Focus

Business Software

The business software sector represents a large, fast-growing segment of the technology industry generating in excess of $450 billion annually. 30,000+ companies provide a variety of niche software solutions. Within this sector, SaaS-based solutions (Software as a Service) represent even more dramatic growth.

SaaS represents an efficient delivery model for business software and related data, both of which are hosted in the cloud and accessed through the internet. Demand for SaaS is driven by the need for businesses to reduce IT-related costs, speed up deployment times and promote innovation. Another sought after benefit is that most businesses pay a subscription over time, avoiding the substantial upfront software license fees. Overall, the SaaS model provides more flexibility to businesses in a time of increased competition and economic uncertainty.

From an investment perspective, SaaS companies are attractive because of their strong recurring revenue base, superior margins, predictable growth and broad set of future potential acquirers.

Business Services

The business services industry is comprised of companies providing business-related services to fellow companies. Companies in this industry offer a variety of services, including technology-enabled services, professional consulting, healthcare services, distribution, logistics, human resources, staffing, security, outsourcing, and marketing among other services.

Technology-enabled services are a combination of proprietary technology and services that help companies improve business operations through a targeted approach making individual processes and functions more efficient. These service providers leverage years of experience and develop precise solutions focused on one particular area such as security, compliance, accounting, sales, human capital management, workforce collaboration among other areas. Top performers in this sector sustain enduring client relationships by also leveraging global best practices and industry relationships and strive to provide customers with ever improving state of the art solutions.

Technology-enabled services companies exhibit attractive investment characteristics such as sticky client bases, recurring revenue, high margins and differentiated value propositions that lead to impressive competitive advantages.

 

Healthcare

Health and wellness continues to be a strong trend across all population segments particularly in developed economies.  It typically comprises over 10% of a developed country’s gross domestic product and includes hospital activities, medical and dental practice activities as well as other activities such as those administered by clinics, assisted living facilities, caretakers and therapists.  The United States spends more on healthcare than any other country in the world.  In 2017, it was estimated at $3.5 trillion or 18% of U.S. GDP.

The healthcare industry also includes the pharmaceutical and medical device sectors, both of which contribute significant impact to the broader economy.  Within pharmaceuticals, life sciences, biotech and genomics companies are rapidly advancing and are expected to see tremendous growth in the coming years.  Within medical devices, minimally invasive techniques and the internet of things are driving improved patient experiences and outcomes with payor systems supporting value based care.

Consumer Products And Services

Consumer products and services can often have accelerated and sustained growth characteristics.  The consumer products market is estimated at $635 billion and spans many categories including beauty, apparel, food, beverages, and health, among others.  Certain products are inherently always in demand while others develop enduring brand equity over time.  And with the rise of the middle class in many countries across the world particularly in Asia, consumer products can exhibit tech company-like characteristics and exponential growth.

Consumer services are often recurring in nature whereby the consumer will request the service on a weekly, monthly, or yearly basis, thus providing the service provider with predictability in future revenues.  Such services include education, childcare, health, fitness, beauty, landscaping, plumbing, home cleaning, dry cleaning, oil changes, tax preparation, and other areas.  Approximately 445,000 establishments with combined revenues of $360 billion are estimated to comprise the sector in the U.S. alone.

 

© 2020 GrowthCap, LLC. All rights reserved.

Sign up for GrowthCap Insights