Investment in UK technology companies by private equity firms has shown a period of massive growth from 2018 onwards. Investment in 2018 totalled GBP2.39 billion. This represented a 225% rise on 2017, where deal values reached GBP733 million. This period of growth is hugely encouraging for private equity firms. Investment in technology companies is top of the agenda and is likely to remain there for some time.
With this in mind, what are the big issues that investors need to concentrate on to minimise risk in deals where technology plays a part?
Product, People and Process
The issues can be divided into three distinct categories, the three Ps. Firstly, the product being built: where does it fit in the market? Is it what the market needs? What technology does it use? What are the competitors doing?
Secondly, the people that investors are investing in and the importance of their knowledge collateral.
Finally, the process of determining what and how to build.
Investors need to understand where an organisation’s products, people and processes are today, and how capable of change they are. The reality is that nothing in the technology world stays the same, the market is always changing and new competitors will come along. You need to look at how well-equipped a business is both to drive and respond to constant change in the technology sector.