Three key messages shared by our investor speakers at FWD20, in their efforts to identify and acquire outstanding assets, then accelerate value in the digital era.
Investment horizons in the digital era
There is no replacement for discipline and hard work, no matter how experienced you are as an investor.
Sakshi Chhabra Junior Partner at Softbank Vision Fund
1. The pace and digital nature of change are exposing gaps in investment due diligence.
Gut instinct, disciplined process and insightful digital analysis are each critical. But as covid puts gut instinct on shakier ground, the latter two are becoming increasingly core to a successful process. One prevalent analysis gap is around digital marketing spend effectiveness and sustainability. Management team integrity and resilience is another area where investors are becoming increasingly hawkish.
It’s become really hard to unpick the sustainability of digital marketing spend, where growth has been driven by competitive google adwords bidding or other PPC. You are then stuck with trying to understand how important or relevant the “tech stack” is for the future of the company.
Richard Pearce Investment Manager at ECI Private Equity
2. Investment returns can be made or broken by the scale of technology change required within a business.
Tech-enabled businesses consistently show a level of resilience and dynamism that can often be lacking in other business types, whether that be their long term revenue, visibility, sticky contracts or diversified customer portfolio. But the priorities and effort required to build that tech-enablement can often be unclear.
The UK digital economy is outperforming every other sector. And if you look at where UK exits are, c.70% now come from tech.
Sarah Turner CEO & Co-founder at Angel Academe
3. Resilience in a company starts with connection between its people.
With the right leadership and values, a big part of resilience can be driven through an organisation from the top, alongside the personal dynamism of the people you hire.
Let's not underestimate how difficult the challenge is to understand management resilience: lengthy hours, difficult conversations. Assessing how managers think about change - and how they treat and motivate their people - will mark out long-term investment success.
Kin + Carta
The pace and digital nature of change expose both gaps and opportunities:
Pre-acquisition
Commercial due diligence needs to address the commercial, customer and technical & digital aspects of a potential investment, in an integrated process.
Post-acquisition
You need to understand where a new portfolio company can catch up, get ahead and evolve, digitally - how much will that cost, and what will happen if it doesn’t.