Technology Investment Banking

Tech Stars Conference: What's next for EMEA tech?

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Katharina Ochs: Hi, you're listening to What's The Deal?, our investment banking series here on J.P. Morgan's Making Sense podcast. I'm your host, Katharina Ochs, from the EMEA Equity Capital Markets team. Today, we're going to talk about the J.P. Morgan Tech Stars Conference that took place earlier this month here in London. The conference brings together founders, CEOs, and investors to discuss key trends in the market, the sector, and more. We saw really strong attendance again this year, with over 100 technology companies participating and meeting with over 500 investors in one-on-one groups and larger panel discussions. Joining me to discuss some of the highlights and insights from the conference are Aloke Gupte, our co-head of International Equity Capital Markets, and Matt Gehl, co-head of EMEA Technology Investment Banking. Aloke and Matt, welcome to the podcast.

Matt Gehl: Thanks for having us.

Aloke Gupte: Thank you, Kathi.

Katharina Ochs: It was really an exciting few days last week that we had with interesting sessions, fascinating companies. So maybe, Aloke, Matt, what were your personal highlights and key takeaways that you took from the conference?

Aloke Gupte: Look, I think there were a number of them, but in the interest of brevity, maybe I'll highlight three. One was, you touched upon, Kathi, a number of people that attended across the three days, and that was fantastic to see. But it's really actually the connectivity that this event fosters between those people. That's not just about investors meeting companies. It's also about companies meeting companies, investors meeting investors. That, I think, is the magic of this event. It brings people together and it helps you foster new connections. It deepens existing ones, and that was great to see. I think the second thing I'd flag is that the Tech Stars brand has now been around for a long time. It's been more than a decade.The Tech Leadership Forum, which is part of Tech Stars, is only three years old. But collectively, the event really seems to have seeped into the consciousness of the tech ecosystem, not just in London here, but all across EMEA, as well as across the pond. We had a lot of attendees from the U.S. this year as well. So this is really an event which is on the calendar, people keen to attend. You saw a lot of senior CEO and founder attendance there. The third takeaway was we had some great panelists and sessions. I thought it was exceptional listening to Andy Murray, fantastic champion and his perspectives of life on and off the court were great to hear. I think I might add, who knew that Matt Gehl was Andy Murray minus the talent and great in determination? So I'd say tennis's loss is J.P. Morgan's gain.

Matt Gehl: I protest the comment that I don't have any talent, but maybe that's not what you said. But I think Andy showed what the combination of drive and exceptional talent can do and I think gave some really interesting life lessons that were applicable, not just on the tennis court, but for CEOs and for investors out there in the crowd. And I think his humility and ability to tell his story was a really inspiring way to start things off. So I think that's a great couple of highlights there. Look, I think then turning a bit more practical. I think what was really interesting for me at the conference was, last year it was more let's get to know each other. Let's talk about things for the future. This year with an improved market for tech, with more IPOs having happened, we were seeing much more tangible discussions and we've seen a lot more follow-ups initially. Companies were more actively talking about raising capital, whether that was a purely secondary round, a combination of primary or secondary round. We were seeing them openly talk about with investors and we're seeing investors booking follow-up meetings with those companies versus last year was ‘Great to see you. Let’s touch base in 6 or 12 months.’ So I think that was really, really positive to see. The second big thing I want to come off of what Aloke said we're seeing a resurgence of U.S. interest in investing into Europe. We saw more U.S. investors over here than we have in the past. We're seeing that in all of our rounds right now. That's the crossover funds. That's the growth equity funds. And increasingly, not just the U.S. funds, but we're seeing a number of the sovereigns out of Canada, out of Singapore, out of the Middle East that are really looking to get involved in a private round. So that was a big takeaway for me. This wasn't just a nice get-to-know-you for an IPO in two or three years. This is let's put money to work in your company over the next six months.

Katharina Ochs: Sounds good. And definitely both of these topics, something that I want to pick up a little bit later again. I personally really thought the session on the U.S. elections was super interesting. It really helped me connect dots and topics that I just didn't connect, coming from educated U.S. experts. So maybe Aloke, did this come up, also considering it's so topical with elections just a few weeks away? What was the mood at the conference about the U.S. elections?

Aloke Gupte: Yes, look, first up, it was a fantastic and clearly topical session with the election just a few weeks ahead of us. I should call out a big thanks to Governor Christie and Paul Begala for sharing their candid views. I think everyone enjoyed listening to them. In terms of the mood of the conference, it seems to be quite a widespread belief that this election is frankly just too close to call. It feels like a toss-up and that's clearly what many of us think and clearly what the conference attendees seem to think as well. The interesting part to take away really is that whilst there are significant areas of policy differential between the two sides, there are also some commonalities. There are some elements on the geopolitical side on the trade side, et cetera, which are common irrespective of who wins. Spending will go up irrespective of who wins. That will create its own set of opportunities and challenges for the economy. And if you generally look at where the mood of the market is, people are sort of saying this is close to call. There are some differences, but hopefully, the similar points are vast enough or meaningful enough such that you won't actually see too much of a disruption in terms of deal flow and activity and, the mood of the market, so to speak. That's clearly the hope as of now. time will tell., so we'll wait and see what happens.

Matt Gehl: So Aloke, maybe to build off your comment there, the election is coming up soon. I think we heard it was too close to call. But I think what's interesting is the focus from technology CEOs and technology investors is really the same no matter who wins. A number one focus is going to be the regulatory environment. The regulatory environment has really had a chilling impact on deal activity over the last several years. And that's not just the U.S. It's in the U.K. It's in Europe. It's in Asia. And so whoever wins, if they take a bit more business-friendly approach to regulatory environment, not just from antitrust, but to AI and to other areas, there's some optimism. You could start to see an unlocking of some of the M&A in the overall space. So I think that's the number one focus from the investor base is going to be on regulatory and who's most friendly, most aggressive, and we'll have to see what happens in a couple of weeks.

Katharina Ochs: Like you said, Aloke, it's only three weeks away, so we'll see what happens. One topic that I think has to be more discussed than the U.S. elections has to be artificial intelligence, and this wouldn't be a podcast on technology if we didn't touch on it. I know in many sessions, or at least all of the ones that I attended, it was also a topic of conversation of the presenters and the companies. So Matt, maybe one for you. How do you see it transform the tech sector going forward?

