Everyone is now a tech investor!

Five years ago, Marc Andreessen famously said ‘software is eating the world’, and now we live in an age where all companies are now tech companies, as a recent article entitled ‘ The end of Tech Companies’ argues.  In the venture and growth equity segment, we are also seeing a trend whereby everyone is now a tech investor.

A recent presentation on The State of the European Tech Market shows how it is surprising to measure how quickly the innovation financing market is changing for the venture and growth equity segment.

Here are the two most surprising results:

• The European market is holding – yes the amount of money deployed is now reducing – you can see the divergence since May 2016 – but remarkably;
• Our (Go4Venture) projections for the end of year show approximately the same number of deals as last year – even if the very top end of the market (Mega Deal ≥€100m) is bring trimmed
• For the first time since we started publishing the Go4Venture monthly bulletin on the European market (2004), Europe is probably more optimistic than the US (where the market is still depressed by the 2015 unicorn repricing). 
  
• One of the reasons for this performance is the ever growing role of what we call “generalist investors”, including corporates (increasingly from traditional sectors going through their own “digital transformation”) and all sorts of non-tech financial investors (private equity and hedge funds, family offices, state and sovereign funds, etc.) which are all seeking exposure to growth companies, i.e. mostly tech companies. In short everybody has become a tech investor, to the extent that in the last c. 18 months:
• 2/3 of large HTI transactions (≥$10m) have involved one of these generalist investors
• 1/3 of these large HTI transactions (typically the growth equity part of the market) have been led by one of these generalist investors) 
  

The scale of transformation is in fact staggering and is turning innovation financing upside down: from a territory of specialist tech investment funds, the market is fast becoming a market dominated by large investors who are potentially changing the end game (and valuations!) of companies. Just to add a couple of recent examples:

• SAP has put aside $3 billion for innovation in the last quarter - First, SAP committed $2.2 billion to a fund for the expansion of its Internet of Things (IoT) portfolio, to help businesses and government entities benefit from the proliferation of sensors, smart devices and big data and to transform business with the IoT. In addition, SAP has re-upped Sapphire Ventures to the tune of $1 billion to invest between $10m and $20m in enterprise technology companies and in particular, sectors like AI and machine learning, cloud computing, SaaS, big data, healthtech and fintech.
• Softbank and Saudi Arabia are setting up a $100 billion tech fund run out of London, with a first commitment at $70 billion, to invest in tech companies worldwide over the next 5 years. At $100 billion this is the biggest ever tech fund ever, and of course, it will not only invest in venture (think of Softbank buying ARM). But this is a potential game changer in the tech financing industry, the equivalent of 2.5 years of money raised by US funds alone, and about 5 years of European VC money raised.

The reason for this profound change resides in the chart below. In short technology is eating the world.

We at Go4Venture are the forefront of these changes and aim to help the whole investment industry get involved with tech specialists by:

• Broadcasting relevant & curated company information cheaply so that investors (but also board members, etc.) can get in touch with companies they feel they can help grow
• Connecting experienced professionals across borders (though our soon to be launched VIP Club)
• Offering relevant syndication opportunities for generalist investors to co-invest with proven tech specialist funds

Of course a lot of this is already happening informally but in a fairly haphazard fashion, which means it is only cost-efficient in the Valley. Outside the Valley the lack of concentration in the Petri dish of innovation makes a platform such as Go4Venture the way to go. Welcome to Go4Venture!

Go4Venture publishes a monthly bulletin with one page profiles of established companies which have been through rounds ≥$10m; in addition, the Go4Venture Platform also features a growing number of ‘rated companies’, i.e. up and coming companies with revenues >$1m and/or financing >$2m, including venture-stage as well as private equity companies (i.e. not early-stage). New rated companies added to the platform recently include:

• 1 social video interactive company (WholeWorldBand)
• 1 energy demand/response management software company (VPS)
• 2 revenue-generating semiconductor companies (sureCore and UltraSoc)

To download the latest bulletin featuring profiles of OVH, Deliveroo, Oufittery, and 13 other companies which have been through rounds ≥$10m, click here. Note free registration is required in order to download the PDF bulletin.