eQ Oyj: Venture capital investments have made – and benefited from – the evolution of technology


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Venture capital investments have affected – and benefited from – the evolution of technology

On October 28, 2021, eQ Asset Management and TrueBridge Capital Partners announced their cooperation and the first closing of the first venture capital fund of funds for a limited number of professional investors. The partnership combines TrueBridge’s deep venture capital networks and strong track record of investing with elite venture capital firms over decades with eQ’s client-focused service offering spanning administration. of funds, reporting and best-in-class customer service.

Investors are reminded that venture capital investments are inherently risky and not suitable for all investors. This article is not an offer or an invitation to invest in any financial product.

Venture capital investments have affected – and benefited from – the evolution of technology

Venture capital has grown steadily for decades as an attractive asset class, with strong returns mainly due to the growth of the tech sector. It requires long-term commitment and is recognized for the role it plays in stimulating innovation by financing businesses in their early stages. But investors need to be strategic in adding venture capital managers – manager selection is critical as there is a large gap between top performing companies and bottom quartile companies. While the overall asset class has outperformed traditional stock indexes over five, ten and fifteen year periods, funds in the first quartile have recorded average annual returns of almost 30% to over 45% IRR over the course of the year. of the last fifteen years. This compares to funds in the bottom quartile that experienced a negative IRR of less than 10% during the same time periods. And access to top managers is limited because these VCs have their choice of investors with whom to partner.

While venture capital investments date back to the 1960s, the venture capital industry began to flourish in the 1990s when new companies were formed to invest in the technology companies that began to spring up as part of the business. of the digital transformation that we have experienced in recent decades. Particularly over the past 20 years, we have witnessed a software renaissance as technology has evolved to affect all aspects of work and personal life.

This trend of technological disruption has led to more opportunities for venture capitalists – and those opportunities have presented themselves on a larger scale and with much larger exits for investors. In 2012, for example, there were four software companies with a market capitalization of $ 20 billion or more; today there are almost 30. Underlying this is the shift in the way businesses and individuals use technology – and how this shift will continue to bring change on a global scale.

One of the fundamental reasons why technology continues to be an attractive investment opportunity for venture capitalists is the large and expanding Total Addressable Market (TAM). TAM software alone is estimated by some at $ 1,000 billion and is a function of several factors: that digital transformation is catalyzing cloud adoption at an almost exponential rate, that software continues to automate new ones. areas in existing and new markets, and that we are seeing continuous innovation applied to almost every industry. Companies like Airbnb and Uber aren’t just competing in the hospitality and transportation industries, respectively – they’ve completely disrupted them and changed fundamental consumer behavior. In addition to this, the share of the wider digital economy is increasing as an overall percentage of GDP. FAANG companies (Facebook, Amazon, Apple, Netflix and Google) will make $ 1.1 trillion in revenue this year, making it the 13e Highest GDP in the world if they were a country. We expect these favorable winds to persist, which will translate into some technology share for years to come.

Moreover, with the onset of the pandemic, an entire decade of expected technological growth has been condensed into months. The pandemic has transformed the lives of consumers, resulting in significant changes in behavior and preferences and, as a result, significant investments in venture capital and exit activities. McKinsey & Company estimates that there has been a “10 year by 8 week” jump in e-commerce deliveries, leading to the success of companies like Doordash, who then used this momentum to expand their global footprint with the Notable acquisition of early Finnish-up Wolt in an $ 8 billion stock deal. McKinsey also estimates that we’ve seen a 10-fold increase in 15 days for telemedicine and a seven-year acceleration in online entertainment in five months. Companies like Zoom that have enabled distance working and learning have seen massive growth. Other companies with forward-thinking business models that have capitalized on these consumer trends have also flourished. While much remains to be seen, there are signs that many of these new digital behaviors have become habitual and will likely continue after the pandemic.

With this recognition, major venture capitalists will continue to focus on technology. But which VCs will successfully choose the top tech winners to support? Research shows that investors who allocate capital to venture capital firms whose funds have performed well in the past are well served, as successive funds tend to outperform. First and second quartile venture capital funds consistently outperform public markets, and this strong persistence of venture capital performance suggests that successful venture capital managers have skills and networks that are harder to reach and to reproduce. This underscores the importance and value of venture capital funds, funds that nurture relationships with and maintain access to “winning” managers.

TrueBridge is fortunate enough to sit at the center of the VC ecosystem, connected to companies, VC managers and sponsors through deep relationships developed over decades. This unique position gives us ubiquitous networks, a unique vision and in-depth expertise in the world of venture capital. Our data-driven approach and long-standing relationships allow us to both identify top performing venture capitalists and have ongoing access to them. Additionally, we serve as the data engine behind the Forbes Midas List, Midas Europe List, Brink List, and Next Billion-Dollar startups, and regularly post industry articles and opinions on the Forbes Platform. This strategic partnership with Forbes has helped us build and further deepen relationships within our industry.

Looking to the future, the future is brighter than ever in venture capital. Corporate-funded technology companies continue to demonstrate the effectiveness that technology can bring to every facet of life. And the pandemic has acted as a kind of stress test, showing investors where there are capacity gaps – and opportunities – in massive markets. Venture capitalists are seizing the opportunity to fund companies that fill these gaps, and the rewards have never been greater. While the competition among venture capitalists is fierce, TrueBridge is well positioned and has strong, long-standing relationships with enduring brands.

Edwin Poston is a general partner and co-founder of TrueBridge Capital Partners. He was previously Managing Director and Head of Private Equity at The Rockefeller Foundation, where he helped invest a $ 4 billion endowment in some of the top performing managers in the venture capital industry.

Staffan JÃ¥fs is the Head of Private Equity at eQ Asset Management.

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