tech outlook 2017 final...these game-changers also come with greater risk, requiring a longer term...

MOMENTUM 2017

A 2017 CohnReznick LLP Report

Technology Outlook: Disruptive Technologies, Emerging Strategies, and Game-Changing Policies

mo • men • tumnoun: impetus and driving force gained by the development of a process or course of events

Regulatory Issues ...6

A CohnReznick Report 3

The Technology Industry Climate in 2017 ................................................1

• Falling Valuations ......................................................................................................1

• Corporate VCs Remain Active ................................................................................2

• The Trump Effect ........................................................................................................3

• A Tech Backlash? ......................................................................................................4

• IPOs Heat Up ..............................................................................................................4

• M&A Stays Strong ......................................................................................................5

• Unicorns Lose Their Horns..........................................................................................6

• Digital Innovation Opens Door to Growth .............................................................6

• The Power of Data Democratization ......................................................................8

• Sector Spotlight: Restaurant Technology Puts Innovation on the Menu ............9

Conclusion ................................................................................................10

Regulatory Issues ...6

Table ofContents

@CR_TechInd

Technology may be the fastest moving and least predictable industry on the planet. There is no other major market sector that shifts gears as quickly. In 2016, we continued to see game-changing tech innovations everywhere, from the home to the highway to the workplace.

So how can we predict what’s ahead for 2017? Our most reliable strategy in forecasting the coming year is to assess the infl uences—societal, environmental, economic—that shape the playing fi eld on which tech players perform their magic.

Looking forward, we see 2017 as a major year of change, with cutting edge technologies like virtual reality, artifi cial intelligence, and the Internet of Things poised to dramatically alter the way we live, work, and play.

But the U.S. technology industry also faces a number of challenges in 2017 led by the inevitable uncertainties associated with a new presidential administration as well as the increasing need for tech companies to rise above the crowd in a hyper-competitive market. That’s why this report highlights key trends that technology fi rms in the middle market should be aware of as they plot their growth strategies for 2017. The 2017 Technology Outlook also offers several ideas that technology fi rms can employ to differentiate themselves, such as using data analytics to drive operational improvements and leveraging digital innovation to accelerate growth.

Overall, the outlook for technology remains bright. There is a wealth of venture capital and private equity funding aimed at the sector, indicating that growth-oriented tech companies will continue to have access to the capital they need to thrive and expand. Further, the prospect of an improving IPO market and strong M&A activity both bode well for the industry. Meanwhile, the new presidential administration has strongly suggested that tax reform is on the horizon. This could free up more cash that can be used toward M&A activity or potentially incentivize investors to continue their investment into cutting edge technology companies.

In this report, CohnReznick’s 2017 Technology Outlook, we analyze a broad range of forces that will impact tech companies in the upcoming year. We hope you fi nd this report to be a thought-provoking look at the current and future state of the technology industry including its key challenges and the opportunities that disruption can bring. You will fi nd actionable insights to help you compete in this complex, ever evolving, and always exciting market. We look forward to hearing your thoughts and discussing the issues raised by this report in the year ahead.

Alex Castelli, CPAPartnerTechnology Industry Practice Leader

Preface

January 2017

Alex Castelli


There may never be a better time to be a technology company in search of funding. Over the past two years, venture capital (VC) and private equity fi rms have raised record amounts of capital, and they now need to put that money to work. For VCs in particular, 2016 was a record-breaking year with $41.6 billion raised across 253 funds, according to the National Venture Capital Association and research fi rm PitchBook.

“Overall, the availability of capital will continue to be strong in 2017,” said Alex Castelli, CohnReznick’s Technology Industry Practice Leader. “It looks like the next two years will offer real opportunity. We have so much pent up demand and positive momentum. If your company is driving revenue and profi table, or moving toward profi tability, now is the time to seek growth capital or explore a liquidity event.”

Companies that are likely to see the most success are the ones targeting large and game-changing markets such as virtual reality, artifi cial intelligence (AI), and the Internet of Things. Investors are attracted to these markets because they offer tremendous upside. But these game-changers also come with greater risk, requiring a longer term investment horizon and larger amounts of capital compared to other sectors within the tech industry.

