2020 Through the Lens of

Private Investors in Technology

Diary by Simon Pavitt, Chief Operating Officer of the London Technology Club

23 December 2020

ABOUT:

The London Technology Club is an exclusive community of family offices, private and institutional investors, wealthy individuals, entrepreneurs and technology experts. We unite those interested in lucrative technology investments, bringing together the best venture capital firms and first-class projects all over the world.

Overall, it has been a great year for the club. We started the year with 39 members and increased that to 67. We have 35 members in London and 17 from other countries around the world. We increased our Venture Capital firm partners to 15 providing us with truly global coverage for unique technology deals. We also increased our institutional partners – including the likes of UBS, Barclays Wealth and LGT Vestra providing us with fantastic support.

It was quite a year in technology investing. As Chief Operating Officer at LTC, I thought the best way to review the year was to look at our activities month by month and share the mindset of our community of investors. They say you are the product of the closest five people around you. I have traded insights and discussions with over 60 speakers in 2020 and can safely say that whilst the below is shameless name dropping, that’s because we have some amazing people spend time with us discussing the crazy events that were going on and imparting their wisdom on how to stay calm, focused and resilient! So I feel like we had a fast-tracked immersion into how the best minds think during volatile times and how they step up and really get to work. I have tried to capture some of the killer insights that were expressed in our club activities.

At the start of the year it was via our signature LTC breakfasts and lunches with members and our network, then due to lockdown, we quickly switched to webinars - establishing a busy LTC webinar series with over 60 speakers and 34 webinars from March through to the end of the year. Whilst we love face to face live interaction, we were able to leverage our community to have some fantastic discussions for our members.

 

JANUARY

Each year we kick off with a breakfast with our Advisory Board Member Chris Rust from Silicon Valley. A seasoned VC investor, ex-Sequoia, Chris has seen it all in investing. Our members began the year discussing a potential bubble or expected tailwinds in economies around the world due to the extended bull run that had felt like it was due to come to an end at some point. The breakfast at the RAC, St James’s remains firmly in my mind as Chris dropped into his discussions over our smoked salmon and eggs about a famous Sequoia presentation named “RIP Good Times” that was circulated around the firm and its portfolio companies in 2008 ahead of the global financial crisis. It talked about what to do in ‘survival mode’ for companies. I remember finding it on the internet and looking at the advice. Little did we know that two months later the spread of COVID-19 would completely change 2020 and we’d be using terms like ‘new normal’ and have to consider what to do in a pandemic. We thought there were tougher times ahead but we weren’t expecting the huge global changes in behaviours. Fast-forward four months and Chris was on a webinar with us again, telling us that “companies that were playing to win, are now playing to survive”. He was so right.

 

FEBRUARY

We released our Future Technology in Property report. Most still didn’t realise a lockdown was on the cards. We hosted 80 people at the British Academy and discussed how technology was impacting the sector. One key takeaway was that property owners were going to have to be much more proactive in managing their properties and that tech was rewarding those that embraced it to create space-as-a-service. We found that property is, more than ever, about end users. They don’t want a flat, they want a lifestyle. Business owners don’t want an office, they want a productive workforce. Again, fast-forward to the end of this year, only 20% of the workforce have returned to work in major cities. Most companies will be looking to reduce their office space and move to a hybrid model with a distributed workforce. I keep thinking about Canary Wharf and the impact there. Perhaps it will get back to some sort of new normal, but an important discussion has been about what developers do with skyscraper space. With some suggesting that converting to vertical farming may be the solution in the future?!

MARCH

We hosted a webinar with Uri Levine- the serial entrepreneur and founder of Waze (sold to Google in 2013 for $1.1B) and Founders Kitchen. These sort of webinars are fascinating to uncover their approach to investing. Uri was clear on what he looks for in good companies and founders:

‘Figure out the problem you are addressing, and the users. Fall in love with the problem not the solution, and the rest will follow. If you are consistent at solving the problem, you will become successful’.

Again, we were still only starting to realise the size of the challenge ahead for the world. Never have business owners had to flex their problem solving muscles… 2020 was all about quickly defining the problem for entrepreneurs and investors. As many had to redefine the problems they faced, many had to search for solutions that they never would have envisaged having to create at the start of 2020.

By the end of March, we were in lockdown and we at LTC had launched our LTC Perspectives Webinar Series. We started with healthcare, as clearly health systems around the world were in full emergency mode. Vas Bailey, Partner at VC Partner Artis Ventures summed up the opportunity for healthtech companies:

“This will be one of the few moments where the provision of healthcare such as medicine and telemedicine is re-written”.

