Venture Investing Is Back

For those who remember the "dark days" of venture capital - after the bubble burst and venture funds were simply not available - good news is here. 

Mark Richey, Managing Director of West Capital Advisors, says venture investing has returned to levels it reached at the height of the bubble in the year 2000:  "Venture investing is back," he feels.  “This encompasses all the sectors – IT, digital & social media, life sciences, advanced materials, and so on – and considers new and growing companies that are commercializing in- novation in the market.”  

IT is still receiving the largest percentage of the allocation, with a focus being multi-platform technology for a market or solution that is currently fragmented. “There is a lot of effort going into how we interface with our customers more effectively on a multi-platform basis,” explains Mark. “From desktops to tablets to Smartphones – our customers, whether they be businesses or consumers, are looking for a consistent experience across all platforms.”

Because they are the most recent addition to the mobile arsenal, tablets and Smartphones are driving in- novation right now. Mark says the true question is, “How do we encourage people to utilize our solutions no matter where they are? There is a ton of money going into this right now.”

This wave of innovation is also happening much more quickly than any wave in the past. Mark continues, “The fi big innovation wave that meaningfully touched individuals started in the 80s-90s with PCs. It was a big deal; no one had PCs. About 5% of people had a PC when the wave started.

“Even into the dot-com era, the penetration of people with laptops was meaningful, but still it was probably around 20%. And not only was it a small percent of the population, but it was constrained to developed countries.”

If you compare that to the penetration of the “next great wave,” mobile, you see a very different picture: currently, 70-80% of the GLOBAL population has access to a mobile device. “Developing regions such as Southeast Asia, Africa, South America – they leapfrogged and went straight to Smartphones,” Mark explains. “Smartphones are easy to use, cheap and wireless. Plus, the cost to develop and service those technologies is so much better now.”

This huge shift in how the world works and communicates drives what Mark calls “the very personal kind of experience we want to have with our customers.” While you might have a large-volume business, he says, to any given customer, it will look very individualized.

With the vast sums being invested in the market, Mark says many are questioning whether we are mov- ing too fast once again, and if another bursting bubble is on our horizon. “That’s a great thing to keep in mind,” he feels, “but the big difference between now and then is that business models are far more realistic now.” While business models 15 years ago were in a beta cycle with little basis and even less revenue to support them, that’s not the case today: “If you can attract users to your system, there are business models to support it,” Mark declares.

Part of this is the global scale of today’s businesses: “Uber [a taxi/rideshare/private car service] is worth more than Hertz,” says Mark, “and many of these companies have no hard assets to worry about, allowing them to scale really quickly.”

While mobile is the heart of IT right now, driving today’s big investments, Mark stresses that a lot of tangential technology is also needed: “When the game extends across systems, no matter where people are, you have network management needs, security needs … there are exponential privacy needs you must address.” This is true across every industry, whether you’re in financial services or building platforms to schedule conference rooms. “Once you start pulling this thread, it goes into a lot of areas,” he continues. “But it all starts with the ability to extend systems to customers and employees no matter where they are.”

So if mobile is the current focus, where will the market go next? Mark feels 3D printers are the next big thing. “I’d suggest running out today and buying your kids a 3D printer, to give them the same advantage we had when we started with computers in the 80s,” laughs Mark.

In the meantime, while he is keeping a sharp eye on the market and the solidity of venture investments, he is optimistic that many companies are on the right track to deliver what customers are looking for: seamless communication and connection options, across all platforms, wherever they may be.