Investing in Technology Companies

 

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I seem to be a magnet lately for investment advisers.  They keep sending me their latest ‘product’, which is generally a package of investments that supposedly will interest me.  These portfolios are really slick, with charts and graphs that are supposed to entice me to buy.

Too bad that they don’t understand me, their target customer.

I invest in three things: Music, Chocolate and Technology.  Of course music and chocolate are the best investments in the world, it’s almost impossible to measure their value.


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Just look at my concert-grand piano.  It just sits there.  The Steinway salesman told me that it will appreciate in value (yeah, right), but I don’t care.  Just looking at it gives me joy and when I sit down and play… And chocolate? Well, enough said.

OK, let’s talk tech companies.  How should you invest?

Should you go blue-chip, high-growth, startup, IPO, or what?  What financial numbers do you crunch, what thought-leaders (ugh) do you listen to?  I think of tech-investors like I do gamblers.  Everyone thinks they’re good at it and everyone’s a winner.  Until you get them to talk.

So what’s my secret?   No secret.

DISCLAIMER:  I don’t pretend to have any more insight than anybody else trying to make a buck, but here’s how I go about evaluating a technology company.  It has NOTHING to do with numbers or company strategy.  It has to do with technology people.


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Call them a ‘dork of developers’, a ‘subnet of geeks’, a ‘needy of nerds’, or a ‘party of programmers’, I look for groups of technical people to really discover the invest-able value of a company.  And it’s easy.  Go to the hangouts, the meet-ups, the coffee-shops, the bars where technical people gather and TALK TO THEM.  Finding out what type of technologies they’re working on is useful but, even more important, find out if they LOVE their work and AGREE on their company’s direction.  A passionate programmer is a productive programmer!

PROGRAMMERS DON’T LIE!!!
They will tell you the truth, many times a little more bluntly than you’d like, but you will find out what’s really going on inside their company.  Are they aligned with the strategic goals and leadership.  Do the Technologists influence major decisions?  Do they agree with the marketing message.  Do they like their sales-people?  And… are they engaged with their customers?  If not, watch out.

With startup investments and M&A work, I insist on talking to the CTO and/or development staff.  I have passed on more than a couple simply because I discovered that the technical staff was unhappy or uninformed on what was happy at the C-level.  I also know of some companies where it’s obvious that technology skills are considered commodity, expendable and replaceable.  These companies are doomed.  Technology folks have great influence on success, revenues and valuation of a company, especially in the long run.  Get to know them and you’ll know whether or not to invest.

IMHO, if you have engaged, empowered, proficient, prolific programmers, you have a powerful company worth my  investment dollar.  And this strategy scales from start-up company to mega-corporation.

Happy investing!  Take it from a programmer who NEVER lies!
P-Cz