It’s easy to imagine that a young startup in Silicon Valley, looking to raise venture capital, might be overwhelmed by the scale of its business.
But a study by the McKinsey Global Institute (MGI) suggests the tech sector is not as vulnerable to the kind of rapid change seen in the financial industry.
According to MGI, there are currently approximately 500,000 technology startups globally and the number is expected to double by 2021, to 1.3 billion.
The number of employees in the tech space is expected be more than two times larger than that.
While the number of companies globally is estimated to increase by more than 60 per cent over the next five years, the size of the industry will likely remain constant.MGI’s report, which was published last month, found that the average valuation of tech startups is only $1.4bn, which is considerably lower than the $3.8bn valuation reported by venture capital firms.
But the report suggests that tech companies will face more challenges than many of their peers in the global financial services industry.
“There is a clear difference between technology companies and financial services firms,” said MGI director of research Jason Bales.
“In the past five years the share of technology companies in the overall US financial services market has decreased, but the size and scale of the financial services sector is larger than the technology sector.”
The McKinsey report noted that the technology market is not immune to the disruptive effects of automation, but said the “disruption is already evident” and that a return to a pre-Robot-A-Car world is possible.
“This suggests that a ‘robotic age’ may be approaching.
A time of rapid transformation, as some analysts predict, would be a natural extension of this disruption,” said Bales, who added that the report is not meant to suggest that the future of technology is bleak.”
Our research is only one piece of the puzzle, however, and there is much more work to do.
The industry has an immense opportunity, and our focus is to help the industry thrive.”