Investing in Tech Companies
Technology is nothing but the collection of various methods, skills, procedures, and systems used in the creation of products or services or in the achievement of specific goals, for example scientific discovery. In simple terms, the technology can be seen as a collection of human minds, which come together to develop new services, new products, and new processes that serve human needs. This is one definition of technology, but technology is so much more than this. It is, in fact, very much like human wisdom in that it is continually growing and changing with the times and environments in which people live.
There are many examples of new technologies springing up around us every day. Take for example all the mobile phones that have been developed over the last decade or so. All these new technologies were developed by highly talented people who saw a problem and wanted to find a solution. Some of these companies have become some of the biggest success stories of all time, while others failed and later closed their doors.
However, there are also new tech companies that emerge from the ashes of these tech giants, just with a capital “C”, but still possessing the drive and the passion necessary for creating new technologies. Examples include Apple, Google, Microsoft, Yahoo, AOL, RIM, and others. Each of these companies started out as small companies without any clear vision, direction, or goals. Yet, all of them found unique ways to meet the needs and demands of their customers, to make their technologies work for them, and to differentiate themselves from the rest of their competitors. They innovated and built customer relationships, and they did so on an appropriate scale compared to their competition, by using appropriate technology, by investing in building the right team and the right culture.
Another way to look at it is to say that the key to being a tech company is actually to start out small, and to be very careful about how you use your capital and other resources, so you can grow into a meaningful size business. In other words, rather than starting out as a small startup with only a few employees, most of the tech companies in this day and age started out in much larger businesses that required multiple locations, multiple departments, multiple products, and multiple executives. The entrepreneurs in these tech companies understood that a smart entrepreneur is one who understands the value of working with a partner, but also understands the importance of growth, and the fact that the larger the business grows, the more value they create for themselves, for their investors, and for the future.
As a result, when it comes to investing in new tech companies, the most important thing to remember is that the higher the level of expertise the founder has, the more valuable their company will become. That means that if you’re going to invest in a tech company, make sure that the founder has enough technical knowledge and expertise, and enough of a track record, to lead the company into high growth and high profit points. By all means, invest in startup companies that are backed by venture capital. Just make sure that you don’t spend more on a startup company than it is worth. One of the reasons why there are so many failure stories in the tech industry is because companies took on too much risk, or didn’t have enough expertise to drive the business forward on its own. When you’re dealing with companies under these conditions, you really have to ask yourself how much risk is appropriate, and how much value is provided by the venture capital.
Some people say that the tech industry will never change, but I would argue that it has actually changed significantly since the early days of the Internet. Today, you have developers creating next generation tech products that may completely change how we do business, and the way we communicate. Some of these companies are going to be tomorrow’s winners. Are you ready for the next generation of tech companies? Invest in them now while you still can!