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‘Investing in technology: Real opportunities’ was the theme of the latest briefing event held at Dolfin’s Mayfair HQ. Welcoming the audience, Dolfin CEO Denis Nagy outlined some of the key points the panel would be addressing. “Today we will be talking about how you invest in technology,” he said. “And in order to do so, first we need to define it. From software to biotechnology to cloud computing and applications within other industries such as oil and gas – all are interconnected and changing lives. Technology has completely changed the financial markets over the past 20 years. But are we seeing a backlash? And what will happen next?”
These questions are nothing if not challenging, but Dolfin brought together a panel of specialists equal to the task of addressing – if not answering – them. Tony Jamous, President & Co-founder of Nexmo, brought a venture capitalist’s perspective to the discussion; Fidel Manolopoulos, Growth Capital Investor, Hermes GPE, addressed issues from the private equity point of view; and Dolfin CIO Vassilis Papaioannou took a public market angle.
Chairing the discussion, Andrew Carrier, Dolfin’s CMO, began by describing the typical trajectory a tech company follows. In the start-up phase, he said, entrepreneurs typically look for venture capital, further growth is often funded by private equity, and finally successful companies go public. But this is not always the cse.
“That’s what investors would like to see happening, because it provides them with more liquidation opportunities” Jamous said. “But it’s not that simple. The failure rate in the early stages is high, and M&A is often a lucrative alternative exit route for entrepreneurs.”
“Entrepreneurs don’t know how their business will develop,” agreed Manolopoulos. “Some go straight to private equity funding while others make it to the IPO stage without external funding.”
The panel went on to respond to a question posed by Carrier: “Aren’t all companies tech companies nowadays?”
“I would ask: is their business software-led,” Jamous said. “Does it enable other companies to progress on the digital transformation path? Using technology does not make you a tech company – so I would define a Wall Street bank as a finance company, but a software company that has obtained a banking licence as a tech company. We are in a confusing phase at the moment but overtime we will see a clear abstraction between software-led or software-only businesses and other industries that must use software to operate and scale.”
“Ultimately, any business will need to become a tech business.”
Fidel Manolopoulos · Hermes GPE
“The tech revolution will become more intense over the coming years,” Manolopoulos commented. “I believe that ultimately any business will need to become a tech business.”
For Papaioannou, what is central to the definition is that a company has a tech footprint throughout its business, from its supply chain to its products
Where the money goes
A question that both investors and entrepreneurs must ask themselves is what makes an enterprise most likely to attract investment. Carrier quoted Warren Buffet’s words: “We’re perfectly willing to trade away a big payoff for a certain payoff.” But what do the panellists look for?
“The first criteria for me is the potential for exit,” said Jamous. “Is the business a threat to the big players? Is it disruptive? And is it scaleable?”
For Manolopoulos, the team behind the business is key. “I look for a founding team that can be complemented by seasoned managers but will still have the power to drive the business forward,” he said.
The panel went on to look towards the future. The possibility of a backlash against the giants of Silicon Valley was discussed, with the panel agreeing that more regulation in the tech space is broadly to be welcomed.
“But regulation lags innovation,” Papaioannou observed.
So, Carrier asked, “What is the next big thing? Is powerful and disruptive AI the next battle ground?”
“I expect AI to have a huge impact .”
Tony Jamous · Nexmo
“I believe AI will improve our lives greatly over the next 20 to 30 years,” Jamous said. “We are still in the very early stages, and it is mostly used to scale behind the scenes. But I expect it to have a huge impact – hopefully for the better.”
Manolopoulos agreed that there is huge potential in the space, adding a thought that must surely have been shared by many in the audience: “It’s complex, and it’s scary.”
Taking a global view, Papaioannou remarked that AI is at the heart of the conflict between the US and China, which has access to funding but has yet to catch up.
In closing, the panellists were asked to share their best advice for investors, and all were in agreement: successful investors look for technology they understand, which is related to their industry. They don’t follow trends, but ensure they have the edge by looking for potential others aren’t likely to understand.
Or, as Papaioannou succinctly put it: “If you couldn’t explain it to your grandmother, don’t invest.”
We will be exploring some of the issues raised at the event in more depth in future Dolfin Diary articles. Subscribe to our updates for notifications of these and of future Dolfin briefings.