This was a time when the usual procurement of new suppliers and new methods in healthcare could take up to four years to tender for and implement were being put up for tender and decisions made by health services in just 48hours! We were witnessing the unprecedented acceleration of technology in healthcare.

 

APRIL

In early April, the markets were highly nervy and volatile. We called upon our member, top British businessman and philanthropist Jim Mellon for some calming words of wisdom, we were rewarded with:

'Trying to find the absolute low is a fool’s errand; don’t be scared to put money to work and take a long term view'.

We found our regular webinars, pretty much every Thursday were becoming a valuable gathering for our members to trade ideas and see how others were interpreting the events of the world. We also noticed that most investors were in fire fighting mode, having to focus on their core businesses, making sure they were steadying their ships. We saw a decrease in appetite for new investments… Hardly surprising as people were working out their strategy to navigate the challenging months ahead. Whether that was advising portfolio companies to draw down their cash from lenders, to ensuring cash in the bank, to cutting any non-core staff and reducing costs wherever possible. As LTC member Edward Shenderovich (founder of Kite Ventures whose investments included Delivery Hero and Knotel) said in our webinar with him, about having to act fast under pressure:

“The way companies perform this year will determine their fate for the next ten years”.

 

It was a time when early stage investing took a back seat. Investors were not able to meet with start-up founders to look them in the eyes and ‘press the flesh’. It’s made us realise the importance of face to face meetings for investors. One member once famously said to us there are six things they look for in tech investing: people, people, people, people, technology, people…

 

And investors want to make sure the founders are the right ones before investing. Not being able to look founders in the eye before investing affected the market.

By the end of the month our attention had moved to the race for a vaccine and the discussions around Brexit had well and truly taken a back seat. We heard from the Former Prime Minister of Malta, The Hon. Dr. Joseph Muscat on the subject:

'The real big thing now is who wins the vaccine race, the race for the vaccine could have the most disproportionate effect ever... if one particular country manages to crack the code before the rest... the geopolitical map as we know it will change at least in the hearts of people'.

There was interest from investors in terms of which countries would come out of lockdown first in order to get their economies back on track. Many were looking at China as a gauge to see how people would behave once lockdowns were lifted.

We were also interested in the effects on the VC market- gathering insight from VCs from around the world. The agreement was that it was a real test of fire for many business plans and investment assumptions. Richard Kivel, Founder of GrayBella Capital reminded us that it was a real test for portfolio companies and that 'companies that were relatively efficient are becoming very efficient now'.

 

MAY

We began May with a webinar with LTC Member Luke Nosek, co-founder of PayPal and Gigafund. He has always looked to back founders with mind-blowing missions for decades with truly patient capital – take Elon Musk for example. Conditions were providing him with unique insights into the companies he had backed or were looking to back:

‘Look for companies that are able to survive extremely difficult things and how they handle that. The problem is that when times are all good you can't prove this. I think we're (Gigafund) good at sussing it out… but there's nothing like proof.’

In May, we also presented to members the investment opportunity Mira. We held a webinar with Ben Taft. Ben is a young, hugely talented entrepreneur based in LA. He credits Mira’s founding story to Dr. Dre and Jimmy Iovine’s School for Innovation. After the runaway success of Beats—recently bought by Apple for $3 billion—Jimmy launched the new academy at the University of Southern California with the goal of inspiring the next generation of entrepreneurs.  Ben was in the first graduating class. We were blown away by Ben and his approach to building a business. We ended up presenting 14 companies throughout 2020. It’s a privilege to get to spend time (online) with these entrepreneurs. During the webinars we have made sure that we ask tough questions and really get under the skin of their missions and personalities. Personally, I can tell quickly just by speaking to the founders before going live on webinars how they organise themselves and manage process. Its unique insight!

 

Mid-May our attentions had turned to the potential impact on impact investing and the long-term harm that the pandemic could be having on charities. We were joined by Natalia Vodianova, a regular to LTC events through the past few years, her thoughts at the time:

“Today we are seeing a tremendous shift – companies are increasingly obliged to think about incorporating ESG considerations into their strategy. This is a very positive development and it is led by the consumer, as consumers are becoming increasingly aware of companies’ values.”

 

We agreed that we would see the companies that will be winners in the long term will be those that considered and planned for all areas of risk. Hence why ESG is top of mind for private investors, family offices and now also, the big institutional investors. Natalia’s thoughts were also echoed by co-panellist Ben Goldsmith:

“After this crisis there won’t be many companies that don’t take ESG considerations seriously” 

Interestingly that month we saw Zoom’s market capitalization rise to $48.8B despite posting revenues of only $623M over the past year. The company saw participants increase from 10 million in Dec 2019 to 300 million in April 2020. The Company’s valuation was higher than the world’s seven biggest airlines combined.

