There are 2 ways to earn profit in the equity markets: dividends and capital gains.
Dividends, or excess capital returned to investors, generally require the business to have a stable profits/revenue streams.
Capital gains, or selling your equity for more than your purchase price, generally require nothing more than functional equity markets and investors with excess capital speculating on growth industries. Software is a growth industry where products can take hold and explode almost overnight, given software's scalability and the current availability of compute and networking infrastructure.
This move from investing based on present fundamentals (dividend) vs. theoretical future potential (capital gains) is puzzling some "value investors" that have relied on P/E (price to earnings) ratios to inform decisions in the past: https://www.bloomberg.com/news/articles/2017-06-08/goldman-s...
There's plenty of capital to go around, but everyone is trying to beat the very low returns you can get on safe, theoretically "risk-free", assets, and they want to do it as quick as possible. You do that by investing early in software, and waiting for the IPO or acquisition from entrenched players.
The real question is - who is left holding the bag when banks start to write the value of their equity holdings down? A lot of pension/retirement/index funds might have a lot less to return to their clients once central banks start to tighten monetary policy and reverse QE by selling bonds back on the market and raising short term interest rates.
Dividends, or excess capital returned to investors, generally require the business to have a stable profits/revenue streams.
Capital gains, or selling your equity for more than your purchase price, generally require nothing more than functional equity markets and investors with excess capital speculating on growth industries. Software is a growth industry where products can take hold and explode almost overnight, given software's scalability and the current availability of compute and networking infrastructure.
This move from investing based on present fundamentals (dividend) vs. theoretical future potential (capital gains) is puzzling some "value investors" that have relied on P/E (price to earnings) ratios to inform decisions in the past: https://www.bloomberg.com/news/articles/2017-06-08/goldman-s...
There's plenty of capital to go around, but everyone is trying to beat the very low returns you can get on safe, theoretically "risk-free", assets, and they want to do it as quick as possible. You do that by investing early in software, and waiting for the IPO or acquisition from entrenched players.
The real question is - who is left holding the bag when banks start to write the value of their equity holdings down? A lot of pension/retirement/index funds might have a lot less to return to their clients once central banks start to tighten monetary policy and reverse QE by selling bonds back on the market and raising short term interest rates.