“How to be Levi’s Jeans in the TMT Goldrush”
PrivCo’s coverage of the ACG TMT Disruption & Deals Conference; Interviews and panel discussions from the biggest market movers in technology, media, & telecom
Furthermore, Wade Davis, CFO of Viacom, provided a bevy of insight into his approach to disruptive technology, all the while tabling any discussions on the corporate governance and current upheaval going on in the executive board room.
– From Right to Left: Shelia Dharmarajan, Kenneth M. Harrell, Jason Sobol, Scott Twibell, and Andrew Vogel
Jason Sobol, Senior Managing Director at Evercore, and Andrew Vogel were the two standouts in the conversation. Sobol educated the crowd about the basic bid/ask problem facing the TMT landscape today. He explained that deals may be taking longer because buyers in particular are operating from a 2014/2015 mindset, pricing in the riskier market environment with each deal they approach.
Andrew Vogel preached on the importance of disciplined investing in an ever-changing world, which he noted is becoming more disruptive by the day. When holding periods typically last for three to five years, staying focused on your theme can be more difficult when the landscape can dramatically change in 18 months. When asked about the valuation bubble, Vogel staunchly defended his theme-based investing stating, “I never believed in Unicorns.”
The entire panel, in what would be a precursor to the second debate, agreed on the basic principle of ancillary investing in the middle of a boom. Each speaker paid homage to the principle that when one is investing in the next industrial revolution, the best risk-averse strategy is to invest in the business or growth areas that will follow the rising tide, and not teeter on the crashing peak. Similar to how Levi Strauss made a retail empire by selling goods to those in need during the height of the gold rush, the smartest investors are investing in the data receivers on cell phones instead of swinging for the fences on the next Facebook.
– Wade Davis (Viacom) and Leslie Picker (The New York Times)
In a fireside chat with Wade Davis, Leslie Picker did all she could to cut through the media noise that currently surrounds Viacom’s corporate governance and centered the conversation around the tectonic shifts going on in today’s media landscape.
Among Davis’ best talking points was his understanding of how old media could learn from new media. Instead of throwing the proverbial old media dinosaurs under the bus, he boiled their problem down to a user experience (UX) problem, essentially stating that the way old media is packaged and delivered to the consumer is antiquated while platforms like Netflix, YouTube, and others have a better UX. The content created by old media is not inferior (in many ways the golden age of television is proof that it could be superior) but the old guard has a great deal to learn when it comes to delivery. The most memorable moment, was when Picker asked about Viacom’s Snapchat partnership, quoting this article from the Journal, “An accord between Snapchat and Viacom may feel like a teenager letting his middle-aged dad tag along to the party because there is a better chance of scoring some booze.”
Davis’ response…”I’m happy to drive my younger cooler nephew to the party.”
– From Right to Left: Martez R. Moore, Dan Black, Hamish Burt, Vipul Shah, Scott Simpson, and Gregg Walker
While the first panel emphasized why deals were taking so long, this panel was primarily made up of investors, and they got to dive into what they look for in TMT targets. Much of the talks were again focused on risk-averse asset classes and investing in the wave, not the peaks. The insights on achieving 3X-6X returns on cash over 10X or even 100X were reinforced by investors Dan Black, Vipul Shah and Scott Simpson. Scott Simpson, Managing Director at Brightwood Capital Advisors, mentioned his investment into GoGo wireless (the in-flight internet provider) early on as a perfect example of thematic investing. Brightwood saw the need for connectivity on a massive scale, and mitigated downside risk by investing in a go-to market product and service.
The best insight into disruption throughout an industry however, was presented by Gregg Walker, Head of Corporate Development at Sony Corporation of America. With a subtle defensive tone, but ultimately one of resilience, he informed the crowd that the music industry has been the victim of disruption for over 10 years.
The discussion topics of the two panels were in many ways complementary. The first panel, made up of mostly deal makers and the advisory side of the equation, spoke about how investors were pricing risk into the market, stressing that this, coupled with the current level of market insecurity, was contributing to the bid/ask problem with the eventual result being a lull in consistent deal making.
The second panel, consisting primarily of buy-side professionals, gave greater context to the increase in risk-aversion among private equity and venture capital firms. After the event, discussions with many of the attendees yielded a refreshing sense of realistic market expectations, which was in sharp contrast to other technology focused conferences such as TechCrunch Disrupt or Code Conference. Investors in those circles (mostly VC and Angel investors) spoke about the market as if nothing was wrong, lacking the conviction in their reasoning that inequitable valuations were simply a hiccup of the times.
ACG’s crowd was a bit more cautious in its optimism. Most of the investors and dealmakers were adamant that if one stood by his or her convictions, following the disciplined investment strategy that got them there in the first place, there would be no problem in generating returns for their limited partners. While all were ready to ride the wave of disruption in the TMT landscape, some higher than others, each one was prepared, in their own way, to never teeter on the peak into the eventual crash, whether it be a single wave or the market itself.
