Emotion is driving volatility among US tech stocks, but local investors are also scrutinising company announcements in the wake of GetSwift and 1-Page, says tech expert Hani Iskander, a partner at specialist technology investment bank Cube Capital.

US tech stocks are taking a hit at the moment some commentators say its spooked investors in the local market. What is your take on the tech market at present?

While some may label it as a correction, I wouldn’t go that far – it is just a movement of markets.

A lot of the going-up-and-down recently is nothing to do with valuations but rather the sentiment following the movements in the US.

Those commentaries are purely emotional and that doesn’t change profitability, potential revenue or efficiencies of businesses in Australia. These things unrelated to the quality and the value of those businesses.

If not a correction, what is behind the moves?

The first thing is that smart investors have become desensitised to company announcements.

That is, investors are no longer as willing to believe broad-scale announcements about deals without mention of potential or actual revenue. It is just noise.

What factors have led to a more discerning tech investor?

Some are quick to point the finger at the GetSwift (ASX:GSW) drama but I think the original sin goes back to 1Page (ASX:1PG).

They were really the beginning of the end when it comes to pumping up a share price with announcements and there have since been many to follow their example.

Even looking back to Martin Aircraft (ASX:MJP), that company announced several memorandums of understanding and joint venture frameworks but received no revenue, eventually leading to its current position where it is seeking to be delisted.

In my opinion, there should be an end to memorandums of understanding – they generate no revenue and are often of no real consequence.

What factors should investors pay attention to?

Look for those that have actually sold products – it is only then that you can issue an invoice and see any revenue.

When assessing companies, I don’t care if a tech is losing money. But I want to know what revenue is coming and when it does, whether there will be more where it came from.

The biggest change in the tech industry has been the emergence of the Software-as-a-Service (SaaS) model and it has led to a real paradigm shift in the way that both companies and investors have to assess performance.

In the old days, every new sale of a licence brought in a big upfront payment from the customer, and provided a cash runway for the next deal to be done.

Now, SaaS is a ‘long tail’ paradigm where companies have to wait three, four or more years to build up their bank of customers to have the cumulative benefit of recurring revenue.

But if you’re a young startup IPO, you don’t have many customers, so surviving for three years while losing money and waiting for recurring revenue to cover expenses is an art form.

On the flipside, the J-curve factor applies as more and more people begin to pay up and in the long-haul it’s what retail investors and institutions tend to prefer. It’s easy to get a spreadsheet of month revenues and see what’s on the table.

Seeing through noise needs a lot more wisdom than getting excited with new technology and glow of the IPO.

How do you distinguish opportunities in the market?

Whether the market is moving up or down, I would most likely want to invest in something that people need, not something that is nice to have.

These businesses will not be impacted by any so-called shake-up because they have good stuff to sell.

For example, I like Volpara (ASX:VHT) who have a breast cancer screening product that is an alternative to painful mammograms.

This is a very solid solution to a big problem which is not ‘nice to have’ – like a jetpack – but a well-needed diagnostic solution for millions and millions of women.


Hani Iskander, a partner at Cube Capital, a specialist technology investment bank. Before moving to investment banking, he was a serial entrepreneur having started and built 7 software companies and holding several C-level roles with global technology companies.

Over the years, Hani has held a regional management role with SAP and has been Vice President of Asia Pacific and Japan with two NASDAQ-listed technology companies. He founded Accelerator Capital in 2000 and managed M&A transactions for 15 years.

With over 18 years’ experience in the software industry and 15 years in investment banking, Hani has a unique understanding of the technology sector and especially information technology. His special interest is in artificial intelligence which goes back to his honours research at UTS where he obtained a Bachelor of Applied Science (Computer Science) with Honours.


This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.