Speaking ahead of the Astia Investor Forum in London today, Tim Hames, Head of Public Affairs, Communications and Campaigns at the BVCA, said:
“In recent months, and heightened in the light of the Microsoft-Skype deal announced yesterday, a claim has emerged that the dot com boom of a decade or so past and the consequential bust are in the process of being repeated. This seems to me to fly in the face of the evidence. The dot com boom was characterized by a glut, indeed a veritable splurge, of IPOs of internet companies. Many of these businesses were little more than a domain name, a website and a concept. The false premise was that there would be a huge premium for whatever companies could pitch their tent in a particular section of the market ahead of any other possible rivals. Furthermore, this was a craze in which hundreds and hundreds of companies attracted cash from thousands and thousands of investors.
Compare those facts with what is happening today. In 1999 there were 308 technology IPOs in the United States. In 2010 there were 20. The companies attracting attention today are well-established ones which have proved that their technology is robust, that they have a large customer base and can accumulate substantial revenues. Furthermore, the current deal pattern involves a relatively small set of businesses being acquired by an even small set of large businesses. This is a very different story.
That is not to deny that something intriguing is occurring. As someone with an interest in history and politics, I see the likes of Google, Microsoft, Facebook , Apple and to a lesser degree Amazon engaging in a modern version of the 19th century colonial ‘struggle for Africa’. All these mega-players -in what might be described as the “Internet Plus” economy - are scouring an area which is big but finite and where the equivalents of mineral resources and strategic advantages are known to be present in order to position themselves for a much wider competition and conflict. They are alighting on prominent businesses which have shown the capacity to create a market for themselves, not hyper early stage companies that barely qualify as a business in the orthodox sense of that term.
This is an absorbing process to watch which may well involve some acquisitions and valuations that might be regretted later but it is a limited engagement at the very top end of the market. The notion of a trickle-down effect from this activity on the whole of the technology sector and throughout the developed world is deeply suspicious. It is like arguing that the arrival of a small number of Russian billionaires in Chelsea explains why aspiring first-time buyers in Catford are finding it so hard to enter the housing market at the moment. Those men from Moscow are probably generating inflation for a tiny number of very desirable properties in the West End but the real problem elsewhere for ordinary mortals is tougher terms in the mortgage market. 2011 may be many things but 2001 Mark II it is not.”
FOR FURTHER INFORMATION PLEASE CONTACT
Tom Allchorne, BVCA: +44 (0)20 7420 1807
Notes to editors:
The British Private Equity and Venture Capital Association (BVCA) is the industry body for the UK private equity and venture capital industry. The BVCA has over 450 member firms, representing the overwhelming number of UK-based private equity and venture capital firms and their advisers.
