June 10, 2015

Why invest in tech

Why invest in tech


Firstly, some background on…


Global Mega Trends:

Technology continue to be the hottest sector for new businesses starting up worldwide, with the largest recent IPO’s and valuations all in tech. The rate of monetization in tech start-ups continues to accelerate:

  • Apple took 7-8 years to reach $1 bn in sales
  • Google/Amazon took 5-6 years
  • Groupon took 3 years (and broke a world history in the process)
  • Dropbox / Airbnb / Pinterest all broke that record again…

Rate of Monetization

As a result, global VC investments into tech start-ups – particularly in web and mobile – continues to heat up. The following represents just a tip-of-the-iceberg summary of recent tech valuation success stories (all billion-dollar-plus companies):

  • Uber, Airbnb, WhatsUp, SnapChat, Instagram, Tumblr, Occulus Rift, etc in US
  • Alibaba, Baidu, Tencent, JD.com, XiaoMi, BaDouJiao, etc in China
  • NDS, Waze, Viber, Trusteer, etc In Israel
  • Atlassian, Xero, CampaignMonitor in A/NZ region

Billion plus tech successes by country

With overall economic uncertainties throughout most of the Western world, and record low interest rates, investors coming into Australia or even domestic investors looking to build up a diversified portfolio  with a balance of risk vs. rewards, should find emerging tech companies representing one of the best asset categories for potential returns.

Asset Class Risk Returns Potential Job-Creation Tax-free Profit
Cash / Bonds Nil – Low Low No No
Property funds Low Low No No
Non-tech companies Med – High Low-Med Yes No
Tech companies or funds High* Very High Yes Yes**

(* High – but potentially can be lowered through portfolio risk-management techniques)

** If invested through ESVCLP or VCLP funds. ESVCLP or “Early-Stage Venture Capital Limited Partnership” are Australian Government-approved investment vehicles that affords tax-free treatment on ALL investment profits)