An Investment Opportunity Space - **Target Markets:** Southeast Asia, Middle East, Africa ### CONTEXT This document describes an investment opportunity space in **infrastructure maintenance** that we believe represents a ***multi-decade secular trend***. > While venture capital races toward far-future technologies, trillions in existing critical infrastructure is ***neglected and failing.*** We've identified where **cutting-edge technology meets unavoidable necessity**, creating opportunities for entrepreneurs building in our target markets. We look for company building and investment opportunities that should be: - **Important if true** (addresses urgent need with significant economic impact) - **Under-explored** relative to potential (scarcity of focused competition) - **Ripe** for new approaches (technology enables new solutions to old problems) ### SUMMARY The investment world obsesses over **growth CapEx (building new)** while systematically undervaluing **maintenance CapEx (preserving existing)**, creating massive opportunities in applying modern technology to maintain the world's $106 trillion infrastructure base. In Southeast Asia, Middle East, and Africa, this opportunity is amplified by extreme climates, rapid urbanization, and accumulated deficits. ##### 1. The CapEx Imbalance > What if the 'boring' category is actually where the money is?" ![[Screenshot 2025-10-04 at 20.32.02 1.png]] ##### 2. The Compound effect of deferred maintenance > Deferral doesn't save money, it multiplies cost. E.g. Currently: $105B deferred road maintenance in US alone. ![[Screenshot 2025-10-04 at 20.37.27.png]] ## BELIEFS The core beliefs that underpin this opportunity space: 1. ***Maintenance spending is fundamentally non-discretionary*** → Physical assets deteriorate without intervention, creating unavoidable liabilities. Equipment breaks. Bridges collapse. Pipes burst. Regulatory deadlines arrive. Unlike speculative growth projects, maintenance cannot be deferred indefinitely. Deferred maintenance compounds at ~7% annually, eventually forcing catch-up spending regardless of interest rates or economic cycles. 2. ***A massive perception gap exists between "maintenance" (seen as low-tech, low-margin) and reality (cutting-edge sensors, AI, robotics, advanced materials)*** → This arbitrage creates pricing power. Maintenance conjures images of wrenches and manual labor. Reality: predictive analytics preventing failures, drones inspecting infrastructure, AI optimizing grid operations, self-healing materials extending asset life 2-3x. Few investors recognize this gap. E.g. Bridge inspection: Manual = $50K, 2 weeks, risky. Drone + AI = $10K, 2 days, safer, better data. ![[Screenshot 2025-10-04 at 20.47.06 1.png]] 3. **Technology innovation alone is not enough; fragmented maintenance markets, disconnected from modern platforms, severely impede progress** → Building integrated solutions that deliver clear ROI unlocks trillion-dollar markets Legacy manual processes dominate. Incumbents are fragmented. Municipalities lack modern data infrastructure. The opportunity is in building platforms that make maintenance faster, cheaper, smarter, and more predictable, transforming reactive repairs into proactive optimisation. E.g. what if we could create the "Salesforce for infrastructure maintenance". ![[Screenshot 2025-10-04 at 20.50.16.png]] ![[Screenshot 2025-10-04 at 20.49.56.png]] ## OBSERVATIONS Some signposts as to why we see this area as important, under-explored, and ripe: ### The Scale is Massive and Growing **$4.4 trillion** U.S. infrastructure investment gap through 2033. **$105 billion** in deferred road and bridge maintenance alone. **$33 billion** federal facilities backlog. These aren't discretionary nice-to-haves; they're compounding liabilities. ![[Screenshot 2025-10-04 at 20.51.50.png]] > Operations and maintenance now comprise **56.7%** of all public infrastructure spending, up from 44.4% in the 1970s. The shift from "building new" to "maintaining old" is already happening. > If maintenance is already the majority of spending, why aren't more tech companies focused here? ### The "Fixware" Category Maintenance isn't about manual labor. It represents cutting-edge technologies that upgrade, modify, and maintain existing systems: - **Software Infrastructure**: Legacy code maintenance, security vulnerability patching, compatibility updates, performance optimization - **Defense & Aerospace**: Satellite systems, missile detection networks, precision positioning, long-life space assets - **Physical Infrastructure**: Transportation systems, buildings, utilities, industrial equipment - **Supply Chains**: Manufacturing equipment, logistics networks, delivery systems - **Energy Systems**: Grid modernization, transmission and distribution upgrades, natural gas infrastructure safety replacements ### Scarcity Creates Opportunity Few VCs explicitly target maintenance. S&P Global forecasts **4.2% global CapEx growth** in 2025 despite elevated interest rates, but growth and maintenance are both expanding, not competing. Technology companies are spending **$320B+** on AI infrastructure while manufacturers spend on both capacity expansion AND equipment replacement. > Everyone chases the new. Almost nobody systematically focuses on maintaining the old. This scarcity of attention creates pricing power