Forgotten heroes of Silicon Valley boom
It’s not just Amazon – UK’s top tech investor reveals...
CANNY investors hoping to unearth a tech start-up that can break the stranglehold of the likes of Facebook, Google or Amazon face a near impossible task.
But that does not mean there aren’t opportunities for upstart firms to offer bumper profits.
The key, says Britain’s top technology investor Ben Rogoff, is to find a service which can ‘bleed in to every part of our lives’.
The so-called Fang stocks – Faceby book, Amazon, Netflix and Googleowner Alphabet – remain phenomenal money-making machines.
And they use their vast cash reserves to swallow smaller companies before they become a threat. This can provide a bumper payday for investors, but it also means it is unlikely a firm starting out in someone’s bedroom will ever grow enough to challenge the world’s biggest companies.
It helps explain why the likes of Microsoft, Apple and Amazon – many of which Rogoff has invested in from the very beginning – account for nearly a third of his £1.5bn Polar Capital Technology Trust, which has turned £10,000 into £30,494 in five years.
The married father of two says companies can’t afford to rest on their laurels.
‘But right now, the likes of Facebook, Google, Amazon – and Tencent and Alibaba in China – have unprecedented scale,’ he says.
‘It’s hard to see where the upstarts will come from. Take Facebook. What does it worry about? It worries about different networks. So it buys WhatsApp. It buys Instagram. It does that all the time.’
Despite this, Rogoff, 45, believes investors can still look forward to a prosperous future as technology ‘bleeds into our everyday lives’.
Some of the best opportunities, he says, are to be found in software and internet companies – in particular, those offering software- as- a- service (SaaS) where customers rent a product on subscription.
His view is shared by investment bank Morgan Stanley, which said that SaaS firms have the potential to double in value by 2020.
One is San Francisco’s Salesforce, which Rogoff describes as the ‘go-to firm’ when it comes to cloud computing – where you use software stored on the internet rather than your computer.
It also creates software used by more than 150,000 companies that allows them to solve customer complaints online.
Its shares have rocketed 160pc in five years.
Another Rogoff favourite is 8x8, which allows companies to make telephone calls over the internet, meaning they don’t have to shell out for expensive equipment.
Additionally, the rise of the smartphone has boosted the mobile games industry. Kyotobased video games and console maker Nintendo successfully ventured into that market in 2016 with Pokemon Go.
Robotics is a key theme in the fund and Rogoff talks glowingly about Keyence, another Japanese business, which makes the components that allow robots to see.
‘The technology sector is creating disruption and are well- placed to profit from that,’ says Rogoff. ‘The reason technology continues to grow more than the broader market is because it continues to permeate deeper into our lives.’