Courting investors? Here are 6 factors they value right now

I’m always interested in what investors are currently looking for in a tech acquisition, and at a recent round table event hosted by Clearwater Analytics, I heard some interesting insights including some trends that surprised me.

Geographical presence and choice of core markets are always key factors in decision-making, and it was no surprise to see the US and Europe as the markets investors most want to target. But within Europe, Germany and Benelux got a special mention. Germany is Europe’s biggest economy and a stable operating environment, while the Benelux countries – Belgium, Netherlands and Luxembourg – are the entrepreneurial hubs in the region with favourable corporation tax regimes. You don’t necessarily need to have your headquarters there, but in terms of where you do business, these are the nations investors like at the moment.?

The next factor was the location of your delivery teams, and it contained a few surprises. For a while now, investors have been keen on teams based out of Southeast Asian nations like the Philippines and Vietnam, whereas South Africa is a relative newcomer that’s on the up. In the last few years, South Africa has become a haven for tech firms and service support companies that have outsourced or created their centres for delivery, primarily engineering teams and customer service technology. As well as the obvious cost savings, South African ticks a lot of other boxes. It’s in a similar time zone to Europe, English is the first language, and there’s a strong education system.?

Two countries were mentioned that I hadn’t given much consideration to before - Greece and Armenia – and I’d be interested to hear from anyone in my network with experience operating teams in these under-the-radar tech hubs.?

Moving away from geographic factors, verticalization is another concern for tech backers, and two sectors get the thumbs up, for very different reasons. The public sector is much loved by investors because it doesn't suffer from recessions quite like the private sector, and once you get onto frameworks and your foot is in the door, there’s repeatable business to be had.?

The other sector flagged by Clearwater’s analysis is fintech. It was the subject of much hype long before AI and ESG came along, and even though those areas have stolen the limelight, fintech is still the evolution of banking in a society built around its financial system, so it’ll be around for a long time to come.?

It’s not just where and what you sell that matters, but who you deal with along the way.? Companies offering strategic advice services that support C-suite decisions have found it easier to raise money, partly because investors love getting access to decision-makers and they’re willing to pay a premium for the opportunity to upsell their portfolio.?

Low code is high on the agenda at the moment and companies that leverage low code platforms like Mendix are seen as good investment prospects. Low-code solutions enable you to cover a lot of engineering ground without the need for a lot of engineers, and if you embrace low code and automation, you’ll be much more attractive to investors. Consider one firm with a 50-person engineering team, half of which are low-level engineers producing a lot of basic code, and another firm that can leverage low-code templates. One will have lower costs, a head start in terms of product delivery and be quicker to market. It sounds like a no-brainer, but I still see resistance from some founders and engineers who find low code difficult to trust, preferring the control you get from building technology with your people, as well as the differentiation that comes with starting from scratch instead of using a template.

The last factor discussed at the round table was hyper-scaler capabilities, a posh term for investing in technology like cloud computing and serverless environments. Once you adopt these capabilities via the likes of AWS, Azure or GCP, there’s no limit - technically at least - to how quickly you can scale that business.?

The event confirmed much of what I’ve been discussing in the newsletter around the importance of emerging technologies and engineering team strategy, but there were some interesting curveballs in there. These factors that play into ‘buyer appetite’ are less for startups and more for mature technology companies who may already tick most of these boxes and are going through a digital transformation. Insights like this can help move some of these issues higher up their agenda or inform strategic decisions moving forward.?

Which ones do you think will be critical to your company’s performance in 2024??