Mindset explains: the technology segment
We got to the Moon with (much) less power than a smartphone
Most of us have already heard at least once that a simple modern calculator has as much processing power as the guidance computer used in Apollo 11 mission. Believe it or not, the truth is a bit more extreme than people realize — a brand new 2020 iPhone carries over 100,000 times the processing power that the guidance computer that took the man to the Moon had. That said, have you ever imagined where the technology can get us today?
The first microprocessor was introduced in late 1971 and revolutionized the path of humanity in technology. Since then, the processing power of computers and other gadgets has evolved exponentially exactly stated by the Moore Law, along with the reduction of its cost. A simple example of that resides in the pockets of most of us: the cellphone evolution. Motorolla StarTAC was launched in 1996 at around U$ 3,000.00. Six years later, Blackberry introduced its first phone in 2002, and after even less time, Apple launched the iPhone for the same price. This exponential evolution is getting more evident now that the evolution curve slope became more accentuated. Technology has developed so much in recent years that today we are simply unable to keep up with 100% of the speed these opportunities show up. And believe us: we are still at the beginning of this new era.
To which direction is technology currently pointed?
Technology is an extensive segment, and its applications are endless. Already, some trends can be observed, and the current crisis has not only made them vivid, but also sped up their development. Technological applications directly or indirectly associated with remote interactions have proven promising along the last few months. Zoom, for example, is currently worth more than Petrobras (independently on how reasonable it is). Facebook and Snapchat have increased 18% and 44% respectively its revenues during 1Q20 YoY. Other remote services have proven very promising, such as streaming. The net income of Netflix increased over 100% during that period, while Spotify’s revenues were 22% larger. It seems most applications directly associated with services remotely provided are on a favorable moment now.
Technology indirectly related to remote services has also shown resiliency and growth, such as cybersecurity. New ways to invade companies’ databases constantly show up, and regulations involving data protection started to gain relevance, such as GDPR in Europe and LGPD in Brazil. This is a sea of opportunities for startups focused on protecting and recycling personal data.
We also could not avoid mentioning fintechs, agtechs and healthtechs. The agribusiness and healthcare segments are naturally resilient for obvious reasons, and by associating technology with them we create resilient and highly profitable companies. Fintechs, although not as much resilient, have also proven significantly profitable if good solutions are offered. By the way, one of the most promising companies in our portfolio is the fintech unicorn Brex. Generally, fintechs offer services and solutions that big financial companies are unable to offer due to their highly inelastic structures.
Amidst so many novelties, VC works as a catalyst, providing an opportunity for investors to enter the technology segment and funding companies with potential as great as Whatsapp, Dropbox, Slack and other companies also initially backed by VC funds.
So why do we like it so much?
As we mentioned, the technology segment is very broad and naturally offers innumerous opportunities. The most fascinating aspect of it is how quickly it evolves (even faster the crisis) and how in early stage it still is. If in so little time we evolved so much, it is hard to imagine where we can get a few years from now. For us, technology offers the best of two worlds: it is growing fast and it is still in its very early stage.
At Mindset, we understand no one can keep up to date with every single novelty in this segment or specialize in all its almost infinite niches. That said, although we gather as much information as possible about the technology segment, we do not dare to invest in startups whose niches in technology we are still not comfortable with. Even with the ones we are pretty much comfortable, we always spend a reasonable amount of time meeting specialist and other peers to make sure we are taking the right decision and investing in something really groundbreaking. The result has been brilliant.
Investing in technology nowadays is as trivial as investing in any other high-return modality, but the current ways to do so are still usually unclear for investors. Our job is to allow them to invest in that segment with criteria, consistency and diversification by using the solid network that we built during the last years in this segment to find opportunities that usually only the most renowned VC funds can access.