Matt Gehl: I think it's about big trend. I haven't seen anything like it since the rise of the Internet early in my career, where the whole industry coalesced around one thing. That was the topic to invest in. Right now, if you don't have an AI story, you simply aren't going to raise capital. So everyone is focused on it. There's very divergent views on how it's going to impact different companies. Everyone says they're a net beneficiary. That cannot possibly be the case, but it's got everyone excited again around investing. But I'd say two things I'd call out. One of the things that's having a little bit of a chilling impact is on some enterprise software investments because with AI causing such disruption in major corporates, there's a potential reallocation of technology budgets, and what we are seeing is elongation of sales cycles. Some of the enterprise software that's selling into large-scale enterprise is seeing a situation where maybe there's some reallocation to AI spending versus traditional seat license software. So that's causing a little bit more lumpiness in some of the numbers. Then we've seen that actually disrupting some processes. It's caused some companies to think about potentially delaying their IPOs a little bit until they've got more visibility.  On the other side, the companies that have really been AI first from the get-go have risen to the front. And these are the companies that are still raising private rounds at north of 15 times ARR. So if it's been embedded in your DNA from day one, you're batting investors away. If you're potentially facing a little bit of a slowdown in your spending because AI is disrupting your customers a little bit, it's having a slight chilling impact. But beyond talking about some of the private companies here, I actually think I want to get Aloke’s view here because the IPOs in tech, there's only been, I think, eight or nine of them year to date. Every one of them has come to market with a pretty strong IPO story. You look at the likes of Menestera or Reddit that were done earlier this year. How are the public investors looking at AI and how is that driving IPO demand?

Aloke Gupte: Yes, I think it's a great question, Matt. And this is clearly the thematic of our times, as you clearly pointed out. One of the things that investors are clearly looking at is you also saw that people were looking not just at the conceptual dynamic of what AI brought to those businesses, but they were also looking at the other factors you'd look at for any other business, which is what kind of sustainable growth do you have? Is there a path to profitability if not existing profitability? What kind of scale can you actually operate the business at? So some of these elements are actually, frankly, common across sectors, but the addition of AI is just sort of ticking the boxes of if people sit down at the start of the year and say, ''I'm going to buy 15 or 20 IPOs this year, what needs to be top of the list?'' AI is definitely the thematic that seems to be there. I think as we move forward into 2025 and this becomes a much more entrenched approach where many businesses actually come out and say that they have this AI component or pillar to their entire strategy, maybe markets will be a bit more discerning as to where there is a lot of depth within that, where that is very real and relevant to the business. So that distinction will perhaps come in time, but at this point in time, it's a very valuable thematic to have. It's an essential thematic to have, and all of these companies are met with a very positive reception.

Katharina Ochs: Considering we've talked a little bit already about the technology IPOs expected to come, and given there has been some lows over the recent years, but it seems to be more constructive at the moment, Aloke, how do you feel about European technology IPOs coming back to market? Do you see the activity picking up again, maybe going back to 2021 levels?

Aloke Gupte: Yes, I think the quick answer, Kathi, is yes. Though you might say that I'm slightly biased on this particular topic. Let's set the context a little bit before we get into that. The last three years have not been a homogenous set of three years. What you saw in the beginning across 2022, and maybe the first half of 2023, was there was a big pivot from growth to profitability. And a lot of companies had to go back to the drawing board and figure out how exactly they were going to meet that new paradigm. And then you started to see a bit of a change, particularly in the second half of 2023, and certainly with a stronger accent on it in 2024, is growth started to come back. You know people still value profitability, but the matrix for now, as we talked about in the earlier question, is really what is your long-term sustainable growth? How can you maintain a good degree of profitability within that or have a good path to profitability, which is relatively near term? And I think a slightly underestimated criteria, which is scale. If you think about it, it's the IPOs that are large and meaningful that have done better over the last few years than the ones that are typically smaller. So those are the dynamics and trends in the market. The second part I'd say is that tech has been the top-performing industry from a public market performance perspective in 2023 and 2024. Now, both of those were also slightly different. In 2023, it was completely led by the large-scale tech, the Mag 7. The performance of the Mag 7 was four times the performance of the NASDAQ and so on and so forth. That has altered slightly in 2024. The large companies have continued to do well, but many others have done well as well. What we're starting to see is the creation of conditions which will be quite appropriate and ripe for companies to go IPO. For the IPO market itself, this has been a build-back year. You know we all wish, and Jamie talks about this as well, about why we haven't seen more IPOs. What we have seen this year is that IPO volumes in both the US and Europe are up three times from what was albeit a low bar last year. Most of those IPOs have performed well. If you look at the top 20 IPOs that have happened globally this year, 17 of them have traded well. So it's a great build back here. We think that hopefully markets will take this momentum into 2025 and you'll start to see a lot more IPOs happen at that point in time. Some of that has been why people have waited has been because of markets. They’ve wanted to see that the market is strong and stable for a period of time before going ahead. But some of that is also just to see confidence within their own business and see that the business is set up in a great way to meet these three or four criteria that we've been talking about. So, yeah, going back, in short 2025, bigger year for IPOs than 2024. 2026, bigger than 2025.

Katharina Ochs: Sounds good.

Matt Gehl: Yes, and maybe jumping on top of that, you said, are we going to go back to where we were in 2020 and 2021? I don't think we're going to go back to where we were. I think we've learned a lot of lessons and I love to mention how the market has moved on. And actually you know we probably won't have as many tech IPOs in '25, '26 as we saw in 2020 and 2021. We may raise more money for these IPOs because the IPOs that are coming are bigger. There's more investor demand and the IPOs that are being prepared are being done so with much more methodical time being spent with the story, with the investors, getting to know people. We were doing IPOs in some cases, three months from the company deciding they wanted to go public to going out, never having met investors back in '21. There was a bit of a FOMO where you had to get public as fast as possible. Now it's a conscious decision that going IPO is best for my business for the long term. And so the IPOs are going to come are going to be must-own IPOs much more so than '21. It was like, I need to get public because everybody else is. I think that's going to be a very positive dynamic for this reopened IPO market we're going to see going forward.

Katharina Ochs: Yes. The conditions are there from the market perspective for companies in a good shape to list. You've talked about the U.S. investors having an increased interest in European tech IPOs. Do you think that means that more European technology companies are going to list in the U.S., or do you think they might choose their home grounds after all?

