Goldman Sachs, arguably the most powerful bank in the world, is quietly becoming one of the most influential investors in technology startups. According to research from CB Insights, Goldman has participated in 132 fund-raising rounds in private technology companies since 2009. Goldman has backed Uber, Pinterest, Dropbox, and 12 other so-called unicorns, that once-rare group of startups valued at over $1 billion. At last count, there were 119 startups valued at more than $1 billion, almost all created within the past few years. Goldman ranks in the top 10 of CB Insights’ unicorn backers. Unlike other major investors in Silicon Valley, Goldman’s reach is truly global with startups ranging from an online pet store in China to a food delivery site in Germany.
Goldman currently has more software engineers and developers than bankers or traders with nearly a third of employees in its tech division. Goldman is full steam ahead on tech investment. In the first half of this year, it participated in 22 deals including Spotify’s $8 billion round in June. Also recently, the firm announced plans to launch an online lending service as well as develop Symphony, a secure Twitter-like service for traders and bankers that could compete with Bloomberg’s IB chat platform. Goldman is also closely watching startups in Asia, a market that most U.S. venture firms have barely penetrated. In January, Goldman’s private equity group led a $56 million round in Singapore-based Antuit, a big-data storage platform.
Consider the privation valuation of Uber, which soared from zero to $50 billion in just 6 years. It is difficult for Wall Street to resist such tremendous growth. With private capital so abundant, Wall Street is no longer waiting for startups to go public before investing in them. Goldman does have a rough past with tech however when it took Webvan and EToys public in 1999 only to see both blow up in 2 years. Still, investing in tech start-ups is not a game changer for Goldman with a $95 billion market cap and $860 billion in total assets. Goldman is investing in tech companies to learn from them and even emulate them. Entrepreneurs say Goldman’s pitch offers small companies a range of resources from basic administrative troubleshooting to broad strategic insights or assessing potential acquisitions.
That kind of expertise could not be re-created by two guys in a garage. In November, Goldman’s principal strategic investment group led a $15 million round in Kensho. Its software aims to reduce human decision making in trading and investing by instantaneously analyzing vast amounts of data. Kensho is essentially trying to build a machine that could one day displace much of Wall Street. It is critical that Goldman learns from Kensho and fully understands how they work and how they plan to dismantle just about every industry Goldman makes money in, including its own.
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