In essence, the high capital requirements of these next-generation tech sectors such as virtual reality

The Technology

Industry Climate in

2017

and AI could ultimately draw funds away from more traditional categories such as enterprise software.

“There is a real concern that deals in 2017 will be more capital intensive ones when compared to venture deals that occurred over the last eight or nine years,” said David Sorin, Partner at McCarter & English and co-head of the fi rm’s Venture Capital & Emerging Growth Companies Practice. “As a result, there could actually be fewer companies receiving fi nancing, but they will be raising larger amounts this year.”

Falling ValuationsAnother immediate concern is the continued downward pressure on valuations as investor discipline becomes the buzzword over the next year. Whereas previously the mantra in VC circles was revenue and customer growth at all costs, today profi tability is paramount. This will make for a more challenging capital raising environment, even when juxtaposed against a growing supply of investor dollars from venture capital and private equity.

“The true gatekeepers of capital have expressed a rising concern about valuations,” said Sorin. “So, even though there is a lot of money in the market, VCs will keep dry powder and wait for valuations to come down. They will wait for entrepreneurs to get their heads out of the clouds and return to earth with valuations that are more palatable to investors.”

Momentum 2017|Technology Outlook: Disruptive Technologies, Emerging Strategies, and Game-Changing Policies2

Ryan Armbrust, Managing Director at venture capital fi rm ffVC agrees with this assessment. “In the past several years, we’ve seen startups feeling pressure to grow as fast as possible, and those that did were often set to high valuations,” he said. “2017 will have investors taking a harder look at just how these companies get to profi tability, including performance metrics and suitability for long-term growth. Investors will want to see prudent use of capital coupled with steady revenue growth, and the ability to mitigate and minimize losses.”

Another factor that could impact valuations in 2017 is rising interest rates. One reason for soaring valuations over the past several years has been the participation of non-traditional investors like hedge funds, mutual funds, and other investors that have poured money into tech startups. When interest rates are low, startups offer the best prospect of a big return. But when rates move higher, non-traditional investors fl ee the tech industry and seek more predictable, less risky returns in fi xed income or dividend-paying stocks. This means venture capitalists may have less competition for deals in 2017 and can wait for valuations to move in their favor.

Corporate VCs Remain ActiveCorporate venture capital arms will remain a bright spot for technology fi rms looking to raise money in 2017. Corporate venture capital fi rms invested nearly $9 billion across 376 deals in U.S.-based companies in the fi rst half of 2016 alone. In Q3 of 2016, corporates and corporate venture fi rms participated in 28% of all venture deals, a fi ve-quarter high, according to the National Venture Capital Association.

“We expect increased engagement in private market activity from corporate VCs in 2017,” said Armbrust. “Corporates realize that disruption is pervasive—and they want direct exposure to this innovation—so we see them becoming more involved in venture in many capacities.”

In particular, he expects to see heightened corporate activity in the artifi cial intelligence space in 2017. “The AI innovation wave, similar to what we saw with the onset of mobile, will continue to transform technology—and more broadly society. AI is reshaping the ways we live, work, interact with each other, and share information,” he says.

“The AI innovationwave, similar to what

we saw with the onset of mobile, will continue to transform technology―

and more broadly society.’”

Ryan Armbrust, Managing Director,

ffVC


The Trump Effect While on the campaign trail, Donald Trump constantly attacked leading companies such as Amazon, Apple, and Facebook. He threatened to investigate Amazon for antitrust violations, boycott Apple for not cooperating with the FBI, and even accused Google of trying to rig the election. But was that just empty rhetoric? Can we expect a more tech-friendly Trump administration?

“The big unknown for 2017 is what the new Trump administration does and how it affects technology companies,” said Asael Meir, CohnReznick Partner who leads the Technology Industry Practice in New York. “Tax reform, offshore manufacturing, immigration, international trade. These are all important issues that impact technology companies.”

Sorin adds, “Much of the talk now is about bringing back manufacturing jobs and bringing back the coal industry. But we also need to look to the future and concentrate on innovation in 2017.”

