Trends Watch: Venture Capital, Technology, Blurring Lines, and Making Sense of It All

EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.  

This week, Elana talks with Sami Moughrabie, Managing Partner, Atmos Ventures.

What is your outlook for venture capital?

At Atmos Ventures, we are investing in deep tech for the enterprise by focusing on quantum and high performance computing and artificial intelligence (AI). There will be no future advances in AI if there are no major advances made in processing power. This is a fact.

Venture capital will be crucial in acting as a facilitator of this technological revolution and this is key because multinationals today are facing an existential threat.

Digitization and globalization are blurring the lines between sectors as well as between traditional competitor groups. Technology is changing consumer behavior, empowering start-ups, making pricing more transparent, and reducing product life cycles. As a result, the traditional sources of competitive advantage—market position, scale, or legacy—are diminishing, and established operating models are becoming obsolete.

Global markets now demand a fully digital enterprise. However, technological fragmentation simply creates too many choices that achieve similar goals in a global marketplace that has become increasingly saturated and competitive.

I believe that the successful venture capitals of the future are the ones that can consolidate and make sense of all this fragmented noise by identifying, and investing in, companies that are adding real value to the enterprise.

Global partnerships are crucial in this consolidation process. We believe that partnering with universities, research institutions, governments, multinationals and private equity firms will be a game changer, despite the fact that most venture capitals shun the Private Equity industry.

Technology is the only sure way for enterprises to increase shareholder value in the short run. It is a great time to be at the forefront of these exciting new partnerships while redefining the way the venture capital industry operates.

What is your outlook for the economy?

Overall I am not optimistic. The global economy is skating on thin ice and we are essentially living in a world of denial. Total government debt and non-financial corporate debt are at an all-time high. We are seeing double digit increases in household debt year-on-year. The world’s debt pile is more than three times the size of the global economy. Some type of major shock is inevitable. This isn’t rocket science.

During these hard times companies tend to get hurt for inefficiencies that they laughed off when times were better. Therefore, we believe investing in technologies will truly revolutionize the internal workings of the enterprise. The more technologically efficient an enterprise is, the more likely it will weather the storm when the inevitable crisis hits.

Therefore I foresee an increase of assets moving from public to private markets.

What keeps you up at night?

Making sure that our technical due diligence is flawless. Some of the world’s smartest and largest investors were scammed by companies like Theranos because they invested in the hype. They failed in conducting a thorough technical due diligence and this resulted in a $9 billion loss. Limited Partners suffered the majority of these losses.

When investing in deep tech, we are essentially making bets on technology that sometimes has not even been commercialized. Sometimes there are only a handful of people in the world that are qualified to even understand a certain piece of cutting-edge research so we make sure that we are partnering with the smartest people in their respective fields in order to make sure that our investors’ money is being allocated in the most responsible way possible.

The reality is that there are a lot of really smart venture capitals out there that get it wrong all the time. We owe it to our investors to be absolutely sure that a certain revolutionary piece of technology does what it’s supposed to do and it is up to us to truly maximize its potential value through these global partnerships that we have spent many years cultivating and nurturing.