Eoin Treacy's view

Here is a link to the full report. Please be aware that the file is 41mb so may take time to download depending on your internet speed.

The pace of technological innovation is graphically illustrated in this report. What becomes very clear is how start-ups view the all-in-one businesses of companies like Starwood, Proctor & Gamble and the car manufacturers and pharmaceutical companies as ripe for disruption. They could be right and there is certainly a great deal of venture capital money willing to make that bet. However we should not expect established companies to go down without a fight.

The pace of adoption of new technology has increased dramatically because many of the new technologies released in the last decade have been software based. Once software is developed to fulfil a given purpose it can be almost instantly scaled. It’s not that easy with physical products which required often long supply chains to get the desired widget to market. If the next phase of innovation is to move beyond mobile to connected devices then there will need to be a major evolution in manufacturing to accompany that move not least because it will need to be a high volume business. 

Taking a broader perspective one of the reasons there are so many private companies which have so far eschewed the opportunity to go public has been the abundant supply of venture capital. Softbank and Saudi Arabia’s commitment to build a $100 billion fund to invest in technology is but the most recent sign of interest in accessing the sector. An additional important source of capital has been the combination of low interest rates and abundant liquidity. If interest rates rise that will be constrain that particular source of capital and the number of IPOs could rise. 

The Bloomberg IPO Index rallied impressively in 2016 and is currently consolidating the most recent portion of its rally. A sustained move below trend mean would be required to question potential for additional upside.