Our community were also concerned about the long-term impacts on mental health of many lonely, locked in their homes and unable to see others. Dan Murray-Serter of Heights and Top Business Podcast Secret Leaders provided positive words:

'You are more likely to have a longer lifespan by being authentically kind to people than any amount of good diet or lifestyle choices you could make'.

 

JUNE

Investor’s radars were starting to think about the US election in November as well as the threat of cybersecurity… both of which have disinformation in common. We turned to LTC member Dave King, CEO of Digitalis for thoughts:

'We all have responsibility for combatting disinformation. Disinformation in relation to an organisation should be on the company's risk register and should certainly be on the board's agenda'.  

 

JULY

July saw us release our Future Technology in Nutrition report, the seventh report in our Future Tech Series in the past 18 months. What is clear is the future is potentially the deepest, fastest, most consequential disruption in food and agricultural production since the first domestication of plants and animals ten thousand years ago.

We collaborated with Camilla Fayed who was “particularly excited about technology that could help us better understand the provenance of our food and how food can meet our specific, individual needs through personalised nutrition”. Later in the year LTC members would invest in Agronomics, the listed investment vehicle that is taking stakes in companies leading the technology in cultivated clean met, pioneering alternatives to, amongst other things, meat and fish.

 

AUGUST

Investors typically take a European-style break in August to refocus on family and rejuvenation. September has a back to school feel with everyone looking to get their head down again for autumn, we see deal cadence pick up and investor minds more focused.

 

SEPTEMBER

We welcomed September with a webinar with Robert Nelsen of VC Partner Arch Ventures. Robert has a career in venture capital like no other. He has started, or invested early stage, in over 29 companies that have gone on to reach over a billion-dollar valuation. He began with predicting good news for us in terms of the pandemic: “By summer next year we will be fine”. Given Robert’s relationships with big pharma companies, leading scientists, Nobel Prize winners and biotech experts, this was reassuring. Robert also is a big believer, like we are, that we are entering into the golden era of biotech. We see the next ten years as a revolution in healthcare. According to Robert:

“The healthcare revolution will be accelerated by the changes that are happening now and we are excited to continue to invest aggressively in risk takers doing truly transformative science.” 

OCTOBER 

We released another Future Technology report, this time: Space. The original space industry was centralised, national and aspirational, based essentially only on state-run programs. However, the new space economy is much more decentralised, entrepreneurial and accessible, with players from across industries and a new era of public-private partnerships (think NASA and SpaceX, Virgin Orbit and the UK Government). We received a nice video message from Tim Peake, the first British ESA astronaut as we launched a new partnership with the Scientific Exploration Society. Both the society and LTC Founder Konstantin Sidorov are adventurers and supports of pioneers. Our Space activities led to our members investing in the world’s leading private space transportation company… watch this space as we announce more on this in the new year!

 

NOVEMBER

The club was able to successfully place secondary shares in Silicon-Valley based unicorn PicsArt. The company was the 14th most downloaded app in the world in 2019 and is the number one social image and editing tool with over 150 million monthly active users. We had company Founder and CEO Hovhannes Avoyan join us for a webinar on fuelling creativity. Hovhannes mission with PicsArt is to “lower the barriers of creativity”. We learned about how the idea of PicsArt came to Hovhannes, a serial entrepreneur, from his daughter looking to be more creative. It was amazing to hear the journey of the company that now process nearly 1 billion images a month, amassing one of the largest open-source collections of content in the world. Hovhannes and PicsArt have a deep competitive moat in its data that it is now harnessing for AI, according to Hovhannes:

“The last three or four years, things have changed dramatically, and we have seen the AI became a part of our everyday life. It is one of the coolest technologies of the last few years”.

 

PicsArt is one of now 500 unicorns around the world, with e-commerce fraud preventer Forter closing a round in November valuing the company at $1.3bn. This was the first time the milestone of 500 had ever been passed.

 

Our focus also moved to Edtech in November, with a webinar with LTC Member Patrick Dumas and Dr Nermeen Dashoush, both of MarcoPolo Learning. We discussed the impact of COVID on the 1.38 billion students affected by the closing of schools, colleges and universities. Again, the adoption of technology out of necessity has completely accelerated the industry. What was once expected to be a $1 trillion industry by 2027 has been brought forward by at least 3 or 4 years according to Patrick.

