The landscape of investment is undergoing a significant transformation, especially within the realm of hard technology—or hard techAs governments worldwide increasingly push for advancements in tech innovation, the focus on investing early and strategically in hard tech has become not just a recommendation but a mandate in many investment circles.

But what exactly is hard tech? It encompasses advanced scientific and engineering technologies that lead to breakthroughs in fields such as artificial intelligence, robotics, and biotechnologyWith the ever-growing significance of hard tech, investment institutions are on the lookout for lucrative avenues that promise substantial returnsHowever, investors are aware that navigating this broad and often complicated landscape requires not only daring decision-making but also a profound foresight and wisdom.

Within the context of hard tech, the question arises: where can investors find the most promising tracks to pursue? Recent years have seen hard tech emerge as a hot topic in the venture capital worldNumerous governmental guidance funds have initiated specialized funds targeting this arena, emphasizing investments that are early-stage, modest in scale, and deeply entrenched in hard technologies.

For instance, Shanghai's Zhi Yu Biotechnology is delving into the protein structure prediction fieldCo-founder Wang Sheng refers to the competitive nature of this domain as “cutthroat,” urging reporters not to reveal the names of their ongoing projects due to the rapid imitation that can occur in bioinformaticsThis exemplifies the intense environment in which hard tech companies operate, where original research can easily attract followers.

On the contrary, Wu Yuan, an entrepreneur working in the field of satellite signal processing, characterized his experiences with the phrase “strained.” He lamented the scarcity of local expertise in the sector, explaining that his company has faced numerous challenges over two years

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He hopes to see a promising business growth cycle after this year, which would alleviate some of the pressures his company faces.

This dichotomy of experiences highlights a rudimentary truth about hard tech investment: while there exists immense excitement and interest, not every facet of hard tech appears equally appealing to investorsAs per data collated by ZERONE, funding for strategic emerging industries has noticeably increased, culminating in a market share exceeding 61% by 2023, up from less than 50% in 2020. The electronic information industry commanded attention this past year, comprising 32% of investment instances—an indication of the changing focus within hard tech investment domains, particularly gravitating towards sectors like semiconductors, health technology, and advanced manufacturing.

Investment firms vary widely in their focus areasBeijing-based Beigong Investment, led by its chairman Yue Peng, has actively invested across diverse sectors, committing to over 140 projects with a total fund size exceeding 30 billion RMBTheir investment strategies prioritize high-precision industries involving semiconductors, integrated circuits, and advanced manufacturing technologiesThey recognize that supporting businesses in these critical sectors will foster the nation’s industrial and technological advancement, while offering resilience against market volatility.

Private entities, such as Shanghai Ying Shichangbai Investment Co., specialize in various tech-related fields, including high-end visual display equipment and brain science treatment devicesTheir investment structures include not only stakes in unlisted startups but also the acquisition of shares in listed firms—an example of how diverse investment strategies can be.

Interestingly, discourse around the collaboration between entrepreneurs and investors reveals a trend where both parties actively seek to align their interestsFor instance, Tang Junmin from Shanghai Tengfang Investment Management has supported projects within hydrogen energy and aerospace, acknowledging a growing number of foreign R&D projects in China

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He highlighted the challenges of rising labor costs and diminishing population advantages and stressed the importance of turning academic research into commercially viable products.

When ventures explore potential investors, they often look for partners with an industrial background who possess valuable resourcesPractitioners in hard tech favor investors who can provide not just financial backing but also relevant industry connections that can facilitate business operationsFor instance, Pen Yang, CEO of Shanmashenzhi, emphasized that investors with expertise in the transportation sector are particularly sought after, especially for companies involved in traffic solutions.

The quest to realize a beneficial partnership between investors and hard tech entrepreneurs is becoming paramountMi Lei, founding partner of Zhongke Chuangxing, remarked that nurturing projects involves assisting them in various ways—beyond cash investmentsTheir collaborative effort in establishing a platform in Shaanxi for photonic chip developments offers essential services like equipment leasing, demonstrating a model that fosters technology transition and enhances productivity.

However, amidst the enthusiasm for hard tech investments lie significant risksInvestors must navigate the challenges posed by policy-driven investments and local governmental expectations that often focus on fixed asset contributions and infrastructure developmentsAs investment firm members articulate, while hard projects converge on governmental mandates for economic growth and job creation, there are inherent risks that accompany production-related investments.

The consensus among experts is the need for a balanced approach to investing in hard techCaution must be exercised as many firms worry about potential bubbles, especially in high-risk contextsAn anonymous investment executive highlighted that state-ownership sometimes leads to irrational investment patterns emphasizing certain metrics, which could induce market instability.

Proponents of responsible hard tech investing stress that while growth is essential, it must be accompanied by proper education and talent development, taking care to avoid overwhelming the market with unprepared investments

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