Matt Gehl: Yes, I think at least initially we probably will see a bit of a shift to the U.S. The reality here is the company needs to choose the exchange that is best for them. And there's no one-size-fits-all answer. If you're a global enterprise software company with sizable revenues in the U.S., with your competition in the U.S., with your biggest customers in the U.S., the U.S. feels like the more natural home. If you're a semiconductor company, the price is all of your revenue in U.S. dollars, and the majority of the market cap is there. You're more likely to gravitate to there. If you're a European-only software business with good growth, high profitability, Europe is more likely to be your home, a dedicated marketplace business. And so I think companies will find their natural home. What you probably won't see is anyone making a decision, ''Oh, the valuation at this period of time is better There's a scarcity effect.'' They're going to make the decision based on what's right for the next 5 or 10 years of the company, rather than optimizing for the short term. And I think we saw some companies looking to do that at the tail end of the last cycle. But what that means is because Europe's been building more global champions over the last 5 or 10 years, that there are more companies that are able to go public in the U.S. And I think whether companies are going public in the U.S. or Europe, that's a great win for the European ecosystem. So while the governments might not love if some of our great champions go public in the U.S., as long as the R&D base, the management base stays in Europe, it's a win for the whole sector.

Aloke Gupte: Couple of things that add to that is, if you set out really what are the various parameters that companies look at? They look at, what are management and shareholder objectives long term? That's an important factor. When you look at some of the more prosaic and technical factors, you think about depth of demand and valuation and where is your comp set based. And then actually comes to the stuff that really makes a difference. Matt touched upon it. Natural home is a really good way of putting it. You know you're listing once, but you're going to be listed for a long period of time. Therefore, long term, where do you really belong? Where are your revenues coming from? What would give you an investor base or a shareholder register that is very long-term, that is a mix of the right kind of global names with some local names if you were to choose Europe and so on and so forth? I think in a nutshell what will happen is that a good number of companies will choose to list in the U.S. because it makes absolute sense for them to do so, as Matt's highlighted. And a very sizable number will choose to, stay at home in Europe because that makes a ton of sense for them.

Katharina Ochs: Exciting. Looking forward to the wave of European tech IPOs then. Now, we've talked a lot about the public markets, but maybe taking it a step back and looking at private companies again, could you both give us some perspective as to what was the mood at the conference, more on the private companies?

Aloke Gupte: Look, there's a definite buzz. I think the quick takeaway is that we're incredibly busy on private rounds at this point in time. It's a race against time through to the end of the year, but we have a number of transactions that could be up for close. And that is great to see because it is true that across '22 and '23, you saw a big slowdown in activity as far as the private markets were concerned because you saw the public markets in a significant amount of pain. The public markets did recover, but private markets, if you look at all of these cycles over the last, 10, 15, 20 years, you'll find that private markets always recover 6 to 9 months after the public markets. And that's exactly what we've seen here today. I think going back to the earlier point we talked about, the level of attendance that we had, the conversations that people were having, Matt touched upon the fact that this year felt much more like there was a touch-and-feel element to it, that these are deals we can do now. You know people talking about it from that lens. We certainly feel that the mood in the private markets has improved substantially. Is there a place where it was in 2020 or 2021? No, but that's similar to the IPO market. That's frankly no surprise.  But we're starting to see investors get more active. We're starting to see companies raise capital. We're also starting to see an interesting trend around secondaries, where a lot of secondary rounds are happening right now. It's a great opportunity for companies to actually write and clean up their shareholder registers. It's an opportunity for some of the early investors in these companies to take money off the table at valuations, which are increasingly becoming more attractive. The type of investor that is focused on private capital right now is starting to expand again. So we're seeing obviously some of the high growth we see is there. We're seeing the sponsors there. We're seeing the sovereign wealth funds there. We're seeing family offices there. So there's a great amount of variety there. Even the crossovers have started to become a little bit more active. So we're pretty bullish about the private capital markets. We have a number of things, as I said, that we hope to close through the course of the year. And again, much like the IPO market, we see that as an improving trend through to 2025.

Matt Gehl: Building on that, I think Aloke mentioned the secondary topic. If you go back two years, most secondary deals were being done by companies. I don't want to say from a position of weakness because they're not selling, but oftentimes because a shareholder just absolutely needed the capital. Now they're being done in a situation where investors are pounding on the door of these companies saying, how do I invest? These companies in some cases have no need for primary capital. They've raised substantial capital back in 2021, '22, more than they even expected or needed. They're not in a rush to go public. So they're saying, well, how do I bring new people into the cap table? Aloke mentioned a lot of value of cleaning up the cap table. The benefit of that is, one, it can make it simpler for the IPO. It can also reduce some of the pressure to potentially need to be in that first wave of IPOs. And so when we're seeing companies going out and raising pure secondary, instead of everyone talking about how big of a discount, we're starting to talk about how big of a dollar value can I invest in the company. And we're seeing private rounds in many cases for secondary deals not being priced at any discount at all because we're seeing the crossover fund saying, ''This is my opportunity to build a position ahead of an IPO.'' So I think that's probably the most positive signal I've seen in the private markets in the last three years. And we're hoping it's going to continue. The other thing that's really interesting if you think from a private standpoint right now is with the US investors coming back into Europe, a desire to invest, it's moved beyond just wanting to invest into the UK or into Germany or France. We're seeing people look much further afield. We're seeing interest in the Middle East come up very substantially. We've got a number of Middle Eastern clients that were at the conference that are going to be thinking about raising capital. And I think you've got a much more diverse investor base that's looking to invest there. So the primary capital is looking further afield rather than just in the home markets they've been in the past.

Katharina Ochs: Interesting. And do you feel like it ever has been market dynamics like this before, or is this like a first that you see all of this coming together?

Matt Gehl: I think back in the glory days of four-plus years ago, you could pretty much do anything, public, private, maybe not as much in the Middle East. So I don't think we're back quite to that level. So as Aloke was saying, we're seeing the building blocks. The public markets are up. We're seeing IPOs get done again. That's now translating into the private market initially with primary capital and now we're starting to see secondary capital. The next phase is going to be hopefully a big ramp in IPOs at some point in the course of '25. I think everything's there. I think the one thing that I mentioned earlier is around M&A. I think that's the big thing we need to be thinking about is in an ideal world when you're doing an IPO, you're able to run a dual-track process. Potentially, if you're a financial sponsor, it's nicer to sell everything at once. If you're a CEO, it's great to actually go public and have that public currency. The IPO markets are recovering. The M&A markets, that regulatory aspect I talked about, is still a giant uncertainty. So if we get some more clarity that regulatory environment might be a bit better, we could have everything coming together for a really improved environment, both IPO and M&A next year. That's a tech banker's dream.

Katharina Ochs: Thanks, Matt. That actually brings me right to the last point I just wanted to touch on, which is where do you see the tech sector and also capital markets in the sector going maybe in like one crisp answer, Aloke, we've heard now where Matt sees it going. What's your view? Where do you see it going?