Immigration is another hot-button issue. Numerous technology company leaders voiced opposition to Trump’s January 27, 2017 executive order temporarily banning immigration from seven countries. Companies such as Facebook have aggressively lobbied Congress to expand the number of high-skilled foreign visas (H1-B visas) awarded each year. The tech sector has long held the position that it needs more workers than the H1-B program currently provides because there aren’t enough skilled Americans to fill those jobs.

But the new administration has drafted a proposed platform that that would make it more expensive for companies to hire foreign workers through the H-1B visa program, according to ComputerWorld. Still, it’s hard to predict what the new administration will ultimately do. On the one hand, President Trump is staffing his cabinet with hard-line immigration opponents. But on the other hand, he recently stated that “we need highly skilled people in this country, and if we can’t do it, we’ll get them in.”

Trade policy is another sticking point. President Trump said he would force tech companies to bring their overseas manufacturing operations back to the U.S. Specifically, in one campaign speech he said, “We’re going to get Apple to start building their computers and things in this country instead of in other countries.” The reality is that most U.S. tech companies rely on existing global trade agreements to efficiently manage their international supply chains. Any change to those agreements could make it more expensive for U.S. tech companies to make their products and sell them throughout the world.

Perhaps the silver lining is that a Trump administration could loosen up a series of regulations, which would be a boon to the tech industry. For instance, Trump is likely to champion antitrust regulators who embrace free markets and oppose strict regulation. Like many Republicans before him, Trump believes the economy can grow faster if businesses are free from federal government interference. “This is going to be a president who will be the biggest regulatory reformer


since Ronald Reagan,” Stephen Moore, one of President Trump’s economic advisers, told the New York Times. “There are just so many regulations that could be eased.”

Trump himself echoed these sentiments at a summit he held for leading tech CEOs in December, promising to do “anything we can” to help the industry. “This is truly an amazing group of people,” Trump said to an assembly of Silicon Valley luminaries from Google, Amazon, Microsoft, Tesla, Facebook, IBM, and Intel. “I’m here to help you folks do well.”

A Tech BacklashOne alarming global trend is the rise of the disenfranchised working class who believe they have been displaced by technology and globalization. This trend is epitomized by the rise of populist movements around the world, including Brexit in England and Trump’s election here in the U.S.

“There is a growing recognition among workers that the reason for our declining labor intensity and the drop in manufacturing is technology,” said Sorin. “And it’s not just blue collar workers. Wait until technology impacts jobs in the restaurant and hospitality industries. Over the next fi ve to ten years, I expect to see a sea of change as we have fewer and fewer people working in those industries because technology can easily replace them.”

Of course, technology itself could also be the answer. Innovation will continue to have a dramatic impact on our economy and society in ways we simply cannot fathom today. “In the coming years, emerging technologies like virtual reality could create many new opportunities in industries like hospitality, travel,

and retail,” said Meir. “If we continue to motivate innovators, we can drive new ways for people to work, learn, and earn a living. So I’m optimistic that, even while technology may be creating certain problems, it is also helping to solve those problems.”

IPOs Heat Up2016 was a slow year for technology IPOs with just 21 tech companies going public, according to data from Renaissance Capital. And those 21 tech companies generated $3 billion from their IPOs, only half as much as tech companies raised in 2015.

But that could all change this year. Many tech companies, including standouts like Uber and Airbnb, have preferred to remain private and avoid the risk and expense of a public offering. However, some investors are losing patience with this strategy and will likely push their portfolio companies to go public in 2017.

“Even though there is still a lot of capital in the private markets, VC investors are now looking for liquidity from their investments,” said Joshua Siegel, a general partner at Rubicon Ventures. “They don’t want their companies to stay private forever. This will be a comeback year in tech IPOs because that is what investors want.”

He believes that many tech companies that have been sitting on the sidelines will have to go public in 2017, even if it means taking it on the chin and going out at a lower valuation compared to their previous fi nancing round.

In particular, he points to a number of so-called unicorns—tech startups with billon-dollar valuations—that are now preparing to go public. “They are getting their fi nancial houses in order and cutting the fat,” said Siegel. “They are eliminating unnecessary positions and dialing down marketing spend as they get ready to put themselves out there for the scrutiny of the public markets.”