Lastly, in November we heard from two pioneers in European venture investment, the passionate and engaging Christian Angermayer and the ‘French Bill Gates’ Alexandre Mars in back to back webinars. Both explained to our members their investment thesis and lens through which they approach tech investing. Christian explained how his fund, Elevat3 looks for profitable companies to help to scale through his ‘triggers’ which helps him de-risk opportunities and regain some element of control or influence on positive outcomes for the company. Alexandre is clear on his strengths and focus, looking for the right ‘strike zones’ as an investor. It is always fascinating to hear from these rock star investors, their outlook and approaches.

 

DECEMBER

As the end of the year draws near, we were delighted to see the IPO of Airbnb. A number of LTC members had invested in the company via the club in January 2019. The first day of trading of Airbnb saw the share price up 112% giving LTC investors 2.2x in less than two years. The trading of Airbnb soared on what was described as a tech frenzy.

We released our Future Technology in Finance report- with fintech being a key sector for the UK economy, capitalising on London being one of, if not the, financial capital of the world. We are busy planning a live broadcast in January around the findings of our report. Fintech was one of the strongest areas of investment for VCs in 2020.

Other positive news in December linked back to our findings earlier in the year- firstly Singapore announced it was giving regulatory approval to the world’s first clean meat. It paves the way for so many countries to create sovereignty in their food systems as they look to rely less on imports and be able to grow foods locally (important for food security, finance and sustainability). Secondly that Deepmind had, through the latest version of its AI system Alphafold, found the solution to a 50-year grand challenge in biology, the ‘protein folding problem’. It yet again highlights the huge potential of AI for biologists as a core scientific tool for research. Many predict it will fundamentally change ways in biological research in the future. Finally, the UK being the first to authorise and roll out a clinically approved Covid-19 vaccine. Technology holds the key to so many things for our future. 

 

Overall, 2020 we will look back at as the tipping point for digital evolution where so many were forced to adopt and experiment with technology. People moved from a reluctance to try to NEED technology for everyday tasks and solutions. From healthcare to communications, education to e-commerce, banking and payments to office work. As expressed well by our member Jim Mellon:

“Tech is now a systematically important part of society. In the past railways, then industrial food, then ships, aircraft, cars, databases then the internet”.

 

This is something, as technology investors, we knew the shift was occurring and the potential. But as so many tech company founders said to us through the year, the speed of onboarding new customers and the accelerated shift in digitization was at breakneck speed. The rule of thumb seems to be one month for one year’s growth: “I saw 3-4 years of growth in 3-4 months in 2020”. Microsoft CEO Satya Nadella: "We've seen two years worth of digital transformation in two months”. LTC Advisory Board member June Felix, CEO of IG Group told us that IG had had steady growth for 46 years. Then in 2020 it added 50% more customers in one year… LTC Member Patrick Dumas of MarcoPolo noted what they forecast to take ten years of growth they expect now to take 3 or 4 years. A McKinsey report suggested changes in 2020 took place four or five times faster than before.

 

Technology now employs more than a fifth of the workforce in UKs biggest cities. London is the global hub for fintech, playing into its strengths of the city as a leader in finance for centuries. Manchester is the second fastest growing tech city in Europe. Digital technology accounts for 9% of the UK workforce, 40% growth in two years. We’ve seen the government accept that we need to be world-leaders in AI, machine learning, space technology and biotech. We have to continue to play to our strengths in the UK: world-leaders in STEM R&D, education, innovation and implementation. We’ve seen a shift in acceptance that software developer is a key role within society, named in the top 5 roles in the UK alongside social care workers and nurses .A recent study by Boston Consulting Group called Decoding Talent found that London is the most attractive city for tech workers worldwide. We have a unique chance to attract and retain the best talent alongside the world’s major financial centre….

Perhaps the diary paints a slightly ‘too rosy a picture’. To say many have had an annus horibilis is probably an understatement and the inequality gap is undoubtedly widening. So, we must remember that technology HAS to be a force for good. Technology has to unlock human potential especially for those in poverty or that are suffering. I am optimistic about technology’s ability to enable progress and prosperity for ALL. From accelerating drug and medicine discovery harnessing AI to vaccine manufacturing using biomimetics, fintech democratising finance in order to help the ‘unbanked’ or healthtech revolutionising preventative and regenerative health, foodtech improving soil degradation, nutrition and decarbonising agriculture, we need to embrace technology even more in 2021. LTC Founder and CEO Konstantin Sidorov is vocal about the key role private investors, alongside governments, can play a key role in fuelling technological progress. Writing for Global Banking and Finance Review he said:

“Public finance cannot hope to provide the finance and pioneer the bold thinking and accept the risks required to find new solutions that drive us forward in a world of change. That role goes to the private investor and private capital”.

We at London Technology Club approach 2021 with optimism and increased pragmatism: People People People People Technology People….

We wish you a safe, healthy and prosperous 2021.

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