Aloke Gupte: I see more issuance and I see more business for us, which is going to be great. I think, look, I echo everything that Matt said. We've got all the right conditions for a lot of companies to raise capital, be it primary or secondary in the private markets, as well as go IPO across 25 and 26. I would just sort of lengthen that time period to say I think we will see a pickup in '25, but we might see a dramatic pickup in '26 as well. I think we do have a very long-term mindset. And so we feel really good about it. I think really, pivoting away slightly from your question, Kathi, I also did want to actually just take a minute to thank Matt for his partnership on the entire Tech Stars event. From both of us, I want to take the opportunity to thank the many people, you  know you included, who worked incredibly hard across many different teams in the organization to make this a big success. Tech Stars is really important to us. We're looking forward to being back next year, bigger, better, and, hopefully in great market environment.

Matt Gehl: Let me just echo that. Aloke's been a fantastic partner. I think we spend more time with each other than our clients and our families over the past couple of weeks, and big thanks to the team. We really do hope to make this, I think, year 13. Next October is going to be even bigger, even better. We really do look forward to even more people coming out. If you haven't heard of the conference before, please do reach out to your J.P. Morgan contact. We'd love to have every corner of the globe, every type of technology company, every type of technology investor be here for the event next year. So it's only getting better in the tech industry, and our conference will follow suit.

Katharina Ochs: Really looking forward to it. Just to recap, today we talked about some of the key themes moving the sector and the market at the moment, including the upcoming US elections, artificial intelligence, and we spent some time talking about private and public capital markets and where we see the sector and the market going in the next few years. So big thanks, Aloke and Matt, for joining me and taking part in this podcast today.

Matt Gehl: Thank you, Kathi. You've been a fantastic host. Did a great job at the conference. I really appreciate you having me here.

Aloke Gupte: Thanks a lot, Kathi. It was a delight to be here, and always great to chat with you, Matt.

Katharina Ochs: Thanks, everyone, for tuning into another episode of What's The Deal?. We hope you enjoyed this conversation. I'm your host Katharina Ochs. Until next time. Goodbye.

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The tech pulse: Inside the 2024 technology investment landscape

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Pankaj Goel: Hi, you're listening to What's The Deal?, our investment banking series here on J.P. Morgan's Making Sense podcast channel. I'm your host, Pankaj Goel, co-head of J.P. Morgan's Technology Investment Banking for North America. I'm looking forward to giving our listeners an update on trends in the M&A and equity capital markets across technology and our expectations on deal activity going forward. Today I'm excited to be joined by my colleagues, Drago Rajkovic, vice chairman and head of Technology M&A, and Greg Chamberlain, co-head of Technology, Equity Capital Markets. Drago and Greg, welcome to the podcast.

Greg Chamberlain: Thanks for having me, Pankaj.

Drago Rajkovic: Hi Pankaj. Thanks for having me on the podcast.

Pankaj Goel: As you both know, we had our 52nd Technology, Media, and Communications conference at the end of May in Boston. We had 267 companies in attendance, of which 42 were private and over seven trillion in public market cap. There was definitely more enthusiasm and optimism about the markets this year. The attending companies saw a near 15% increase in their market caps for the past 12 months. So Greg, looking at the equity markets, how do you think the mood is coming out of the conference?

Greg Chamberlain: So overall, I would characterize mood as being good. Equity markets are trading around all-time highs and the tech sector has outperformed this year. As we approach the end of Q2, NASDAQ is up around 15% and that's on the back of a very substantial 43% rally in 2023. There's certainly been some stellar performance concentrated in certain parts of the market. For example, the mega cap stocks continue to do particularly well with several of the largest leading tech platforms like NVIDIA and Meta and Alphabet and Microsoft continuing to outperform the market and their impact on both the tech ecosystem overall, as well as from an investment perspective, their contribution to the performance of these main indices continues to be very significant. From an industry perspective, the semiconductor sector has been the standout winner this year. It recently surpassed software and services as the single largest industry group within the S&P 500 and now represents 12% of that entire index. So it's a part of the market that's had extremely strong tailwinds over the course of the year. The exposure to AI that this sector provides, as that technology continues to trigger significant capital investment, and that remains a dominant theme across the market. And then finally one point I’d just make on software which is an important part of the tech sector. We recently conducted a survey across all our public market tech investors around software and despite some recent volatility and in share price movement in that sector in that space the output pointed to continued optimism around both sector multiples and increased exposure to the sector.

Pankaj Goel: Thanks for that. How do you feel about the deal volumes, which has been 15 and under, indices are at all-time highs? Do you expect more deal volumes for the first half of this year or do you feel it aligns with your expectations?

Greg Chamberlain: It's an interesting question. If you go back, tech IPO issuance peaked in 2021 with 112 IPOs that year. And they came to a virtual standstill for 18 months as we saw tech valuations compress and investor appetite for new opportunities effectively come to a halt. The green shoots of recovery finally emerged in the second half of last year when we saw five IPOs price. We've already matched last year's number in 2024 and there are signs of improvement in activity and most importantly investor appetite. These deals are priced at the top of their IPO price ranges, in some instances pricing above, and despite some mixed fortunes are trading on average 27% above IPO price, so better than the market. What's encouraging is the breadth of issue we've seen in the market this year with deals coming from a range of sectors, including STEM, software, and internet. However the run rate for US tech IPOs is around 35 year. We've seen that for the last decade or so. So we are yet to get back to typical averages despite this big up and activity. When we look forward at our pipeline, it looks strong for the remainder of the year and also next year. So it does feel like this market is gonna see a gradual reopening over time. I think one of the reasons we're not seeing a flood of deals in the tech sector is partly due to the fact that many companies raise money privately in the valuation rich environment of 2020 and 2021, and they're looking to grow into these values over time. Another reason I think is because they've become more disciplined with their cash funds so there's less of a rush to raise IPO capital. A consequence of these two factors is that we're seeing more scaled private companies with an attractive balance of growth and profitability and these issues when they do come will be very well received.

Pankaj Goel: And what do you think has been driving the performance? Some of these IPOs like Astera Labs that you and I worked on have ended up being successful and some others have not fared that well. So what are you hearing from the investors? What are they expecting from the first line of IPO that are coming to the market?

Greg Chamberlain: I think there are certain things that investors have been looking for. Firstly is an ability to articulate a clear and differentiated vision. There is a premium on durability in this market. Investors that understand the competitive advantage that a company has, the sizeable opportunities looking to penetrate is a really important factor as they think about making multi-year investments. Another factor is the expectations that these issuers have set at the time of coming public. Investors look for reasonable expectations both in the short and the midterm, that they think the company can match exceed as they mature in the public market. And then the final point is the amount of time many of these issuers have spent getting to know the investment community. They've ensured that by the time it comes to the IPO roadshow, there's a pretty fulsome understanding of the business, its vision, and a familiarity with the management team well in advance of that final investor meeting, which has led to a strong reaction at the time of the IPO itself.

