Private equity and IT service/technology do a strange dance. Some compare this dance a modern day gold rush. Also, it looks like the two dance in sync. Let’s look at technology and private equity.
For example, private equity firms up their investments in tech companies. Furthermore, they did so in a short period of time. Such firms invested $43 billion in tech in 2015. But in 2016, they invested over, $148 billion. That’s over three times as much. Then there’s this scenario: Firms often invest in companies that aren’t doing well, or just getting off the ground. That’s especially true with venture capitalists. Also, look at how tech companies are buying out each other in recent years. Private equity firms may or may not want a piece of that.
Then there’a another dance between technology and private equity. That is the rapidly changing pace of the tech industry. For example, back in 2005, nobody had a smartphone, or apps. As recently as 2010, nobody had Uber or Lyft, or Airbnb. But now, we can’t imagine our lives without these things. So it’s easy for private equity firms to invest from one big thing to the next. Because there is always going to be a ‘next big thing’. This trend shows no signs of slowing down.
Then there are the equity firms that are there just to buy out struggling tech firms. These companies include Vista and Insight Ventures, among scores of others. Then there’s the debate of a company going public. Yes, there is more security and backing there. But more often then not, tech companies like anyone in computer servicing depend on bubbles not caused by Wall Street. Also, when a tech company goes public, they have all sorts of demands to put up with. I see the relationship between technology and private equity going for a very long time. There’s too much tech innovation to go around just for private equity firms to quit. They may quit on certain companies, but not on the industry itself. Where do you see it going?