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Why Major Tech Investments Will Cool In 2016

The Chinese technology sector was wary of supersonic growth not all that long ago, but as The Wall Street Journal reported late last week, “it’s been a warm winter,” even amid concerns over too much in the way of investments, too fast.

As noted by the publication, the “froth of the first half of 2015 has receded,” even as the Chinese economy has slowed. The fallout has been that the companies — regardless of size — have been able to see continued growth in demand amid the hundreds of millions of Chinese who want to traffic in goods and services, especially over mobile devices. The fundamental groundswell that is in place in terms of consumer demand means that investors are still in the game, with an eye on putting money where their interest is piqued, albeit, as WSJ put “with more strings attached."

That means that the investment landscape should work on a more even keel, with judicious movement on both sides, from investors and the companies seeking their cash.

Nonetheless, the looming year is unlikely to see the momentum that saw $133 billion across more than 1,400 deals in 2015, more than tripling 2014’s levels. Consolidation may remain key, as companies found it easier to link up rather than continue to burn through cash.

Investor scrutiny across both private equity and venture capital will be focused on strong business models, with a newfound attention on revenue growth. WSJ noted that many companies will have to close shop if there is no real movement toward profitability. So, a shakeout may loom, and that will be exacerbated as Tencent, Baidu and Alibaba keep battling for the eyes, hearts and wallets of the Chinese consumer. WSJ said that investments attracting attention include companies that own entertainment rights and content.

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