Pankaj Goel: Got it. So you think pre-education before the deal launch is critical to getting a successful outcome. Thanks for all those views. Drago, let's start with the current tech M&A activity. It's definitely been more robust than '22 and '23. What do you think is driving increased volumes?

Drago Rajkovic: Yes, the M&A activity has been more robust this year. It is up about 20% year to date. And I would say a couple of things that are driving this phenomenon. Number one, we have entered this year with an improving economy. There are expectations that the Fed is going to be very constructive on the interest rate side. And we also have very strong equity markets. That in turn is driving confidence in the boardroom. And having sat a couple of years on the sidelines, many corporates are eager to move forward with their strategic plans. In addition, many of the strategics have also optimized their businesses over the past couple of years and are looking to drive value from incremental M&A gains. So this more positive sentiment has driven both strategics and sponsors to get more active. And we're seeing elevated dialogue across the spectrum of buyers, strategic sponsors, size, except the mega deals. Those transactions we're still not seeing yet in the marketplace. These are transactions 30, 40 billion plus. Companies are still uncomfortable doing those in this environment. And I don't think we'll see any of that until 2025.

Pankaj Goel: Let's pull on the trend a little bit. So we advise Altium on the same earlier this year. We advise HP on the acquisition of Juniper. We also advise Squarespace on Go Private transactions recently. There's been a mix of strategic private equity sponsors and VC firms who are approaching the market. What's the difference in their approach as they look at the M&A as an outcome?

Drago Rajkovic: Yeah, so Pankaj, the strategics are still somewhat resistant in this market, even though a lot of them are seeing their business stabilize and demand stabilizing, and they're feeling more positive about the outlook, there are a number of things that are still holding the strategics back. The investors are valuing profitability more than growth in many instances today. And many of the strategics have been focused on delivering that. So we've seen a lot of companies be inwardly focused and still are. Activism in tech has risen significantly. So making sure your housing order is also important as well. The interest rate and cost of debt are still high and finding accretive deals has been more difficult in this environment. And then investors are still not fully risk-armed, so any transformative or even material deals are a source of risk for investors, and we have seen negative share price reactions for many of the announced transactions. The last thing I would say is regulatory, of course, in certain sectors, especially semiconductors, has been difficult to solve and is chilling the activity as well.

Pankaj Goel: Thanks, Drago. In IPO markets, as you know, success plays in the public domain, but in M&A context, there's a lot that happens behind the scenes. We have seen a lot of deals not getting across the finish line. What are some of the reasons for deals falling apart and not getting to the finish line in your view?

Drago Rajkovic: Yeah, Pankaj, it's still very difficult to get to the finish line We're seeing them fall apart very close to the announcement date as people are moving through diligence and negotiating agreements. First in the approach stage, it is still difficult to bridge the valuation gap and value expectations from the sellers, especially with healthy businesses. We have a strong equity markets and given where that market is priced, you would think that would be easier to do. But a lot of pockets of tech are still recovering in terms of valuation. Number two, the market volatility has also made it very difficult at times to agree on price and has a number of times disrupted already agreed upon deals and taking those offers and premiums out of act to a point where people had to just part ways. Lastly, we're seeing a lot more scrutiny around diligence. The bar is certainly higher, both with strategics and sponsors and certain liabilities that buyers used to accept in the past and nowadays, they just won't. And so overall, while we're seeing a lot more intent, a lot more dialogue, it is still very difficult to get to the finish line.

Pankaj Goel: Thanks so much for that, that’s a really great point. Let's look forward. Greg, we have seen an extremely robust private capital markets, the first half of the year. Nearly $50 billion has been raised this year, which is more than the volume in all of 2023. As you look forward, what do you expect from the IPO markets in '24, balance of 2024 and going into 2025? And more importantly, given this flow of private capital, do you expect the larger blockbuster IPOs to make a comeback?

Greg Chamberlain: Several interesting topics there, Pankaj. I think on the private capital markets, volumes are up pretty significantly year-on-year. The level of interest and participation from crossover investors being those that can invest both in the late stage private as well as public markets has picked up pretty dramatically, and some of the valuations in these deals are up to pretty lofty levels, much higher than they have been in the last couple of years. So it feels like a market that's doing very well. Within that volume, almost half of the equity private-placed issuance has been around the AI sector. Investors very hungry to invest capital in a variety of different opportunities directly connected associated with AI. So that's been a real tailwind terms of the IPO market, I think the pickup in issuance is gonna be gradual. The outcome and receptivity of some of these deals that we've led and we've talked about on this podcast has been fantastic and I think that bodes well for future assurance. As Drago picked out in his commentary, that could also be fueled by the macro tailwinds that we may get from rate cuts that could benefit growth sectors. For many of the larger potential blockbuster issuers, they can afford to be patient. Private markets providing plenty of capital and they are navigating very large market opportunities away from the glare of the public markets. That said, companies have different incentives to go public, both strategic and financial. So I really do feel it's like a matter of time before several of these larger private companies do dust off their plans, start working with banks and the regulators to prepare to go public.

Pankaj Goel: Thanks, Greg. Now let's go to Drago. Drago, you gave a really good backdrop of what's working and what's not working. But if you look at the balance of 2024 and going into 2025, you also have an election year later this year. What are you expecting from the M&A market?

Drago Rajkovic: The M&A market is, as I said before, it's confidence driven. So as long as we have an economy that continues to march towards a soft landing and an easing trajectory by the Fed, I think the M&A market will continue to improve incrementally. This fall with the election, a number of people will wait for that to pass as we all do expect some volatility in the markets and it is typical in that context. However, I do see as we get into the next year and there's a lot more clarity around this economic cycle and how we're going to turn and at what rate we're going to turn, I think the activity will pick up significantly. And number one, the strategics, as I said earlier have been... even though they're looking at more things, they're still reticent to do things, uh, given some of the uncertainties in their own businesses. The sponsors have been picking up in their activity. They're looking at a lot more things. They have still significant amounts of money in their funds.

We're also seeing them putting lot of their assets in the market by necessity. As you all know, their LPs have been demanding some return of capital. And then lastly, they do need to synergize some of the businesses they paid high multiples for three, four years ago. So they're looking to add on complimentary businesses to those assets. And then when it goes to private companies, we are seeing more of them coming into the marketplace. They have been able to buy more runway with their balance sheets than we were expecting. We're hoping to see a lot of privates come to market last fall, early this year. That hasn't been the case, but slowly they're coming to market. The VCs are sorting through their portfolios, trying to decide what they're going to fund and what they're not going to fund going forward. And I think we're gonna see a lot of activity there. We still expect that to continue to be structured. A lot of these assets have had their last rounds to be in 29, 2020, '21, at very early evaluations. So a lot of them are looking for either equity deals or earn outs or partial deals where they can keep some upside and a continuing stake. So overall, I think we're gonna see gradual increase over the course of this year with a little bit of a lull around the election. And then next year, if the economy starts turning slowly, I think we're gonna see quite a bit of volume.

