analyzable, hence we also face the associated challenge of assessing the merits and demerits of new technologies (including some in unfamiliar sectors) as rapidly as possible. Though difficult, this speedy assessment is absolutely necessary since the longer we take, the more are the chances of the valuations getting driven up through competitive pressures from the broader investor space. Though necessary, this need for speed in turn creates a set of evaluation-accuracy linked risk factors.