by Paul Wilson via www.asx.com.au
What do Uber, AirBnb, Twitter, Workday and DropBox have in common? They are all valued at more than $10 billion but were formed less than a decade ago.
Technology companies can get very big very quickly, reflecting the size of the global markets they are addressing and their ability to scale rapidly.
Australian technology companies also have had rapid rises in fortunes, with names such as Atlassian, the global software developer, OzForex Group, the currency transfer business that is challenging a traditional domain of the banks, and Freelancer, the world’s largest outsourcing marketplace.
Australian emerging software as a service (SaaS) businesses such as SiteMinder are already world leaders. These companies are all addressing very large opportunities by utilising technology to provide a more efficient service.
Naturally, Australian investors want the opportunity to participate in such businesses that have the potential to achieve such phenomenal growth and global reach. Some investors want to diversify their portfolios to include technology as an asset class. They also want to manage the downside risk of technology.
The market capitalisation of companies in the IT sector listed on ASX and NZX has more than tripled over the past five years, but still represents only 0.7 per cent of the ASX 200. This compares to financials comprising 47.7 per cent of the ASX 200 at August 31, 2015, using S&P indices data.
Many investors in Australia are looking to gain some exposure to the technology sector, recognising that the industry balance in Australia is likely to trend towards other developed markets over time. Some portfolio allocation to IT is a way to obtain exposure to potentially high-return investments while providing some industry balance to portfolios.
Several technology companies have recently listed on ASX. Some have had a stellar performance, others less so. A number are perhaps not fully understood by the market. There is no question that investment in the technology sector can produce exceptional returns, but also comes with a level of risk.
Traditionally, expansion capital investing in the technology sector has been the domain of ultra high net worth individuals and Silicon Valley firms. Bailador Technology Investments (ASX Code: BTI), which listed on ASX in November 2014, gives retail and institutional investors access a portfolio of technology companies at the expansion stage.
Acquiring BTI shares gives investors exposure to a portfolio of investments in six high-growth private companies in the technology sector, which have been made according to the principles outlined in this article.
To learn more about (1) the solid foundations of the technology sector, (2) how well it is established in larger markets such as the US, and (3) how to reduce risk when investing in this sector, click on this link to be redirected to the ASX Newsletter.
Mary Meeker’s annual Internet Trends report has been released at Code Conference at the Terranea Resort in California
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Mitchell Sneddon in Eureka Report : Eureka recently took a 5% holding in Bailador and is now holding. Mitchell Sneddon speaks with David Kirk about Bailador's success.