and multiple expansion opportunities. ### Technology Enables New Business Models Sensors available at lower size, weight, power, and cost (SWaP-C) than ever before. AI models can now ingest raw sensor streams to produce forecasts, drastically reducing computational cost. Mobile connectivity in emerging markets (70%+ penetration in many regions) enables maintenance solutions without legacy IT infrastructure. ![[Screenshot 2025-10-04 at 20.54.40.png]] ![[Screenshot 2025-10-04 at 20.54.47.png]] > What cost $100K in developed markets can often be delivered for $10K in emerging markets with appropriate localisation. > Could we leapfrog straight to mobile-first maintenance platforms in markets without entrenched incumbents? ### Investment Characteristics Maintenance-focused investments offer attractive attributes across cycles: - **Inelastic Demand**: Services needed regardless of economic conditions provide recession resilience. Regulated utilities earn returns on maintenance rate base investments. - **Inflation Protection**: Real assets with pricing power offer natural hedges. Many maintenance contracts include inflation escalators. - **Visible Revenue Streams**: Multi-year backlogs and regulatory mandates create predictable cash flows. Public sector budgets provide long-term visibility. - **ESG Alignment**: Infrastructure resilience, climate adaptation, and energy transition align with institutional investor mandates. - **Defensive to Growth Spectrum**: Investors can position across risk profiles from regulated utilities to construction cyclicals, all participating in the maintenance theme. ### Regional Drivers Amplify the Thesis - **Southeast Asia:** Infrastructure from 1990s-2000s boom now aging rapidly. Extreme weather (typhoons, flooding) accelerates deterioration. Jakarta is literally sinking. Singapore planning $100B coastal protection. Infrastructure spending growing 6-8% annually vs 2-3% in developed markets. - **Middle East:** Heat, sand, humidity accelerate degradation 2-3x. Desalination plants are life-or-death infrastructure. Vision 2030 initiatives creating massive infrastructure spending. Smart city projects (NEOM, Dubai) require sophisticated maintenance from day one. - **Africa:** Power outages cost sub-Saharan Africa **2-4% of GDP annually**. Mining operations need continuous maintenance in harsh environments. Development bank funding provides built-in payment security. Mobile money enables new service models. ![[Screenshot 2025-10-04 at 21.05.09.png]] > These markets face more severe infrastructure challenges, have less entrenched competition, and offer leapfrog potential for modern solutions. ### Regulatory Mandates Create Captive Customers Federal and state mandates require regular infrastructure inspections. Lead service line replacements are federally mandated. PFAS (Per- and Polyfluoroalkyl Substances) treatment requirements create unavoidable spending. Natural gas distribution safety replacements proceed on regulatory timelines, not market cycles. → Regulatory compliance creates predictable revenue streams. Customers have dedicated budgets and multi-year visibility. > What if we built platforms that turn compliance from a cost center into an optimization opportunity? ### Economic Value is Proven Current weather forecasts enable **£trillion industries** from energy to aviation, yet assimilate only a fraction of available earth observations. Ensemble-based seasonal forecasting optimizes water resource management for economic savings. Infrastructure investment has **direct measurable ROI**: every hour of road closure costs thousands in economic activity; water loss from leaks averages 15-20%; extending satellite life 2-3 years saves hundreds of millions. ![[Screenshot 2025-10-04 at 21.08.50.png]] → The economic case for maintenance is proven. The barrier is execution, not market demand. > If both growth AND maintenance spending are increasing, is this really a tradeoff or just a massive expanding market?_ ### Current Investment Landscape - **Utility Sector**: Electric utilities face record CapEx of $187 billion in 2024 rising to $211 billion by 2027. Water utilities carry massive pipe replacement programs. Natural gas distribution companies execute mandated safety replacements. Regulated returns on rate base provide predictable economics. - **Infrastructure Services**: Engineering and construction companies benefit from both new projects and maintenance work. Three-quarters of major firms' business is U.S.-focused, capturing government infrastructure spending. - **Industrial Equipment**: Power management, electrical systems, hydraulic and mechanical equipment providers report strong demand. Equipment sales to replace worn assets outpace capacity expansion purchases. - **Energy Infrastructure**: Midstream pipeline companies, transmission operators, and renewable developers combine existing asset maintenance with growth opportunities. Energy transition creates both new assets and immediate maintenance requirements. - **Digital Infrastructure**: Data centers, communications towers, and network infrastructure require ongoing maintenance as they age, with AI driving unprecedented new capacity that immediately enters maintenance cycles. ## WHERE TO BUILD ![[Screenshot 2025-10-04 at 21.10.44.png]] ### Eight High-Potential Opportunity Areas: **1. Predictive