5 Years On: Software is Still "Eating the World"

If you've yet to read Marc Andreessen's article on why 'software is eating the world' - don't fret - much (if not all) of the content is still relevant today. In fact, given that 5 years later, Andreessen's argument has strengthened, there is even more reason to believe that the move to online services is not creating a fictitious tech bubble as experienced in 2001, but rather disrupting industries and contributing the the evolution of business as we knew it - even from 10 years ago. 

Today, we have fresh flowers being delivered through our mailboxes (e.g. Bloom & Wild), groceries being delivered within the hour (e.g. Jinn), algorithms are styling our boyfriends (e.g. Thread) who we are actually meeting because of having merely 'crossed paths' with them (e.g. Happn).  And this is only on the consumer level, never mind the innovation that has allowed us to catch insider trading, detect insurance fraud, prevent human trafficking (e.g. Palantir), allowed retailers to truly understand their customers and personalize their engagement with them (e.g. Ometria)!

Technology, (particularly software) is indeed jumping the hoops of infrastructure, opening our world up to new possibilities, making life as we know it both more efficient and less time consuming. Even more convincingly, is the speed at which it is happening and the increasing rate of change that companies are experiencing - making the survival of companies ever more reliant on investing in technology in order to survive. 

Whilst there is speculation that we are going to experience a rapid shift in the tech funding environment, and a staggering 73% of founders in one study (I must point out that this is the opinion of the two-thirds who had an opinion on the matter) are convinced we are in another tech bubble,  there is very little clarity on how the IPO market is going to move - which is unsurprising given that there are 155 Unicorns (a start-up company valued at over $1 billion) today, with a cumulative valuation of  $550bn, up from 39 just 3 years ago. If one compares late 2015 market caps of U.S.-based technology companies that have gone public since 2011, with the valuations of their last, respective pre-IPO financing rounds (bearing in mind that in some cases the last pre-IPO financing round dates back to 2003) - then the results look as follows: 

Market capitalizations are as of 9/28/2015. Data from Pitchbook and CapitalIQ.

In 2012, it was 2.8 times pre-IPO valuation. In 2013, it was 2.7, then fell to 1.1 by 2014 and 1.45 in 2015. What has changed? Well, it is becoming more popular for private companies to win higher valuations than those that are public, showing the growing divide between private and public market valuations.  One can't make the assumption that because of the significant increase in Unicorns that there is a bubble waiting to burst. If you're looking for a bubble, look at the UK housing market or the South African rare game industry (more on the latter topic later...).

The point is, we are spending a lot of time debating the valuation of these firms rather than digging deeper into the actual underlying intrinsic value of these tech firms.

Technology is allowing for the automation of almost anything.  In the next few years, if we haven't already, we will see artificially intelligent machines writing poetry, autonomous cars totally disrupting traditional auto-insurance models (more on this to come as well), and machines replacing traders

If we are to change at a rate that is able to cope with pace at which technology is taking over; we will need to be open to adoption and be eager to learn. If you're stuck for inspiration, consider this: the The White House estimate that if you make less than $20p/hour, you are going to be replaced by a computer (with a median probability of 0.83); in other words.... 60% of American jobs are at risk. Best we start becoming tech savvy. 

This also brings me to one final point.... To meet the increased demand for tech talent (in the UK at least), we will need an additional 1.2 million digitally skilled workers by 2022. When you consider that women make up 46% of the UK's workforce, but that only 2 in 10 professionals in the tech sector are women; the need to inspire and motivate more women to enter the sector becomes an obvious strategic solution rather than a feminist agenda.

Software is eating the world, and we need to start learning about the tools to used to eat in this industry along unless we want to be swallowed along with it.