One of the major trends in the high-tech space is the focus on the cyber security subspace. After a recent string of companies whose security was violated and their customer information leaked, information privacy and security has further shifted to become a primary focus for companies whether small or large. This is accentuated by the consolidations and acquisitions in the space: Israeli firm Fore scout Technology acquired Dutch firm Security Matters for $113M. Well-known security firm Symantec acquired Appthority and Javelin. Facebook is reportedly seeking to bolster its security infrastructure by acquiring a security firm to obtain IP and expertise necessary to avoid future gaffes that have plagued the company recently with regards to the illicit access of its user data by the now-defunct Cambridge Analytica.
The importance of technology to our way of life has geopolitical implications as well. The US government recently advised businesses including those of allies to avoid Chinese hardware vendors including specifically Huawei. This arose due to fears, not unfounded, that the Chinese government would manipulate the hardware to allow it access to the devices through so-called “zero day exploits” (exploits that have not been detected by the wider cybersecurity community, allowing ill-meaning actors access to the devices or systems). The cyber security space is quickly becoming one of the most exciting but also most contested subsectors of the tech industry.
In the FinTech subsector, the challenge is to find a way for technology to replace traditional banking processes while maintaining compliance to regulations. Traditional banks have been one of the most responsive sectors to the threat of technology, acquiring or in investing in these upstarts (as in the cases of BBVA of Spain investing in Atom Bank of the UK and BPCE of France acquiring the Finnish Fidor Bank, both online banks) or launching their own operations (Goldman Sachs launching Marcus, also an online bank). Robo-advisors are becoming more widespread as financial services companies target retail investors, aiming at presenting themselves as a simple, low-cost entryway into personal investing, as has been the case with the Canadian company Wealthsimple. However, regulatory issues are still a concern for FinTech companies, especially as they begin to resemble traditional banks in how they function and the services they offer.
While high tech has seen the rise of exciting companies with interesting solutions to previous problems, we are starting to see some of the excesses and blowups of previous booms manifest into this wave of newcomers. For example, Theranos, previously a darling of the PharmaTech sector, was revealed to be a sham with a non-viable product. The signs of excess are starting to edge their way to related companies and industries. Like in the case of WeWork and its need to maintain funding by resorting to issuing high-yield bonds, which has drawn attention to the fact that it has been haemorrhaging cash. Its financials revealed as part of its bond prospectus recently showed an unusually high cash burn rate. This has raised concerns about We Work’s ability to keep sustaining itself. As a company that provides workspaces for very early startups, especially high-tech startups, it is worth examining how this particular company is able to overcome the challenges it is facing as that might provide a clue as to the outlook for shared workspace companies. They, in turn, might provide us with a clue as to how the high-tech industry might be performing in this current boom.
Source from: MERatings