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Back to the fundaments

May 26, 2021 / Article
By Dejan Ljuština

Tech companies were the winners during the recent Corona crisis. Investors and markets have rewarded them generously while dispersion has created many new opportunities for them. And now, as markets are changing, companies are reflecting on the fundaments of their success. This is what they need to do next.

Despite what has been happening in the economy and throughout society over the past 12 months during the global crisis, one constant has prevailed: the success of the tech sector. It has emerged as the winner despite lockdown, in spite of markets going up or down, and in the face of assets losing or gaining value. In the first quarter of this year alone, the combined revenue of Alphabet, Amazon, Apple, Facebook, and Microsoft has jumped by 41% to $322bln1 .

Graph: AAFM YoY revenue

Figure 1: Q1 2021 revenue of Apple, Amazon, Facebook and Microsoft

New norms

Big technology dispersion 2 will shape businesses and consumers for the rest of this decade. It is the third largest disruption after globalization and digitalization. Tech dispersion enhances many experiences by cutting out the middleman and eliminating supply chain costs. Whether it is watching the next Star Wars movie on Disney+ instead of at the cinema, ordering from your favorite restaurant via Wolt instead of going to their establishment, ordering groceries online, managing finances via the Fintech app instead of at the bank branch, talking to your doctor via video app instead of waiting in a waiting room, tech has shifted the landscape for businesses and consumers. 

One might say these trends were triggered by the Coronavirus crisis. And while this is partially true, the pandemic has in fact been an accelerant of trends that were visible before the crisis and that will exist after it goes away. These new norms are here to stay. Consumer expectations around convenience and removing frictions from product or service usage are not going to decrease, moreover, they will only increase over time.

Meanwhile, we are seeing the world begin its recovery from the pandemic, and there are huge amounts of money in the hands of consumers 3 as well as investors4. The hunger for new things (products, services, and experiences) will be unprecedented, which makes now the best time to start something new. There is an abundant financial capacity out there, but companies need to create and be brave. They need to explore the new and unknown. 


The winners in 2020 were the companies that had vision and courage. 2020 bore witness to a record number of IPOs and a never seen before hunger for disruptive businesses. Among the most successful companies were platform businesses. They navigated the crisis impact better than traditional brick and mortar businesses. The likes of Airbnb outperformed the traditional hospitality sector because it does not operate an asset-heavy business model, and users adjusted quickly to the new situation. Uber was hit hard on the traditional transport role of the business but very quickly focused on food delivery through Uber Eats. There have been many other examples of platforms that prospered: Fiverr, Cameo, Rover, Handy, Wyzant, and others seized the opportunity of dispersion and grew successful businesses.

And this success is possible for founders and companies that do not have the advantage of starting business in global innovation capitals. UiPath, a company from Romania that until recently operated from a small office in Bucharest, made a record-breaking IPO for a CEE company with a valuation of $35bln 5 on Nasdaq.

Furthermore, it was not only digitally-born companies that were brave during the crisis. Some traditional businesses have also been very active. For instance, KB from the Czech Republic 6 implemented a major agile transformation program that changed and increased NPS and digitized the company to cope with digital challengers.  

Disruption 2.0.

In terms of sectors, you might ask which is next to get disrupted? It will be those that failed to deliver customer expectations around convenience and quality of service in relation to the price charged. Many sectors will be turned upside down (Insurance, Healthcare, Education, Real Estate) because they have been mostly dormant in the periods where other sectors got disrupted.

Disruptive newcomers do not carry the baggage of the past. If we look at the Insurance sector, premiums are determined by historical averages of monolithic groups of customers where roughly half have been overcharged and the other half paid less than they should. For incumbent companies, this is a very difficult landscape to navigate. Then enter Lemonade and other such companies. These disruptors do not have physical front-offices and do leverage on AI to onboard customers and offer them premiums based on their individual data. 

One disruptive phenomenon that appeared in the meantime are NFTs and tokenization. They have the potential to go beyond art and media, where initial success has been achieved. Smart contracting takes care of many things such as meritocracy and fairness. By using NFTs software engineering firms will know how to fairly appraise its developers and salespeople, brands will have more direct access to the consumer, and the expensive middleman is eliminated. We might even see the large winners (Amazon, Tesla and the likes) leveraging NFTs and creating their own monetary and non-monetary currencies. Some might resist, but they could be the ones left on the wrong side of this moment in history. 


In capital markets this year to date, we saw a record number of IPOs 7 which were mainly driven by the phenomenon of SPACs. SPACs have been around for a while, but their resurgence is a key characteristic of this crisis. They offer several benefits as a means of bringing a company to the public, but over time we will see many of them underperform the traditional IPO-based public entries. In addition, something that is not mentioned very often is that SPACs are quite an expensive way of financing (on average 50.4% of the capital raised8) and have high dilution effects. Based on the recent situation, the hype around SPACs is winding down, and as a result, many companies that have been created will have a difficult time finding targets to merge with.

Graph: SPACS underperform

Figure 2: SPACs peformance

SPAC valuations are driven mostly by the tech subsector’s macro stories and a general hunger for investment into tech companies. We are now however seeing more of a shift towards the fundaments, which is good for founding shareholders as some of the large valuation’s investments created frustrated shareholders after stocks dropped following the de-SPAC.


One basic characteristic of the future winners is about having rapid and profitable growth. This requires managing growth and profits in a smart way. In the long run, companies that connect their narrative and underlying financial fundamentals well tend to achieve more stability with their market caps. Large technology companies have become a sort of utility when it comes to stock performance as their innovative power and ability to continually grow has been matched by superb and stable underlying financial performance. 

The next important characteristic is to be obsessed with removing customer frictions. Often companies add new features to their products to achieve this, which usually increases the attractiveness of their products. However, there is a missed opportunity to eliminate frictions by removing features or stopping queues, which then remove some interactions or moments where frictions occur. Achieving exceptionally high NPS through these adjustments is the best possible “guarantee” for successful growth. Companies often need to focus on the new domains (new unserved customers and unserved needs) to uncover radical innovation advantages on the customer experience front.

And the final characteristic is to leverage on network effects and AI. This is particularly important for companies in traditional domains. Either existing or new platforms will be present in any sector of the economy, hence it is important to leverage on your products and services, and create network effects that improve them and ultimately encourage more people to use them. The role of AI is crucial here as the ability to process data usage is essential to come up with better services.  


Dejan Ljuština is CEO and Managing Partner of the Vision Partners.


  1. Amazon, Apple, Facebook and Microsoft - Company earnings reports
  2. Post Corona: From Crisis to Opportunity, book by Scott Galloway
  3. How Has the Pandemic Impacted U.S. Savings Rates? https://time.com/nextadvisor/banking/savings/us-saving-rate-soaring/
  4. What Private Equity's Record Dry Powder Haul Means for the Industry.
  5. $35bn Romanian software company UiPath files for IPO
  6. Enterprise Agility at Komerční Banka
  7. Global IPOs begin 2021 at breakneck pace
  8. SPAC Insiders Can Make Millions Even When the Company They Take Public Struggles.