Thought Leadership

View from the Valley: Microsoft, LinkedIn and the hunt for growth

14th June 2016

By David Smith

I’m always struck by the amount of reinvention that is going on in Silicon Valley. Nothing stands still and even established companies are constantly looking at their performance, market trends and the competition. They are prepared to tear up the playbook and take a different approach. In start-up terms this is called a pivot, but even the big companies do it. One of the big companies currently reinventing itself is Microsoft, and this week’s announcement of the $26bn acquisition of LinkedIn continues the transformation under CEO Satya Nadella as Microsoft continues its drive towards cross platform, cloud-based enterprise productivity tools and services.

Two of my meetings this week involved companies who, in order to drive growth, have split (good) assets and are focusing on emerging competencies which, in many cases, hardly existed a few years ago. Another meeting was with a giant traditional telco that has recognized the need to embrace digital technologies, digital content and digital delivery in order to stay relevant in the face of changing consumer behavior, and have just made a major acquisition in this area. The hunt for growth is at the core.

Raising Long-Term Growth Capital

I went to an interesting #BABC breakfast event on “Raising Long-Term Growth Capital in London” this week hosted by the UK law firm Penningtons Manches with speakers from the London Stock Exchange (LSE) and KPMG. The pitch was to attract US companies to list on the Alternative Investment Market in London – better known as AIM, which is the LSE’s international market for smaller growing companies.

Interestingly there is quite a lot of US participation in AIM already: there are 107 USA companies listed on AIM, which is 10.5% of all companies listed, and 57% of the international companies listed, while US investors make up about 30% of all investors on AIM. Part of the pitch to the IPO candidates is that listing costs on AIM are around half of the costs of listing in the US, and it is more accessible to smaller companies, with the average market cap is $100m, about a quarter of the size of a NASDAQ listing. It will be interesting to see how much traction an initiative like this gets, particularly if US IPO markets remain sluggish.

US vs Europe and the rest of the world

CityLab / Atlantic Media writes that Silicon Valley is now more centered in San Francisco than it has ever been. Silicon Valley accounts for roughly 40 percent of all venture capital investment in high-tech startups in the U.S., and more than a quarter of funding around the world, and this is increasing. They conclude that “Despite various predictions of “the rise of the rest” and the spread of innovation to other cities and regions, the reality is that innovation is even more concentrated in the Bay Area than ever before.” However Boyd Cohen, an American professor at EADA Business School writes this week on that Europe has the potential to overtake the Valley in innovation, so clearly the jury is out on that one!