Maintenance & Monitoring** Sensors + IoT + AI to predict failures before they occur. Bridge monitoring, pipeline leak detection, grid fault detection, building systems. _Why it works:_ Extends asset life 20-30%, reduces maintenance costs 15-25%, creates recurring SaaS revenue. **2. Inspection Automation & Robotics** Drones for infrastructure inspection, crawling robots for pipelines, underwater vehicles for dams, computer vision for crack detection. _Why it works:_ Regulatory mandates require inspections; automation delivers better data at lower cost; eliminates human safety risks. **3. Advanced Materials & Rapid Repair** Self-healing concrete, trenchless pipe repair, prefabricated bridge components, corrosion-resistant coatings. _Why it works:_ Materials lasting 2-3x longer justify premium pricing; rapid repair minimizes disruption. **4. Grid Modernization & Energy** Advanced grid management, transformer monitoring, natural gas safety systems, distributed energy resource management. _Why it works:_ $400B annually in grid investment globally; AI driving 2.4% electricity demand growth; utilities must maintain reliability while integrating renewables. **5. Water Infrastructure** Smart meters, leak detection, advanced treatment for PFAS, pipe condition assessment, water quality monitoring. _Why it works:_ $50B federal funding available; lead service line replacements mandated; water loss creates clear ROI. **6. Software for Legacy Systems** Middleware connecting legacy to modern platforms, cybersecurity for SCADA systems, digital twins for asset management. _Why it works:_ Rip-and-replace too risky; gradual modernization only viable path; creates 10-20 year customer relationships. **7. Defense & Aerospace** Satellite servicing, military vehicle predictive maintenance, depot optimization, supply chain for spare parts. _Why it works:_ Defense budgets prioritize readiness; mission-critical nature justifies premium pricing. **8. Transportation Infrastructure** Pavement condition monitoring, bridge monitoring, rail track defect detection, transit vehicle maintenance. _Why it works:_ Infrastructure failures are political failures; federal formula funding provides steady revenue. ## WHAT MAKES A GREAT OPPORTUNITY ✓ **Non-discretionary spending driver:** Regulatory mandate, safety requirement, or asset-failure prevention (not just "nice to have") ✓ **Technology moat:** Proprietary sensors, data, algorithms, or domain expertise that's difficult to replicate ✓ **Recurring revenue:** Ongoing monitoring, SaaS subscriptions, or consumables (not one-time project sales) ✓ **Fragmented incumbents:** Legacy manual processes create opportunity for modern platforms ✓ **Clear ROI:** Demonstrable cost savings, risk reduction, or compliance achievement ✓ **Multiple customer types:** Ability to serve municipalities, utilities, industrial operators, federal agencies ## REGIONAL ADVANTAGE **Why Southeast Asia, Middle East, and Africa?** → **Higher growth rates:** Infrastructure spending 6-8% annually vs 2-3% in developed markets → **Less competition:** Fewer well-capitalized maintenance tech companies operating in these regions → **Government prioritization:** Explicitly prioritized in national development plans (Vision 2030, Kenya Vision 2030, Malaysia's 12th Plan) → **Failure consequences:** Infrastructure failures have more severe economic/social impact, creating urgency → **Leapfrog potential:** Less entrenched systems enable modern platform adoption; mobile-first markets can skip desktop infrastructure → **Payment security:** Development banks, PPPs, government tenders provide payment security; mobile money enables new models ![[Screenshot 2025-10-04 at 21.13.35.png]] **Specific Regional Opportunities:** - _Southeast Asia:_ Port/maritime infrastructure, urban transit systems, flood management, power grid reliability, agricultural infrastructure - _Middle East:_ Desalination optimization, oil/gas pipeline monitoring, cooling infrastructure, solar panel maintenance, aviation infrastructure - _Africa:_ Mobile-based inspection platforms, solar mini-grid optimization, low-cost water monitoring, mining equipment maintenance, telecom tower monitoring ## THE BOTTOM LINE The world needs to maintain **$106 trillion** in existing infrastructure by 2040. This spending is happening regardless of interest rates or economic cycles because physical assets deteriorate and systems fail without maintenance. **In our target markets, the opportunity is even larger relative to market size.** Extreme climates accelerate aging. Rapid urbanization outpaces maintenance capacity. Accumulated deficits create urgent needs. And critically: less entrenched competition + leapfrog potential + higher growth rates. ![[Screenshot 2025-10-04 at 21.18.25.png]] This is where cutting-edge technology meets unavoidable necessity. **Build the tools that maintain the world.** --- ## ENGAGE We're actively seeking: - Entrepreneurs building in these opportunity areas - Technical experts with domain knowledge in infrastructure sectors - Operators who understand maintenance challenges in our target markets - Investors interested in defensive growth characteristics with multi-decade secular trends Share feedback, surface breakthrough ideas, or connect with us about opportunities in this space. [[Mainteance CapEx - What actually matters]]