The biggest unicorn in the IPO spotlight entering 2017 is Snap Inc., parent company of Snapchat, the wildly popular social media site. A successful offering could leave the IPO window wide open for other tech unicorns including Palantir and the previously mentioned Airbnb and Uber.

“Even though there is still a lot of capital in

the private markets, VC investors are now looking

for liquidity from their investments.”

Joshua Siegel,General Partner,Rubicon Ventures


Still, Siegel insists that the IPO bar is very high right now and that only the best companies will clear it. “This is not the dot-com days where companies with limited revenue and no path to profi tability could go public,” he says. “In 2017, you have to be generating real revenue for the public markets to accept you. The scrutiny of regulation is signifi cant and costly, so those going for IPOs will have to be bigger companies with established revenue streams.”

M&A Stays StrongIt was another blockbuster year for tech deals, with the technology sector leading the global M&A market in 2016, according to Dealogic. M&A activity should remain strong in 2017. One surprising reason for a robust M&A market looking forward: President Trump.

While many in the tech community remain nervous about the Trump administration, his vow to dramatically lower corporate taxes could free up a lot of cash that can be used toward acquisitions. The lower tax rate may also entice some companies to bring their money back home from overseas. That repatriation of capital could further fuel an M&A boom.

“The amount of M&A activity could be staggering,” said Siegel. “Tech companies that are making $5 million to $50 million in real gross revenue with healthy margins are ripe for M&A activity because they can add substantial value to whoever buys them.”

Also helping to spur acquisition activity is the fact that strategic buyers still have a large appetite for much needed technology and, in many cases, would rather purchase it than develop it. “No doubt we will continue to see that, especially if there is an easing up on regulations,” said Jeff Bobrosky, CohnReznick Partner who leads the Technology Industry Practice in Los Angeles. “It’s quicker and easier to buy it rather than build it. And, in many cases, strategics are willing to pay higher valuations as well. So, we expect that trend to continue apace.”

Meanwhile, cross-border activity is also heating up as large companies from China become aggressive purchasers of tech businesses in the U.S. and elsewhere. A recent example of this is Tencent’s acquisition of Supercell, maker of the mobile game Clash of Clans, in June 2016. Tencent is China’s largest online social media and gaming company.

China’s M&A activity in the West has been growing at a record pace. In fact, China was the leading acquirer of foreign companies in 2016, unseating the U.S. from the top spot for the fi rst time since 2006, according to the Mergermarket Group.

“We expect to see a healthy M&A pipeline in 2017,” said Bobrosky. “For many tech companies, an acquisition is much more preferable than an IPO and offers an opportunity for management to provide liquidity for its shareholders. For many tech companies, an IPO is viewed as time consuming and expensive. Even if you have signifi cant momentum in terms of profi tability and revenue growth, it’s still quite an undertaking, especially when you have other sources of liquidity available to you.”

“We expect to see a healthy M&A pipeline in 2017. For many tech

companies, an acquisition is much more preferable

than a IPO.”Jeff Bobrosky, Partner,

Los Angeles Technology Industry Practice Leader,

CohnReznick


Unicorns Lose Their HornsAfter years of prosperity, unicorns may be on the endangered list in 2017. Nearly one-third of the 90 tech startups in the United States that have gained unicorn status will eventually be worth less than $1 billion, according to a recent report published by private markets research fi rm SharesPost.

Dreaded down rounds are likely to accelerate in 2017. Last year, there was an average of one unicorn down round or down exit per month, according to CB Insights. The most recent was Ola, India’s leading ride-hailing service and Uber competitor. Ola reportedly raised a funding round that valued the company at $3 billion, a sharp decline from the $5 billion valuation it earned during its previous fi nancing round.

“Investors are no longer willing to give sky-high valuations to companies that are not meeting real revenue metrics,” said Siegel.

Siegel also expects to see the non-traditional late-stage investors who helped fuel the unicorn bubble, such as hedge funds and mutual funds, abandon the market in 2017. This could put further downward pressure or unicorn valuations.

