Within the technology industry, the term “eating your own dogfood” has been widely used to describe the practice of using and demonstrating the confidence in a product by giving it real-world usage within your own company. As a technology focused investment bank, we firmly believe that technology is transforming multiple sectors, enabling new business models, more efficient processes, and more client-focused approach. It would therefore be quite the paradox if we didn’t believe technology will transform our own industry, investment banking, which has remained relatively unchanged for decades.
As a matter of fact, technology is already affecting investment banking in substantial ways. Investment banks, which previously made a lot of money on handling trades for people are slimming down their brokerage functions as technology enables people to handle their own trades and have access to more information than ever before. At the same time increased regulation is making the process of working with investment banks harder and harder as more paperwork is required to validate compliance.
Within Beringer Finance we believe we must not only adapt to this changing landscape. We believe we must be at the forefront of enabling it. Even with our 102 year old history, we have an entrepreneurial mindset, one that enables us to embrace the change ahead instead of fearing it. Our unique combination of people with years of experience in the tech industry, combined with people with years of experience of how investment banking works, allows us to look at every aspect of our work as a potential area of improvement.
As mentioned above, the world of investment banking has not changed much in the last half a century, yet the world around it has changed significantly. Entrepreneurs have matured and have a much deeper insight into the capital raising and trade sale process than ever before. The community of investors and potential buyers for companies has exploded in size. Like in so many other industries, the value that the investment banker brings to a deal has changed significantly. The rolodex needs to be more than just names, since services like LinkedIn for example can offer just that.
Company business models have evolved, making the traditional revenue based valuation methods, something financial majors have had to learn backwards and forwards to graduate, irrelevant in today’s technology driven world. A company with a breakthrough technology but little or no revenue can be worth billions, making understanding of technological trends a more important trait for investment bankers than the ability to calculate the theoretical multiplier.
In today‘s connected and instant gratification environment, both entrepreneurs and investors seek the ability to complete a complex capital raise process with minimal effort. Yet every day investors get inundated with pitches for companies that don’t fit their investment criteria and entrepreneurs spend hours trying to find and pitch to the “right investor”.
Both the processes of raising capital and buying/selling a company (M&A) require many details to match up before a deal goes through. Although we have heard many stories of investors signing checks in a matter of minutes or hours, then the truth is that on average most deals take months, from the time planning starts until the money is in the bank. At every step of the way there are multiple factors that can make the deal go bad.
We believe that the investment banking industry is ripe for a transformation. We believe that by questioning how we do things today, we can find new and more innovative ways to achieve those same goals. We believe that like in all other industries, we must re-design the capital raising and M&A processes with the clients (both the entrepreneur and the investor/buyer) at the center. We believe that we can leverage the power of technology to automate large portions of the process, while at the same time develop new ways the investment bankers provide additional value to the process.
Over the coming months and years, as we progress in our journey of transforming investment banking, I will attempt to provide you with regular updates, that are intended to provide you with an insight into our efforts and the transformation of our own industry.
This article originally appeared on the Beringer Finance website.
Published June 30th 2017 at LinkedIn