Investing in Tech Outside of the Valley

Investing in bold, exciting, world changing tech can be one way to make explosive returns. There is risk involved, of course, just like with every investment. But share prices can often skyrocket on something as small as a few positive words.

A great example of a tech company’s stock skyrocketing on sentiment is Tesla Motors Inc. [NASDAQ:TSLA].

Over the lifetime of the stock, Tesla has risen 1,048%. If you had invested, say, $10,000 into Tesla when it listed, your position would now be $104,800. This is not to say Tesla isn’t an innovative tech company, or that they haven’t produced anything.

However, there are many who believe Tesla is extremely overvalued. Even when a man died after a Tesla car’s autopilot malfunctioned, shares were hardly affected. But the short sellers are as yet to make any real profit.

If innovative tech companies are so great then, where do you find them?

Silicon Valley makes up almost half of all listed start-ups

When you think of tech start-ups, you probably think of Silicon Valley. It’s where small companies go to become big. And once they’re big, they usually set up shop in the Valley. It’s home to companies like Apple Inc. [NASDAQ:APPL], Hewlett Packard Enterprise [NYSE:HPE] and Alphabet Inc. [NASDAQ:GOOGL].

The Valley also houses many venture capitalists just waiting to make millions off a great idea. It seems that if you want to become ‘the next big thing’, the Valley is where you go. But should we focus our investment eye only on Valley start-ups?

Start-up mapping firm Compass Startup Genome believes so, for now anyway. The Valley is number one when it comes to fostering tech talent. From 2013–15 the San Francisco area accounted for 47% of all start-up companies exits.

By exits, I mean a company which breaks through to become listed.

Coming in second, according to Compass, was London. It accounted for 10% of all start-ups which moved onto an exchange in the same time period.

It’s clear that Silicon Valley is a special place for tech companies. It’s so special that HBO have produced a TV show about it. But it’s definitely not the only place you should be looking at for tech investments.

The start-up distribution in the tech industry is changing. And some areas are growing faster than the Valley. Compass wrote in 2015:

‘…we see Silicon Valley growing at a 45% rate over the last two years, whereas many other ecosystems further down the index is growing at a much faster pace. London has quadrupled in the same timeframe, and Berline has grown 20 times (due primarily to the two big IPOs of Rocket Internet and Zalando).

Consider investing in Hong Kong tech

Just like the Valley, Hong Kong is rife with tech companies looking to become big. However, because of the Valley’s history, other markets are overshadowed.

Hong Kong is one of the world’s leading financial centres. But it’s quickly catching up in the technology sector too. Companies like GoGoVan, Insight Robotics and Vitargent are clearly innovative in their own right.

GoGoVan saw a problem when it came to hiring delivery drivers. So they created an app that connects users with 18,000 registered drivers. The company has expanded to Singapore and could be the next big benchmark in the delivery industry.

Insight Robotics has developed a firefighting robot. The system uses thermal imaging and artificial intelligence (AI) to spot fires. Insight’s robot is already used in 17 provinces and 41 cities across mainland China.

Vitargent uses fish embryos to test food, cosmetics and other consumer goods. The start-up claims they can screen for more than 1,000 toxins at once. Current technology can only screen for around five to 10 toxins at any one time.

There is even a Hong Kong start-up trying to take on the billion dollar hedge funds. Aidyia, founded by Ben Goertzel, has developed an AI-run hedge fund. The software can process vast amounts of information with data dating back years.

Then, based on the patterns identified by Aidyia’s software, it makes predictions for the next month. It determines which asset prices will increase or decrease over the next month. And it will place buy and sell orders based on these predictions.

So it’s not just the Valley that you want to keep your eye on. There are many companies looking to list across various markets that are springing up in various countries. All you have to do is keep your eyes and ears open. Take opportunities when they present themselves.

Härje Ronngard,

Junior Analyst, Money Morning

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Money Morning is Australia’s most outspoken financial news service. Your Money Morning editorial team are not afraid to tell it like it is. From calling out politicians to taking on the housing industry, our aim is to cut through the hype and BS to help you make sense of the stories that make a difference to your wealth. Whether you agree with us or not, you’ll find our common-sense, thought provoking arguments well worth a read.

Money Morning Australia is published by Port Phillip Publishing, an independent financial publisher based in Melbourne, Australia. As an Australian financial services license holder we are subject to the regulations and laws of Corporations Act and Financial Services Act.


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