On the West Coast, you don't even need technology to raise money from a tech fund. Growth is enough in a world of convergence
While working from our LA office, Daniel Domberger explains why on the West Coast, you don't even need technology to raise money from a tech fund. Growth is enough in a world of convergence.
In a highly-competitive market, with a shortage of high-quality businesses to back and a feeding frenzy among investors who find one, many of the traditional labels used to define sectors and investment approaches are breaking down.
There's plenty of discussion of convergence between the worlds of media and tech, or content and platform, as online distribution blurs the distinction between them and it can be hard to say with clarity which element in a business proposition is more important.
From Tech to Tech-Enabled
Increasingly, anything 'tech-enabled' has been able to attract more attention from ostensibly tech-focused investors, pulling them into areas including services and online retail, more traditional and less scalable businesses than software.
Right now, almost anything consumer-facing that touches the internet somewhere and is demonstrating enough growth and growth potential can raise money from West Coast VCs.
That's how mattress retailer Caspar raised so much, it's a mattress manufacturer which has bypassed the traditional retail channel, and instead sells directly online. That's enough to have VCs piling in. See our commentary on the recent IPO of Caspar's UK competitor, Eve.
Juicero? A blender, and bags of fruit. With a QR code. That's enough to have tech investors lining up, at least until Bloomberg published a hilarious takedown.
Another good example is Glossier, the digitally native, community-driven beauty brand which sells online and offline and targets millennials. A direct-to-consumer product company with a content-led marketing strategy. They do it very well, and it's both disruptive and fast growing. It's not really a technology company.
The silos are breaking down
What this really shows is the way the traditional sector silos are breaking down, and convergence is pulling tech-led investors, mindsets, and multiples - into the Consumer sector in particular, but across Business Services too.
In a highly competitive investment environment, with PE houses and VCs under pressure to deploy the funds they've raised, stories of convergence allow investors to look beyond narrowly-drawn sector boundaries, and chase growth wherever they can find it. The link to technology need not be very deep or strong, as long as there is a market of scale and sufficient growth trajectory, or even potential.