Pankaj Goel: Thanks, Drago. Now, maybe the final question is to both of you. What advice are you giving boards and companies right now when they're thinking about IPOs or private capital markets on M&A? Maybe we start with Drago this time.

Drago Rajkovic: Yeah, sure thing. The key things we're telling to the boards these days is number one, whatever you do, it has to be highly strategic. It has to be very clear to the investors as to what the purpose of that transaction is. And it has to be very clear as to where the value and synergies are going to come from that transaction. As I said before, the market is not still fully risk on and investors get nervous with larger deals unless they're perfectly clear in terms of strategic intent. We're cautioning folks not to go too heavy on the balance sheet. We're seeing a meaningful discount being applied in terms of valuations to the traded companies that have elevated leverage levels. So we are in many cases recommending the folks to go the equity route. And then lastly, we are very sensitive to the terms that any transaction can be affected at. And I'm talking about multiples and premiums 'cause there are only so far you can go with that, even if the value equation works for you, just from an investor reception perspective.

Pankaj Goel: Over to you, Greg.

Greg Chamberlain: Yeah, Pankaj, I think there are several areas of focus that I would recommend any management or board think about as they prepare for either a public market listing or even a capital raising in the private markets. First is to make sure that they have a very clear articulation of the market opportunity, their vision and how they see the company operating over the next five years. Secondly, it's very important to determine the key performance indicators that they want to convey to investors as these will be the quantitative metrics that investors judge them by and through which they will articulate the performance of their business going forward. They're very hard to change once you've gone out with them so ensuring that everyone within the company feels comfortable with the data and the numbers that the company will articulate its success is important. So getting around to meet investors privately well in advance of any raise, public or private, I think is critical.

And then the final thing I just say is companies can't control many of the factors that could impact the timing of their transaction. We've seen that in spades in recent years. So I think there's a real importance on being prepared. You may not be able to choose your exact timing of a transaction, but there is significant option value in being prepared and taking advantage of an appropriate market window. I think looking ahead, we're really optimistic about the next wave of issuance. There are plenty of really well-placed and attractive opportunities in front of us, and we look forward to working closely with clients and bringing many of those to market. Thanks very much for your question, Pankaj.

Pankaj Goel: Thanks, Greg. To recap, today we had a great conversation on trends in tech equity and M&A markets. Overall, we are seeing trends to be more favorable in 2024, and we expect deal activity to continue picking up. Drago and Greg, thank you so much for joining us today.

Greg Chamberlain: Pankaj, great to spend time with you. Thanks for having us.

Drago Rajkovic: Pankaj, thank you for having us today. This was a great discussion.

Pankaj Goel: And thanks to our listeners for tuning in to another episode of What's The Deal? We hope you enjoyed this conversation and be sure to tune in to our next upcoming episodes. I'm your host, Pankaj Goel. Until next time, goodbye.

Voiceover: Thanks for listening to What's The Deal? If you've enjoyed this conversation, we hope you'll review, rate, and subscribe to J.P. Morgan's Making Sense to stay on top of the latest industry news and trends. Available on Apple Podcasts, Spotify, Google Podcasts, and YouTube. To stay ahead of the curve, sign up for J.P. Morgan's In Context newsletter, packed full of market views and expert insights delivered straight to you. To subscribe, just visit jpmorgan.com/in-context. This material was prepared by the Investment Banking Group of J.P. Morgan Securities, LLC and not the firm's research department. It is for informational purposes only and is not intended as an offer or solicitation for the purchase, sale or tender of any financial instrument.

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From IPOs to AI: Deep dive on tech investment banking

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Evan Junek: Hello, listeners, and welcome to What's The Deal? I'm today's host, Evan Junek from J.P. Morgan's Corporate Finance Advisory team. And I'm excited to be joined by Chris Grose, co-head of Technology Investment Banking for North America here at J.P. Morgan. Chris, welcome to the podcast.

Chris Grose: Evan, thank you for having me. Glad to be here.

Evan Junek: So great to have you here, love to just to know a little bit more about yourself, how did you get to J.P. Morgan, what has your career path been, and then tell us a little bit about what is technology investment banking at J.P. Morgan?

Chris Grose: Sure, I started my career at J.P. Morgan. So I've been in the business just under 20 years. I spent the first half of my career in New York advising companies across a number of different industries. And then in 2014, an exciting opportunity to join our tech practice which candidly was still pretty early in its infancy if you look at the progress that we've had over the last 10 years. I worked through a number of transactions. Ultimately, took on some operational roles, and here in the last 18 months have now taken the responsibility of managing our technology business for North America. As far as what our business focuses on and does, it's advising corporates, both private and public companies on their strategies. And that could be everything from raising private capital to raising public capital through IPOs and other types of offerings, as well as managing their capital structure and strategic advisory. There's so much going on in the technology space, and so it's certainly from my vantage points, one of the bright spots in the overall investment banking business.

Evan Junek: We just wrapped up our 51st Annual Technology, Media and Communications Conference or TMC Conference. It would be great to cover many of the themes discussed this week at the conference in a little bit more detail, including state of tech capital markets, the M&A environment, corporate clarity and separations and maybe even some of the latest developments of technology. But stepping back for a second, why do you think technology matters so much today and what does the path forward in the industry look like right now from where you sit?

Chris Grose: From my perspective, technology is the catalyst for innovation, and so it's transforming, as we all see, every industry, and each of our daily lives. It's just such an exciting time to work with these amazing businesses. Take global IT spend as an example, Evan, which is a pretty important barometer for how companies are investing. It's growing exponentially. If you just take the top 10 TMC companies by capex and R&D spend, that accounted for over $1 trillion of investments in 22 and 23 alone. And today, overall tech investment is now nearly equal to the investments across all other sectors in the United States. So related, it's probably not surprising to you that TMC now accounts for 35% of the S&P 500, and there's an aggregate market cap of over $17 trillion in this space. And I think if you add to that just the amount of dry powder looking to invest in tech, the space is pretty remarkable. There's over $1 trillion of VC and PE capital just waiting to be deployed. Now obviously the elephant in the room, layoffs, inflation, and a possible recession continue to drag on the industry. But, even despite these, I'll call it short-term challenges, there's pretty exciting times ahead, with major technological advancements, like AI, that's going to create enormous amounts of value. So, from my perspective, I've never really been more excited for what the future has in store.

