Katie Elizabeth

Palo Alto - September 27, 2020 - WCP is pleased to share our quarterly insights & opinions newsletter, offering our observations on significant trends in key industries and verticals. In this outreach we cover:

• Silicon Valley's next evolution
• The sharp rise in COVID-19 related health-tech
• A cloud trend you should be watching
• How marketing clouds are impacting the unprecedented growth of e-commerce

Reach out to any of our 15+ investment banking professionals if you are seeking an advisor for an M&A event or a private placement. Woodside Capital Partners is the leading corporate finance advisory firm for tech companies in M&A and financings in the $30M-$500M segment. The firm has worked with the best entrepreneurs and investors since 2001, providing ultra-personalized service to select clients.

Silicon Valley Has Changed Forever, And Will Change More - For The Better

Let's consider the allure of Silicon Valley as a world-leading region for innovation. It's a central hub of large and small companies that are changing lives across the globe, a full ecosystem of all the resources needed to start a business, plus we can't deny its natural beauty, great academic institutions, incredible weather, and more. Truth is, the Valley is one of greatest centers of innovation in the history of the planet. Yet simultaneously for many, the Valley's success is making the place unlivable due to high housing costs, economic disparity, clogged traffic, 3-hour commutes, blackouts, homelessness, crime - and the list goes on. Add in the opportunity to run modern organizations with globally-distributed workforces, and some say that there will be an exodus of workers, empty office complexes, and a significant depletion of innovation mojo.

To this vision of tech dystopia we say "wait a minute - not so fast!". Each time the death of Silicon Valley has been predicted - with pundits declaring "this time it's different!" - the Valley somehow manages to produce another wave of new innovation that gives rise to societal, economic and cultural growth. We believe that the COVID crisis is no different. Here are a few of Woodside Capital Partners' predictions about the Valley, post-COVID:

• The majority of workforces will not remain distributed post-COVID - people will return to offices buildings. Surely some jobs will become more conducive to remote work - for example, jobs that don't require nor benefit from creative collaboration. And some workers will permanently leave the Bay Area to live in Tahoe, Honolulu or Jackson Hole and work via Zoom. But working side-by-side enables ideation and inspiration that are different from remote collaboration, on a screen. Moreover, workers that stay close to the power centers of their organizations will likely be better-situated to earn promotions - so they will stay in the Bay Area. Leadership teams will benefit from close proximity to manage "creative destruction" of their own firms - innovation to reinvent their futures. Post-COVID, we believe that offices, stores, research centers, factories, restaurants and more will thrive again. They may look different, but thrive they will.
  Considering the massive layoffs that happened earlier this year, some jobs have been eliminated, and will never return. However, many new jobs will be created to take their place. This is the nature of human progress. It may be difficult to imagine what those jobs will be - for example, the job of social media analyst was inconceivable just 15 years ago. Today, there are tens of thousands of social media analyst jobs worldwide, some paying six figures.
• As more and more of the approximately 500 tech unicorns go public, a new wave of capital is becoming available which will significantly boost M&A of tech companies in the sub-$1 billion range, where 98% of M&A takes place. The combination of these companies will enable new tech giants to arise, and will force incumbent industry leaders to operate better, more competitively, and with more focus on bringing high quality and low prices to customers.
• Commercial real estate will play a role in enhancing innovation, with work spaces becoming more modular, and co-working spaces increasing in importance and tenancy. This will give workers, companies and industries greater flexibility. Alas, residential real estate prices in Silicon Valley will remain high. Desirable, world-class geographies - like San Francisco, Manhattan, London, and Tokyo - command high prices. People tend to be willing to put up with high prices, over-crowding, and even higher crime rates - in order to be at the center of the action. Given the presence of tech finance / venture capital, also tech leaders like the FANG companies, and so many entrepreneurs, the Valley will continue to be a very desirable place to live. This too will fuel innovation.
• Emphasis on family will be even more important post-COVID. When the crisis passes and a new normal is established, people will have just spent the past 1-2 years interacting much more with family. While this has surely caused some challenges to arise, it is also deepening and strengthening relationships that are, generally, the most meaningful in life. In spite of the way that tech has the ability to isolate us, we believe that real communities and actual physical time with other people are irreplaceable and there will be an increased emphasis on these relationships as the crisis subsides. How does this impact innovation? It makes quality of life better, and that will fuel new innovation.

Despite the new enablement of distributed workforces from platforms like Zoom, Google Hangouts and others, the Valley will continue to be a hotbed and a global leader in tech innovation. No disrespect meant to our entrepreneur friends around the world, but the entrepreneurial momentum of the Valley is hard to displace, and is amplified by the presence of so many leading tech companies where engineers and product managers spin-up ideas and spin-out to start companies. In turn, the very same large companies supply those entrepreneurs with resources, and act as customers and acquirers of those companies. COVID has indeed changed Silicon Valley - and we believe it'll be for the better.