“These are the guys that got into the Ubers and Airbnbs and thought they would exit in a year or two, but they still haven’t gotten out yet,” Siegel said. “These guys will dial it back because they realize you can’t invest in unicorns and expect them to IPO in a year. It is taking a lot longer than that. The IPO window will really have to open up and give them some liquidity before they become active investors again.”

Digital Innovation Opens Door to GrowthDigital changes everything. It’s not just a strategy—it’s a way of life. And it needs to be embedded in every company’s DNA.

For all businesses, especially technology businesses, a digital strategy is no longer a nice-to-have; it’s a necessity. “2017 will be the year that companies really start accelerating their digital strategies,” said Paul Gulbin, a managing director with CohnReznick Advisory and leader of the fi rm’s Digital and Innovation Services. “The leaders in 2017 will be the companies that can quickly build a digital footprint, engage with their customers, and transform their operations.”

The truth is that technology companies always need to stay one step ahead of the competition. If not, they face eroding profi ts, stagnating growth, and customer attrition. What’s more, consumer expectations—fueled by constant exposure to leading-edge digital technology—are at an all-time high. This is putting added pressure on technology companies to continually evolve their customer engagement experience in order to retain customers and attract new ones.


Think about it. Your customers are constantly engaging with the digital world. The fi rst thing they do in the morning is reach for their mobile device. They get their news online, they conduct research online, they solicit feedback from their social networks, and they use their mobile devices to fi nd the best price and promotion.

The ability to deliver a rich customer experience is a key driver of digitization. “Anything less than a stellar experience is a risk to the business as customers quickly lose patience with poor customer service,” said Gulbin. “It’s why a digital customer experience leader like Amazon is growing by 30% annually and a customer experience laggard like Wal-Mart is growing by less than 2%.”

Successful digital transformation centers on building customer intimacy to drive engagement. This is prompting nearly every technology company to deliver exciting and personalized customer experiences.

For instance, by leveraging social data, technology companies are in a unique position to identify, understand, and segment their customers. As a result, they can better infl uence their customers’ shopping behaviors by delivering relevant messaging and by making shopping experiences more personal.

In 2017, delivering better customer experiences will rightfully become a top business strategy imperative for technology companies. The good news is that companies do not have to boil the ocean to achieve impactful results. The key is to start small, be agile, and move fast. By applying the tenets of agile development—rapid prototyping, continuous feedback, and constant iteration—companies can quickly and cost-effectively put their digital strategy into action.

“Successful digital transformations occur through continuous innovation—by radically changing business models and capabilities in measured steps, over time, and as resources allow,” said Gulbin. “This agile approach empowers organizations to launch, learn, and re-launch digital initiatives, swiftly reacting to changing market conditions and customer needs.”

“Gaining or losing market share in 2017 will heavily depend on how well businesses can execute on their digital transformation and continuously innovate,” added Gulbin. And the digital world will continue to up the ante. Companies that embrace agile digital transformation can radically change their business models and meet those demands head-on.

“Successful digital transformations occur

through continuous innovation―by radically

changing business models and capabilities...”

Paul Gulbin, Managing Director,

CohnReznick Advisory


The Power of Data DemocratizationData analytics is not just for data scientists anymore. In 2017, data will become more democratized. That means all decision-makers within a technology company will—or should—have access to data analytics tools with which they can make timely, intelligent decisions.

This data democratization is made possible by signifi cant advances in analytics tools over the past few years. The tools are now more powerful, affordable, and practical. They’re also highly intuitive and visual. This allows a business user—any business user—to ask more insightful questions and get more accurate answers. Smart tech organizations realize this and they’re taking advantage.

“The best technology companies understand that the days of keeping an analytics team locked away in an ivory silo are long gone,” said Matt Giroux, Managing Director with CohnReznick Advisory and the leader of the Firm’s cloud solutions, business intelligence, and data analytics service offerings. “If you want your technology business to truly grow, everybody needs to have access to analytics. You need to embed analytics everywhere that decisions are made—from the executive suite to frontline interactions with customers.”