Evan Junek: Well, I want to come back to AI. But let's start around the state of the markets today, and how the markets are approaching tech broadly. What do you think investors are really focused on?

Chris Grose: Today, we're in month 18 of correction, since the peak of the market in November of '21. The NASDAQ declined about 35% from the peak to the December '22 trough, and we're now about 20% off those lows, so still quite a bit a ways down. I think investors are really focused on three core macro areas. The first is the Fed. There's just a marked divergence in views of where the Fed goes from here. Our house view, as you know, is that we don't expect more rate hikes for this cycle, and that rates will stay steady at around 5% through early next year. But interestingly, the market is pricing in an interest rate cut in the second half of the year, with rates coming down to sub-4.5%, so I think it's pretty important that we get clarity on just what that looks like. I'd say the second key topic is an understanding of the possibility of a near-term recession or whether we're already in a recession, just where we go from here. I think no matter who you speak to, there's pretty broad consensus that there's likely to be a slowdown in the back half of this year or early next year, but the good news is, is we've seen continued consumer health, and corporate earnings have been actually rather resilient. So, the expectation that there's an economic downturn on the horizon, I think is that, yeah, sure, and perhaps it will come. But it's more likely than not to be mild, and even if it is severe, I just think there's a widespread mindset of like, "Let's get this over with, find the bottom, and start to march upwards from there." And then I'd say the third point is the ongoing geopolitical risk. I think it's the one element of the three which, candidly, is unknown, and could have pretty material impacts as to what the outlook looks like. And so, whether that's question marks around China's reopening and the stance towards tech, the ongoing Russia-Ukraine conflict, just to name a few. So, when I look at those events I do think overall, we expect volatility to continue in the commodity markets, FX, as well as in, in overall equities.

Evan Junek: I think that's well summarized. Risks of rates and corresponding policy, recession risk, geopolitics. How do you see those factors impacting sentiment for tech companies generally?

Chris Grose: It’s a great question. I just think overall conservatism is the mindset. If you look at where multiples have gone in the tech industry over the last 18 months, we saw a pretty sharp correction in early '22.  Investors have shifted their mindsets from growth at all costs to seeking proof points for sustainable margins, consistency, and durability. And if I look at software as an example, which I think is a pretty good barometer for tech, the average forward revenue multiple is down from roughly 11 times in '21 to just under four today. Which if you look over the long-term average, it's about five times forward revenue. So, there's certainly been a pretty significant pullback in valuations. And maybe to further illustrate the point, there's just been a shift in investor mentality from growth at all costs. At the peak of '21, a point of revenue growth was worth nine points of free cashflow margin. Now, fast-forward to today, that ratio has meaningfully shifted. A point of revenue growth is now worth just two points of free cashflow. So, you can kind of get a sense of where people are focused, and investors have said, "Rule of X is what matters. I want a balanced approach to both growth and profitability." If you look at the best-in-class companies today, that are, let's say 25+% revenue growers, and 50 rule of X companies, they're trading at a premium multiple. And, if you actually look over the last two decades, companies with superior free cashflow have outperformed the broader market by almost four times. And so, we expect this trend to be here and to continue for the foreseeable future.

Evan Junek: When you talk about Rule of X, we're talking about this idea that firms who have a baseline-level of margin and growth that sum up to X. In your example, rule of 50 being growth plus, let's say, free cash flow margin, between those two that would add up to 50, just to contextualize that for the audience. I think the key point there, and we're seeing it even across other sectors as we do work ourselves, is, a general shift, not entirely away from growth, by any stretch of the imagination, but certainly with a much greater focus than we saw 18 or 24 months ago on margin, on cash flow, and on profitability.

Chris Grose: Exactly.

Evan Junek: Translating that to a more specific aspect of the market what do you think that really means for the tech IPO market? How do you see that evolving?Chris Grose: We're in a period of time where the tech IPO window has been closed for really 18 months, and this is now the longest hiatus since post the global financial crisis when the IPO window was closed for 14 months. There's been four tech IPOs that have priced in 22 and 23 year-to-date versus 112 in 2021 at the peak. If you just look at more normalized markets, we still typically see about 35 to 40 tech IPOs, or about a third of the overall IPO market. So, there's been an incredible gap in new issuances come to market in tech. I would say we are starting to see some green shoots. There's been some successful IPOs across other sectors, which, hopefully, is an indicator of a broader reopening here in the second half of the year. I will say the pipeline, though, is quite strong. We've got a handful of scaled, profitable, and growing companies that will potentially test the market, whether it's later this year or early next year, and I think that that will hopefully be the start of a flood of companies thereafter. 

Evan Junek: Chris, maybe expand on the factors that would drive an opening of the IPO market. 

Chris Grose: I would say there's three factors when we're speaking to investors that they're focused on. The first is just a recalibration of pure multiples. I think that's more or less effectively taking place at this point. Pure multiples are now at a place where investors feel like there's a good entry point. The second is just what the macrostability is. Again, fed clarity, as it relates to potential rate cuts and the inflationary environment, is still unclear, and until there's more clarity there, I think that things are gonna be on pause. But once that actually starts to work itself through the system, investors will be able to get confidence in the 24 and 25 growth outlook, and these businesses, as a result of a lot of what we've spoken about, now are very focused on profitability at the same time, which gives you a pretty good setup into a new range of IPOs coming to market.

Evan Junek: Given the IPO market is so quiet, what have you been seeing on the MNA side of things?

Chris Grose: It's been rather tempered, as well. I think if you just look at LTM Global MNA volume, during the peak, so, let's say roughly November of '21 and compare it to today, volume is down about 65%. Equity issuance, just to give you a frame of reference, is down 75%, so, it's not a whole lot better. Companies are just more cautious and more selective in their MNA targets. And because of the backdrop with the market volatility, we've just seen a wider range of value expectations and therefore larger bid ask spreads, which have led to some pretty difficult conversations around price negotiations in a deal context. If you also add to the fact that the current regulatory environment widely covered in the press, more deals are facing anti-trust scrutiny. So, I'd say those kind of confluence of factors have led to a pretty cautious tone around MNA. Now, what are the bright spots? The bright spot is that the tech industry is continually representing a higher percentage of total MNA activity. So, today it's about 25% of total MNA volume, and that's up from high single-digits 10 years ago. There's gonna be continued MNA, but it's just the pace that's the question. And I do think the positive downstream effects of any time you have an economic cycle run its course, corporates have huge cash balances, they're gonna be there to deploy it, and they're gonna happen to be deploying it at a pretty attractive valuation entry point. So, I'm optimistic about the MNA environment over the next 18 to 24 months, once some of these macro points work themselves through the system.

