With Christmas just around the corner, Boyd Carson, Sapphire Capital Partners, gives his insight into where he sees particular investment threats and opportunities in 2019
At Sapphire, we do two things: We assist entrepreneurs in making SEIS/EIS advance assurance applications to HMRC, and we manage investment funds. The two areas fit hand in glove. The advance assurance work, which also includes assistance with investor readiness, provides us with a never-ending pipeline of potential companies for our investment funds, but it also provides us with a unique insight as to which sectors entrepreneurs think will be the opportunities of the future. We work directly with these entrepreneurs, and we are aware of definite trends. As a result, there are three areas of growth that I see for 2019 and which I will outline below:
The community-based business
The first of these is the ongoing challenge to the attention-based business model (such as Facebook). Users no longer want to give companies all their data so that those companies can run advertising against them. I see this happening all around me, with friends and family opting out of certain types of social media. The community-based business model continues to be a definite growth area for 2019, as we continue to do much consulting work for start-ups in this area.
The second area is robotics. Automation and robotisation continue to drive significant productivity improvements across the global economy. Capable, self-operating machines are increasingly becoming available to help people reduce time spent completing tedious, repetitive tasks. The promise of robotisation within many
Robotics has been receiving much publicity in 2018, but I believe this sector will continue to mature, and there will be many great opportunities for investors to invest in robotic start-ups in 2019
areas of life suggests that robots may result in a new industrial revolution that potentially will spur on the global economy over future years. Consequently, robotics likely represents one of today’s most exciting investment themes. Robotics has been receiving much publicity in 2018, but I believe this sector will continue to mature, and there will be many great opportunities for investors to invest in robotic startups in 2019. Indeed, from Sapphire’s perspective, the fund we manage in conjunction with Britbots continues to be very popular, both concerning the number of startup companies applying and funds raised.
A new approach
The third growth area for 2019 is one that isn’t sector specific; rather it is companies who possess a purpose-driven philosophy. ESG (Environment, Social, Governance) is not a sector, but a set of factors measuring the sustainability and ethics of companies, with a goal of being each sector’s “Best In Class” a way to make an impact, as well as differentiate and attract investment. For example, companies involved in space exploration, or blockchain technology may rank higher in ESG and as such attract more investment than, for example, environmental technology companies or social enterprise.
Where are the threats?
Regarding threats we face in 2019 and the coming years, the retail sector appears exposed to significant challenges particularly concerning traditional “brick and mortar” trade. I know this first hand from the continuously increasing number of packages we receive to our house from orders made online. Traditional local shops continue to struggle to compete with online retail. Consequently, any business model that involves retail that has no online presence, we typically will not look at for our investment funds.
The “B” word
As for the topic on everyone’s mind known as Brexit, I can call it a danger for the associated uncertainty and confusion it is creating, but cannot comment further as I have no idea whether it will, in reality, turn out to be positive or negative for UK entrepreneurs and investors. Your guess is as good as mine on this one.
About Boyd Carson
Boyd runs Sapphire Capital Partners, the investment manager for multiple funds. He is a Fellow of the Institute of Chartered Accountantsand a former director of PwC in New York. The firm has won multiple industry accolades, including recently the EIS Association’s award for Best SEIS Fund Manager.