Investment

Investing in Technology – $93 Billion

A serious investment from the Vision Fund

One of biggest obstacles to technological development is cold hard cash. Alongside the traditional bank loan, established businesses and startups have various alternative options including crowdfunding, angel investors and lending schemes, and of course money from venture capitalists. Last year, global VC deals exceeded $100 billion. In an announcement which shook the venture industry, a group of notable investors revealed the closure of a $93 billion funding spree. Japan’s SoftBank, Saudi Arabia’s Public Investment Fund, and Apple are just a few of the companies who contributed towards the Vision Fund, which is now the largest private equity fund worldwide. The growth of tech funds may well accelerate technological expansion, but how will this impact other venture funds and the beneficiaries themselves?

Growth of tech funds

Tech funds are important and governments are increasingly encouraging technological growth, while consumers are willing to contribute to crowdfunding platforms, but capturing the attention of a venture fund offers the biggest rewards. The Vision Fund represents the growing commitment of big businesses to foster global innovation, and it’s not the only one. In 2015, Amazon revealed a $100 million fund for startups developing technology compatible with Alexa. Just this month, UK based SILK Ventures raised $500 million for investment in Deep Tech, FinTech, HealthTech and Deep Science. Half of the fund was provided by a special commission of the People’s Republic of China, highlighting the trend that merges Asian capital and Western technology.

It’s not all about startups, either, as 24 year old computing company NVIDIA just received $4 billion from the Vision Fund. Obviously the Vision Fund is very much centre stage at the moment, but the emergence of other, admittedly much smaller pools of money is still incredibly encouraging.

The opportunity

If you’re a startup looking for investment, the growth of behemoth tech funds is very welcome. It presents a massive opportunity for companies in need of financial backing, as well as giving them the chance to work with industry giants. As funds aren’t solely restricted to young firms, it’s a good thing for overall technological advancement.

According to SoftBank CEO Masayoshi Son, the $50 billion invested in the US will create 50,000 jobs, which if true is great news for consumers as well as corporations. Son also stated that the fund was aimed at addressing the risks and challenges facing humanity today. Even so, big venture funds won’t necessarily lead to an immediate tech boom. In fact, when hedge funds first began pumping cash into startups, young companies held off from going public and focused on building their businesses instead. Ironically, there are even concerns that the Vision Fund has been a little too keen – some companies have asked SoftBank to lower the amount they originally wanted to invest.

On the one hand, companies can benefit hugely from investment, but sometimes the relationship can turn sour. In 2016, a dispute arose between Amazon and their beneficiary Nucleus when Amazon appeared to steal (and then market) a Nucleus product. The Vision Fund in particular also presents a serious challenge to other investors, snapping up promising firms before others get a look in. Despite this, the availability of heavy funding – not to mention the influence, contacts and resources of a major partner – is still vital for tech firms looking to make an impact.

Big tech funds initially sound like fantastic accelerator for technological growth, but the situation is far more complicated. Funding isn’t guaranteed to create more products and services – at least not in the short term, and excessive investment could even discourage companies from going public, which is counter productive. Companies should also be careful about how much they share with their benefactors to avoid disputes. Generally, however, the availability of serious money is an enabler for innovation, equipping businesses with the resources they need to be successful. Even if they initially hold back from releasing public services, their eventual products and platforms will be better developed and more refined. The real question is, now that the venture industry is dominated by giant investors, will smaller VCs survive?

Is competition in the venture industry an enabler for innovation? How will venture firms react to the surge in tech funds? Will increased funding discourage companies from going public? Share your thoughts