Consider product management, for example. The success of every tech company depends on building products that are effective and sticky. This, in turn, depends on understanding how and why people are using the products. The product management team can do this best if it has hands-on access to data analytics tools. With this access, product managers can ask the questions they want and make decisions based on actual insight rather than intuition.

Technology companies are capturing information at a pace and volume never before seen—indeed, never before imagined. This information can provide signifi cant competitive advantage. For example, unstructured datasets, including data from social media platforms, can help a company unlock previously unseen opportunities and identify previously unknown issues.

“Tech companies will need to fi gure out what to do with all this data and employ it in ways that generate real value,” said Castelli. “Making use of all that data is the key to growth in 2017 and beyond.”

Some tech companies are differentiating themselves by aggregating masses of information from blog posts, Twitter feeds, and Facebook comments, and then leveraging that data to build a better feature set for their next product release. This approach to analytics enables companies to quickly and accurately build the product features and functionality that will have the greatest impact in the market. Without a data-driven approach to business decisions, this would not be possible.

Gaming companies, for instance, now release software into the wild before the game is even complete because they have learned that this is a very effi cient way to hone and improve the game. Product teams gather data from social sites and gaming message boards and analyze it to see which game features are resonating with users and which need to be improved. Marketing teams can collect information on a recent campaign from Twitter, Facebook and LinkedIn, run analytics on it, then feed the insights to sales managers in the fi eld to immediately tailor new messages to customers.

Today’s market won’t wait. In 2017, every technology company needs to have the information on hand to make the right business decisions in real time. And they can—if they extend analytics to all decision-makers so they can act with speed and confi dence.

“Technology companies are great at making products but they often struggle to make their own operations more effi cient,” said Giroux. “Especially as they enter the growth stage of their development, technology companies need to look internally to create operational effi ciencies and discover new areas of opportunity. By extending data analytics to all corners of the organization, they can make that happen.”

“The best technology companies understand

that the days of keeping an analytics team locked

away in an ivory silo are long gone.”

Matt Giroux, Managing Director,

CohnReznick Advisory


SECTOR SPOTLIGHT: RESTAURANT TECHNOLOGY PUTS INNOVATION ON THE MENURestaurants have never been huge consumers of technology. However, this is quickly changing as the cost of technology continues to come down and mobile innovations offer establishments the opportunity to transform the way they operate.

“The restaurant business has been so underpowered by technology for so long. But we now have cheap and accessible mobile devices and powerful data networks that are changing the game,” said Abigail Lorden, brand director at Hospitality Technology magazine. “The time for pushing innovation into this industry has never been better than it is right now.”

Increasingly, restaurant owners are considering technology critical to their success because it helps make their daily operations more effi cient. Technology enables them to reduce costs as well as overhead. In fact, 87% of restaurateurs now believe that incorporating more technology into their business will help attract more customers, according to the recent American Express Restaurant Trade Survey.

Restaurant owners are embracing a broad range of tech tools, from point-of-sale software that automatically splits the check for customers to mobile apps for online ordering. One fast growing technology companies is Olo, which provides a white label digital ordering platform for brands like Applebee’s, Five Guys, Jamba Juice, and Shake Shack. Olo’s mobile app lets customers order and pay for their food in advance, so they can skip the line and pick up their order when they arrive.

“Technology will remain a very important story for restaurants in 2017,” said Noah Glass, Olo’s founder and CEO. “The reality is that signifi cant sales are now coming through mobile channels. Some large pizza chains, for example, are now getting half their sales from digital channels. Restaurants simply can’t afford to kick the can for another year. Otherwise, their competitors will get a meaningful leg up and steal market share away from them.”

Going into 2017, there will be an increased focus not just on technology adoption but on the integration of disparate apps and systems. The second course, as it were. “Initially, it was really important to have a mobile app,” said Lorden. “Now, it’s increasingly important to make sure your mobile app is integrated with your overall technology infrastructure, including your point-of-sale systems and loyalty programs. That’s how you eliminate data silos and get more meaningful insights into customer preferences.”

Currently, the market is fl ooded with innovative applications that do not connect with each other and do not share their data. That’s why there is increasing demand for an integrated, one-stop-shop solution that can bring all the functionality and customer data together in a single place.