Evan Junek: I think it's been said that necessity breeds creativity, and I'm curious to know if you've seen deal structures change a bit in this environment as a result of some of the factors you've just mentioned.

Chris Grose: Yeah, we absolutely have. If you look at public market valuations, they've more quickly reflected the market conditions than the private market, and therefore, there's been an increased focus on take privates. So, the MNA volume in private equity has actually been one of the bright spots. And that's partially driven by a record amount of sponsor dry powder, as I mentioned earlier, and we continue to see a number of firms raising massive new funds. While the debt markets have been a bit more resilient than the equity and MNA markets, we are, though, experiencing a decrease in the willingness of debt investors to participate in really highly-levered situations, which has constrained the amount of cash that can be there to fund transactions. And so, one, you've seen a little bit of a structural change on how deals are being financed, alternative financing or direct lenders has certainly been one of the key themes in the LBO context. And the second is around minority deals. Minority deals actually represent about a third of all deal activity over $500 million in the last two years. And those number of minority deals, in my view, are expected to continue to grow, primarily because of the change of control debt financing triggers in transactions. You wanna be able to keep the cheaper cost of financing that was put in place a few years back, versus what the cost of financing is today. In this new paradigm, this is what we're managing our clients through. So, I do think deal structure creativity will continue to be at the forefront of how things get done.

Evan Junek: Let's shift gears a little bit. We've seen a pretty substantial pickup in shareholder activism activity. How do you see that impacting the tech space right now?

Chris Grose: Maybe to put a finer point on it, just around the increased volume that you mentioned, so, in 2022, campaign volume was at its highest since 2015, and it was actually up 35% even verse '21. What we're seeing is campaigns mainly demanding strategic changes from management and urging companies to focus on greater corporate clarity. Activism campaigns are becoming more and more common in the tech industry, and actually, about a quarter of all '22 activism campaigns were technology. So, I think it's interesting to first start with where are activist pushing for change. The first is the importance of growth versus profitability, what we were speaking about earlier. And we've seen this impacting activist campaigns as they've been very focused on a healthy balance of growth and profitability, the rule of X that you spoke about earlier, Evan, and making sure that companies are optimizing and rationalizing their spend. And we've seen that a number of tech companies have announced corporate restructurings, and cost removal from the system in order to get to profitability sooner. I'd say we've also observed a couple of other key trends in activism. One notable one is that top institutional investors have become more open to siding with activists in proxy contests. And I'd say maybe the point that's even the, probably the most eye-opening is that no one company today is really protected. So, companies who have meaningful insider ownership, or they have multi-class share structures, they're now at risk. And so, in situations where performance has been weaker than expected, there has been an immediate focus around activists approaching those businesses with a heightened focus on the board, what are the governance policies, and ultimately, focusing on the cost structure of those businesses. The last point I'd say is that when I think about what to expect going forward, I'd be watching closely two trends. The first is the expiry of the sunset provisions for companies that have dual class structures, so that will certainly start to come to light given many of these businesses have been public now for five, seven, 10 years. And the second is the new universal proxy card rules which we think will likely result in an elevated amount of proxy fights.

Evan Junek: You mentioned in some of your comments around activist demands this theme of corporate clarity. Can you talk about recent trends around that and what you've seen with respect to tech?

Chris Grose: Corporate clarity remains pretty robust across the market, even in the face of, as you alluded to, general market uncertainty. The fact that US corporate separation announcements were up about 40% from '21 to '22, I think tells you a really everything you need to know in that corporates are looking for ways to create shareholder value, and if it cannot be done as diversified entity, they're then thinking about, "Is there ways for us to spin off pure play growth businesses in order to create incremental value for shareholders?" The facts are that, roughly, pure play companies across the market traded about a three times PE ratio premium to more diversified companies. And so going forward, irrespective of what the market backdrop looks like, we expect separations to remain a pretty popular strategic option for really three reasons. The first is the self-help path, if you will, doesn't require an M&A counterparty or an IPO window to be there. Two, it creates optionality for you if you're also thinking about a potential sale or merger, so there's sometimes competitive dynamics at play. And then the third is that the precedents have proven to create a bunch of shareholder value. If I look at high growth companies, and compare pre-separation with post-separation, we see about a 30% uplift in trading multiple. If you're a CEO in a board today, trying to find 30% uplift in your trading multiple is pretty difficult. So, if there's an opportunity to streamline your operations, corporate clarity I think is one of the key things that people are gonna continue to turn to.

Evan Junek: Well, I told you we'd come back to it at the beginning. I don't think any podcast on tech would be complete at this juncture without a question about AI. Where are tech companies and investors most focused with respect to artificial intelligence today, sort of the hottest of the hot topic of the moment?

Chris Grose: Certainly investors have become acutely focused on companies' ability to navigate the impacts of AI. Both in the near term, but really more focused on what the medium and long term impacts are, since we're still pretty early in the infancy of AI. I'd say it's pretty difficult to actually track the trajectory of AI, but the positive ranges, you can think about it as, like, product set improvement, cost base optimization, efficiency, I mean, there's a lot of things that start to impact a company's success if they're able to implement AI. And we are seeing companies aggressively trying to get in front of this disruption, by addressing their AI product, and competitive positioning. I think if you look at the most recent earnings for tech companies, it tells you everything you need to know. The number of references to generative AI in recent tech earnings calls were up 60 times versus just two quarters ago. And if you look at the range of outcomes in earnings last week, or over the last couple of weeks, they've ranged from stocks down 50%, where AI was perceived to be an existential threat, to up 25% with investors repositioning into companies that are perceived to have beneficiary tailwinds with AI. The thing that you just have to be focused on in our business as an investor, and for a corporate is that we are just in the very early days of AI. There's been 200 billion of venture capital that's flown into AI since '21, and AI now constitutes nearly 50% of series B+ funding, year to date. One out of every two is an AI company (laughs). So, you know, it kinda tells you where the future is going. There's a bunch of different market reports out there, but one that I saw estimated that AI will contribute over 15 trillion dollars to the global economy within a decade. So if that's even remotely close to accurate, this is where every company is gonna be focused. It's a very exciting time in tech we are thrilled to be at the forefront of helping several of these leading companies of the future unlock these massive opportunities and pretty exciting time to be in and around everything that's happening in technology.

Evan Junek: Look, there is no shortage of fascinating topics we could hit on when it comes to technology strategy and the markets, but unfortunately, we are out of time. So, Chris, thank you so much for joining me today and sharing your insights.

Chris Grose: Evan, It was my pleasure

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