By Ben Hogg, MD, International, Lucid
The financial markets are riding high with strong capital availability, robust M&A opportunities and active IPO markets. Where there is still some market uncertainty with the backlash of the COVID-19 pandemic, the markets are also seeing a big shift from traditional IPOs to SPACs. Special Purchase Acquisition Company (SPAC) IPOs have seen record growth this year, as venture capital (VC) and private equity (PE) firms show more interest in incorporating them into their investment portfolios given the relatively attractive yield and minimal risk these can provide.
The European markets have also been hot, with private equity and venture investors showing no signs of slowing down as we enter the final quarter of the year. According to the latest figures from Real Deals’ Data Hub Market Tracker, European investments rose by 10% in the second quarter of this year.
Investors are clearly eager to see capital deployed, but growth will still be critical to counter lofty investments. Beyond the GICS (Global Industry Classification Standard) that outlines the core 11 sectors for investment purposes, there are many industry groups and sub-sectors within this that stand to benefit from these positive market dynamics, including Research Technology (ResTech). ResTech is unique in that the sector touches and influences many aspects of both the technology and consumer ecosystem — from software and tech innovation to marketing automation and consumer marketplaces.
In the wake of the last 18 months, most businesses are scrambling to get a better understanding of their customers as the world continues to tackle the global pandemic and the global shift to diversity and inclusion and social good practices. There has never been a greater need to ‘pick the brains’ of the consumer. Add to this the growth of a tech-forward mentality across business where timelines are accelerated and quick access to knowledge is paramount, and you have a perfect storm of growth and success for ResTech.
But First, What is ResTech?
Similar to the advent of other high growth sectors like AdTech, MarTech and EdTech, ResTech is attracting attention from the investment community as it becomes a true ecosystem bringing together software and tools to help businesses better reach and engage with their customers and audiences. With the ability to quickly gauge the behaviours, opinions and sentiments of different groups of people, ResTech enables organisations, agencies and brands to efficiently target, analyse and deliver insights that can positively impact the business’ bottom line.
It has the power to provide a clear roadmap to success for marketers, researchers, or anyone who needs insights. These valuable consumer insights keep businesses on the pulse of people’s changing sentiments so that they can understand what they care about, and how to best appeal to them through personalised experiences and targeted messaging.
The acceleration of digital adoption in the last year has been quite remarkable. The role of technology has been fundamental in sustaining business and life as we now know it. It is clear that the future of business innovation and success will be dependent on tech as the cornerstone of global leadership.
Not only does that change the way in which we operate, but it also changes the fundamentals of how we interact with our customers. It is no longer good enough to make assumptions and hypotheses about what our customers might be interested in — to properly and effectively engage them, today’s business needs to understand them. Measuring actual consumer intent has become increasingly more important.
The Role of ResTech in Today’s Global Markets
What does the introduction of ResTech as a sector mean for the markets, investors, analysts and partners — how do these stakeholders create value that will benefit customers going forward?
While it may seem somewhat elusive, ResTech is, in fact, a key player in today’s global markets, and not just because of the predicted growth in the tech sector overall which, according to IDC, is the most significant stock market sector with an estimated global market value of around $5 trillion USD. And, when you drill down into the sector, the ResTech story sits within a critical part of the overall market: software, which currently represents the fastest growing segment of IT spending in 2021 overall, according to Gartner, while Forrester recently predicted tech services as a whole will ‘ride on the coattails of software demand’ to lead growth in the sector.
As more businesses adopt a software-first approach, automation technology that can determine consumer sentiment in real-time is hugely advantageous for understanding the customer journey, and will be more than business critical to the success of the industry going forward.
But, to get to this point, ResTech needs a common vocabulary, a uniform process that will benefit the entire ecosystem. Until now, there has been a limited understanding of the business models within ResTech — how research works and how transactions are made. Educating the market is necessary to help investors and analysts understand the potential for growth.
This is particularly so in the UK and Europe, where investors are very different to those in the US. Market research has not been on the radar of UK and European investors — let alone ResTech. There has been a steep learning curve and solid time commitment to engage with investors earlier on, to allow them to become more familiar with the market, the business model, and the sector overall.
A uniform business model, a common vernacular and a joint approach for the ResTech sector could create a centre of gravity whereby all stakeholders within the ecosystem understand the potential, the opportunity, and the real drivers for growth. What this means is that we can expect to see key factors such as cutting edge research, skilled engineering, top tech talent and operators who know how to drive sustainable business against the backdrop of a delicate global economy pique investor interest.
Lessons To Learn and Moving Forward
The lessons that can be learned from the growing UK tech industry can help define ResTech, its business models, and market opportunities and valuations.
COVID-19 has removed the traditional client objections and barriers to entry to adopting a “tech/software first” approach. Time, flexibility, and the bottom line have become ever more important as the traditional rate of adoption is replaced by a new kind of disruption with a shape that mirrors a cliff edge more than a bell curve: the shark fin model. This model has been driven by the sheer wall of innovation being constantly introduced to the market, combined with the rapid spread of information amongst consumers via social media and streaming video channels, which accelerates the rate of adoption and lowers the barrier to entry.
The ramifications of changing consumer behaviours driving this new idea behind the shark fin model are vast. For one, the product innovation cycle has shortened while consumer purchase decisions have spiked at a rate that is near impossible to keep pace with. Add to this the challenge brands and businesses increasingly face today of trying to identify fads versus trends without an understanding of deep insights and cultural data points to paint the whole picture.
This is the exact tipping point where ResTech can present a perfect opportunity for business, for the investment market, and for the future of the global economy as we continue to weather quite a storm. The time has never been better for market research to own its future — to be bold and disruptive in placing tech innovation at its heart to help today’s brands and businesses provide real-time clarity into the thoughts, opinions, and feelings of the world.