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Firelake Capital has the unusual advantage of using direct private venture activities to inform our public investments. Our involvement in the strategy, management, and growth of companies on the frontiers of photovoltaic energy, polymer chemistry, materials science, and water technology makes our valuations of public equities in these markets far more sophisticated than those of firms that rely on public research alone.
We apply the same criteria we use in our venture investments to select our public holdings. While the criteria are obvious, making them work in an investment fund is anything but simple.
The traditional information technology sector, built to automate companies in the service economy, is mature. Growth is slowing and the computer and software markets are being commoditized. The microprocessor-based PC platform is mature; change comes slowly and the returns to innovation get crushed by economies of scale. The value of IT has shifted from the expansion in new markets to security, safety and regulation, and from growth to cost containment.
The entrenched oligopolies in cable and telecom are under attack. The traditional analog technologies used for television, photography, and voice telephony, are being replaced by new digital technologies with new economics and service delivery models. Internet service companies, scaling rapidly, will bludgeon, then consume their ancestors.
Future growth in information technology will occur in consumer markets where digital technology is replacing analog, and wireless technology is replacing the use of wires. The most significant innovations are in a new platform, the wireless handheld device, where a billion-unit annual market offers high returns to those with unique functionality and the appropriate business model.
The Firelake partners have many decades of experience investing in small capitalization technology companies. They have analyzed them, and witnessed what it takes to succeed and grow a large company with a highly valued stock. They have managed multi-billion dollar portfolios and conducted thousands of interviews with company managements.
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