“This could actually lead to more consolidation in the restaurant technology space, as the larger providers look to add functionality they don’t yet have,” said Christopher Mahon, a partner at CohnReznick and member of the Firm’s Technology and Hospitality Industry Practices. “We expect to see a greater level of M&A activity in 2017 among the various players.”

One strong driver of consolidation is the need among restaurants to have more predictive capabilities. To succeed, they must be able to make sophisticated decisions about their businesses and about consumer patterns. But that’s hard to do if data is buried in different places throughout the operation.

“If you have a promotional offer on burgers, you don’t want to target your regular customers who you know are vegan because that’s the only kind of food they order,” explained Lorden. “Without data around customers’ buying patterns—what sort of food they like, when they come in, how much they typically spend—you can’t provide the sort of customized experience that is necessary going forward. This data exists. Those restaurants that can extract it strategically will be the big winners in 2017.”


Conclusion

Technology is not like other industries. It not only stands alone as a fast paced and innovative industry, it has permeated many other industries. Numerous companies, once thought to be non-tech, are embracing technology as a means to fi nd and engage customers, drive operating effi ciencies, and increase profi tability. Companies have to consider how technology can assist in their growth. They must update or discard past business models and create new ones.

This rapid pace of change will continue in 2017, with disruptive business and consumer technologies that are set to take the market in radically new directions. There is ample funding available to fuel this next wave of innovation, now that venture capitalists and private equity have raised record amounts and are eager to invest in ideas that promise returns. Tech companies can also look to a stronger IPO market for funding, as well as an increasingly active M&A space to strengthen their business.

The looming uncertainty in 2017 is at the federal level. The Trump administration has promised to take on policy issues of great importance to the tech sector—including immigration, trade and regulatory reform—and it remains to be seen what changes are made. Still, no matter what happens on the political front, the market demand for innovation and next-generation technology will continue to accelerate and drive the industry forward. Those technology companies with vision, solid fundamentals, and astute management will fi nd 2017 to be a year of tremendous opportunity.


About CohnReznick’s Technology Practice

Acknowledgements

Members of CohnReznick’s Technology Industry Practice Leadership team include:

Jeffrey Bobrosky 818-205-2640 [email protected]

Alex Castelli 703-744-6708 [email protected]

Mark Hooley 858-300-3420 [email protected]

Stephen Jackson 959-200-7112 [email protected]

Chris Mahon 703-744-6706 [email protected]

Asael Meir 516-336-5515 [email protected]

Ravi Raghunathan 973-364-7826 [email protected]

About CohnReznick’s Technology Industry PracticeCohnReznick’s Technology Industry Practice assists private, public, and investor-backed companies at each stage of their lifecycles. Technology clients are served by a team of partner-led professionals who have extensive knowledge of industry-specific accounting and tax issues. As such, we are instrumental in helping clients understand the financial and operational risks and rewards inherent in most business decisions. With contacts throughout the investment and banking communities, CohnReznick can help make introductions to venture capital firms, private equity groups, and strategic investors. Learn more at www.cohnreznick.com/technology.

CohnReznick wishes to thank the following contributors for sharing their insights for this report:

Ryan Armbrust, ffVC

Noah Glass, Olo,

Abigail Lorden, Hospitality Technology

Joshua Siegel, Rubicon Ventures

David Sorin, McCarter & English

About CohnReznickCohnReznick LLP is one of the top accounting, tax, and advisory firms in the United States, combining the deep resources of a national firm with the hands-on, agile approach that today’s dynamic business environment demands. With diverse industry expertise, the Firm provides companies with the insight and experience to help them break through and seize growth opportunities. The Firm, with origins dating back to 1919, is headquartered in New York, NY with 2,700 employees in offices nationwide. CohnReznick is a member of Nexia International, a global network of independent accountancy, tax, and business advisors. For more information, visit www.cohnreznick.com.

1301 Avenue of the Americas New York, NY 10019 212-297-0400

www.cohnreznick.com

CohnReznick LLP © 2017Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

@CR_TechInd

tech outlook 2017 final...these game-changers also come with greater risk, requiring a longer term...

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