Caution in an era of superlatives.
August is here and after a record breaking first half we can all step back, contemplate and reload. 2018 so far was certainly a banner year for Venture IQ. We doubled our revenues; grew the team; expanded our client base; further developed our software and started our China activities. At the same time we’ve seen record temperatures, record lack of rainfall, record stock markets, (near) record low unemployment and record VC investments. As much as we’re enjoying (most) of these things, they’re not all good news for the future.
As we get some time to reflect over summer, here are some of the topics playing around in our minds as we prepare for the last part of the year:
- With record VC- and especially Corporate VC investments, average deal returns have only one direction to go (hint: not up). Money chasing returns tends to drive them down. From history we know that “dancing until the music stops” isn’t the best strategy – so more than ever we’d counsel being more cautious and keeping investment discipline in this late stage of the economic cycle. Having a portfolio of mostly early stage, yet to be proven businesses is no joy if liquidity decreases or the cycle turns.
- No single company will rule the world, so investing in the #2, 3, 4, or even #10 in a high value industry can be a good investment decision. But it seems that at the moment a lot of money is pouring into me-too companies with questionable return potential. Do we really need another blockchain, “[….]-sharing” or “[…] as-a-service” company? What would the impact be if all that money would go into solving problems that impact humanity and our planet, like food, resource efficiency, sustainable energy, education and care? Detractors will say that businesses in these sectors are more difficult to scale. Maybe, but if you pick the right ones, they probably have better return potential given more realistic valuations, technical differentiation and actual business models, while serving humanity as a market (HAAM :-)). And if it fails, at least there’s the societal return of advancing a technology a step further.
Venture IQ’s goal is to improve efficient capital allocation – scouting the best technology companies to link them with funding and corporate execution power, and thereby hopefully also making a difference. So, if after a deserved summer break you want to up your game in identifying the best, high quality technology companies, we’re here to help.