Institutional and family office investors see opportunity in VC and high-growth tech firms

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An overwhelming majority (74 per cent) of institutional and family office investors expect to allocate capital into a venture capital (VC) fund in the next two years, according to a new survey from Ariadne Capital.

Furthermore, 78 per cent said they expect to or have decided to invest directly into a high growth, technology start-up before 2020.
 
The survey is based on responses from 125 international investors, entrepreneurs and service providers attending Ariadne Capital’s 7th Annual ‘Follow the Entrepreneur’ Investor Summit (FTE), held for the first time in Malta on 10 and 11 July. 
 
“The Survey results affirm the growing appetite we are seeing in the market for new investment opportunities in ‘Digital Enablers’ – those young, fast-growing enabling technologies,” says Julie Meyer, CEO and Founder of Ariadne Capital. “The discussions among the 50+ international entrepreneurs at our FTE Summit this year highlighted the immense growth potential for not only the fast-growing, emerging businesses themselves, but the awareness in the business community of their impact on traditional businesses, and that together, David and Goliath are reshaping industries into ecosystems.”
 
A key theme of FTE Malta was that the Greater Mediterranean Ecosystem is the 2nd largest GDP Zone after the US. Malta has a unique position in the region as the only native English-speaking, EU-based, British legal system with a strong financial services base. Respondents were asked to identify the top three challenges in the next two years for entrepreneurs conducting business in Europe versus the Mediterranean.
 
Over half (62 per cent) of the respondents said that sourcing private funding from VC, Angel or private equity was among the top pain points for entrepreneurs within the Mediterranean region, whereas increasing regulations around data privacy (50 per cent) was the leading challenge for entrepreneurs in Europe.
 
Meyer adds: “It’s encouraging to see that investors are seeing the opportunity in backing entrepreneurs at a time when financing is a significant challenge for emerging companies in the Mediterranean, an area with immense potential for business growth and testing new digital applications.”
 
For entrepreneurs in both regions, a lack of skilled developers (47 per cent Europe/54 per cent Med) and the uncertainty around the future of Europe (46 per cent Europe/50 per cent Med) were among the highest rated challenges anticipated for business in the next 2 years.
 
However, the following challenges were seen to be more of an issue in Europe than in the Mediterranean: increasing dominance of large technology companies like Apple, Google, Facebook, etc. (38 per cent Europe/31 per cent Med); cyber security risk (38 per cent/ 32 per cent Med); and access to corporate funding (36 per cent/33 per cent Med).
 
In evaluating the most disruptive technology on a global scale, respondents said that artificial intelligence/machine learning (36 per cent) will be the leading innovation in the next two years. This was followed by blockchain (29 per cent per cent) and robotics (16 per cent).
 
Almost half of the respondents (48 per cent) anticipate that the Financial Services/Insurance ecosystems will be impacted the most by new technologies in the next two years, followed by Health/Lifestyle (14 per cent), and Consumer Retail (12 per cent).
 
“New enabling technologies will break down traditional barriers between industry segments, creating completely new value chains and new business opportunities that may not be filled by incumbent players,” Meyer adds. “It is for this reason we see a significant opportunity for the world’s leading ‘Goliath’ corporations to collaborate with the fast growing ‘Digital Davids’ to not only stay at the forefront of disruption in their industries, but to drive the building of Ecosystem Economic firms across Europe.