Tech routinely transforms markets:

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Tech also transforms business models:

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And yet, tech acquisitions create more value for consumers:

Private equity funds, hedge funds, mutual funds, and LPs, with their direct investment programs, all actively participate in late-stage tech.

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"The total value of venture investments in technology in the first quarter of 2021 nearly doubled from the same period in 2020, more than twice the growth rate of other sectors. Tech start-ups accounted for nearly 70% of total venture investments in the first quarter of this year.

The pandemic fueled this growth by accelerating the shift toward later-stage deals that had been underway for several years. The total value of tech deals in the Series C stage or later ballooned 165% year-over-year in the first quarter of 2021.

Investors have flocked toward surer bets to hedge risk and ride out the storm. But we expect this preference for later-stage rounds to continue after the pandemic. Venture-backed companies are choosing to stay private longer, which allows them to continue investing in revenue growth by avoiding capital market pressure to focus on profitability. We also see this with moonshot innovations, such as self-driving car companies, which require expensive, long-lasting development cycles. The result is growing competition for late-stage deals, which is creating opportunities for larger-sized funds and blurring the lines between traditional venture capital and private equity."

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"The clear message is that technology isn’t just an industry. It has become the primary disruptive force across the entire global economy.

'Born tech' companies deliberately built their businesses upon technology at an early stage because they viewed it as critical to their success, even if their end product isn’t a traditional technology product or service."

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"In more mature software companies, we see oversized returns for companies that are moving to software-as-a-service subscription models. The SaaS model allows companies to focus on new ways to create value, and since many companies are early on their journey, more gains may lie ahead.

Many of these software firms may still be relatively undervalued by private equity investors. Analysis of technology deals over the past decade shows that while hurdle rates for software investments are about the same as for riskier industries (a target internal rate of return of 21% to 22%), software investments have been more likely to overperform and less likely to lose money."

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