The private equity sector is poised to enter a ‘third wave of innovation’ driven by the Internet of Things (IoT), the founders of a new venture designed to support funds and investors in this sector has claimed.
A growing number of hedge funds on Cayman are investing in private equity funds or integrating their approach into their investment strategies but also often struggling to find suitable investment candidates with the potential to be scaled up to the point exit returns are worth the risk.
Mark Crosier and Marta Szluinska have founded nVoyage with the purpose of helping corporates and private equity firms leverage the IoT to transform traditional businesses or design and build new ones to order – boosting value creation and returns in the process. The company will target corporates and funds in both the US and Europe.
The firm’s founders previously helped several large corporates innovate. Last year they successfully completed a commission to design two very large ‘unicorn’ sized start-ups for a large $5bn US client allowing them to test their new Discover, Design and Build process at scale.
The founders believe that a similar approach, which they call Technology Transformation, can also help PE firms realise far higher exit multiples than the industry typically has enjoyed and, in the process, find new investment candidates too – potentially boosting returns from a 2.75x industry average to as high as 4x or 5x in the process.
As well as advising many of the largest US and European corporates, Crosier previously founded DeepStream Technologies, an Internet of Things and 3D electronics hardware firm where he was founder and CEO from 2003 until 2009. He has also held a number of senior engineering management positions at Lee Panavision and Eaton Electric where he served both as an R&D director and later general manager of a new business unit.
Szluinska, who began her career as a research physicist, was responsible for the development and implementation of the technology strategy for BAE Systems Applied Intelligence. She was also instrumental in the development of the UK Technology Strategy for Intelligent Mobility led by the Transport Systems Catapult. The strategy sets out how the UK can be at the forefront of the fast-growing global Intelligent Mobility market, estimated to be worth £900bn by 2025.
Crosier said: “We are hugely excited about this new venture. The corporate and private equity sectors are struggling on many fronts at the moment; it is tough to find suitable acquisition targets and achieve sustained value growth. We see our unique process and technology as solving many of these issues. We want to help our clients leverage the increasingly sophisticated Internet of Things to transform traditional businesses and design and build new ones.
“For corporates, commissioning the design and build of their own start-up at arms-length outside the corporate structure can enable them to harness the entrepreneurial skills, speed and innovation of start-ups, whilst creating a company that can better survive acquisition and integration into a larger entity.
“Meanwhile, the private equity sector has struggled to find new sources of value growth in a market with an oversupply of capital (dry powder), an increasing dearth of primary acquisition candidates, increasing acquisition costs and lowering exit multiples.
“Our Technology Transformation process solves many of these problems by applying new technology to existing companies, dramatically increasing their exit multiples and thereby making previously unattractive assets into a wealth of new targets for PE firms.
“This is not easy to achieve. The processes we have developed for Discover, Design and Build and Technology Transformation, take a different more rigorous approach than what we’ve seen in the start-up and corporate sectors before. We apply scientific and engineering rigour to the design and build of companies or to their re-design and restructuring, treating the whole company as though it was a product.
“We believe that Technology Transformation of traditional sectors and companies will become the third wave of innovation for the PE sector.”
Szluinska said: “We found the idea of designing and building companies to order for our clients so exciting we just had to make our process available to a wider audience, hence we started nVoyage.
“Our process aims to find the acquirer/sponsor before the company is designed and built. In effect, we are short-circuiting the normal open-loop market process of the start-up sector and in exchange for the certainty of capital supply we provide the entrepreneur with a fair market valuation based on agreed multiples.”
Private equity sector, value creation, nVoyage, Internet of Things (IoT), Mark Crosier, Marta Szluinska, US