Health-Tech Insights

COVID-19 has been a wake-up call for the healthcare industry and is dramatically changing the way we consider and deliver healthcare. Methodologies that support early detection and measurement confidence have gained a wide platform in public discussion. A sharp rise in market demand for PCR, NGS, and non-invasive, rapid-test products is now supported by a sympathetic regulatory landscape that enables rapid product development and commercialization. As the patient population expands with viral spread, the diagnostic market grows to meet it.

Public and private investments are supporting the growth of diagnostic development. Major healthcare players with gaps in their portfolios are looking for opportunities to invest in non-invasive, high speed, accurate, point-of-care, home testing, or centralized diagnostic solutions. Valuations for companies designing and manufacturing diagnostic tests have increased during the last couple of quarters with many successful capital raise, M&A transactions as well as IPOs in the space.

Another segment with a dramatic upswing over the last 3 quarters is telemedicine. Telemedicine platforms have been developing in earnest over the last 4 years, but the COVID-19 pandemic has brought a sense of urgency as patients and providers avoid personal contact. Healthcare experts note that provider billing has rebounded to pre-COVID levels due primarily to an increase in volume through telemedicine. Once shunned as impersonal and consequently ineffective, telemedicine is now considered a gateway to preventive care when combined with early detection diagnostic tools. Physicians, payors, and patients finally see the limitless potential for technology that facilitates at-home self-screening for acute and chronic conditions.

Over the next 12-24 months, we expect a dynamic and rapidly changing landscape that will emphasize investment in operational quality and efficiency over blunt cost savings. Personalized patient profiles, population benchmarking, and dynamic monitoring and engagement systems will continue to expand the impact of diagnostic and telemedicine companies as they grow to meet the needs of our new world.

Zero Code: The Cloud Trend You Should be Watching

There is a lot going on in cloud: containers, kubernetes, serverless, multi-cloud, edge cloud. But zero code, or low code, is the trend you should be watching closely.

What is low/zero code? Simply, it is to create applications without needing developers to create code. While it sounds like magic, it is not. It is possible through the convergence of three different capabilities in the cloud: API frameworks, pay per use cloud based services, and drag and drop UI frameworks. Let's take a look at each.

• APIs are now a fundamental, key part of every coding project. As such, it is imperative that an application is controllable via a programmatic interface to allow it to integrate with other applications. Going deeper - an application that is not extensible or integratable to other things is not that useful in today's environments. An API is now the default way you interact with code.
• Cloud based services are capabilities, with APIs, that are hosted in the cloud and ready to be used by developers in their applications to save them having to create this service themselves. This is not just a time saver, it is also a good practice to use well crafted code from respected sellers who are specialists in a category. Even better is when a brand in a category offers a cloud based service they are expert in. An example would be credit card processing. It makes perfect sense as a developer to not want to take the risk of creating this service from scratch - it is far better to use a service from Visa or Mastercard to do this.
• Drag & Drop UI. As we have mentioned, all code has APIs, and these APIs were created specifically for humans and machines to be able to figure out what the app does just based on the API. It is a simple step to present these APIs as inputs and outputs of an application or component graphically in a UI. This UI can then show which components can connect which other components. Think lego blocks. All that remains is for a application or the cloud based components to be categorized so they are easy to discover and use. Now we have a way to find components that achieve a task and we can arrange them to perform a greater task by connecting them together in a UI which translates to a code based workflow being performed when executed. The best part is, none of which requires any programming knowledge or any code being generated. In the background there is code, but this is auto-generated. As a bonus feature, the code generated will run in a cloud automatically, so you don't even have to worry about resources to run the code.

Why is zero code or low code important? Three reasons:

• Low code will make any developer a lot more efficient. A significant portion of the code contained in any application are core capabilities that are not new. If a developer can skip this step and move on to the innovative aspects, this makes code generation quicker, and more consistent. But it also frees up the developer to be more creative instead of bogged down by process. The end result? Better code, better applications.
• Developers are a scarce resource, and being able to create applications to service simple workflows with non-developers is a game changer. Take a bespoke manufacturing environment as an example: what if I want a lathe to tell my metal processing shop when it is ready for new metal? I can access the APIs, look at them in a drag and drop UI tool and connect them. I do not need to understand code, APIs, or develop any code to connect these two workflows together. Game changing in terms of making integration easy and accessible to everyone. And then suddenly other game changing technologies such as Industrial IoT, Drones and robots become a lot easier to experiment with and adopt.
• Zero code / low code creates an app store economy for cloud based components - some free, some paid. A repository for code already exists, (GitHub), and is now owned by Microsoft. But there is room for an app/component economy as well. Look for these to emerge in the big cloud providers domains.

Who are the players in low code? In the business world keep an eye on: K2, Bizagi, Workato, Airtable. Also, Google just acquired AppSheet, AWS has Honeycode, and Microsoft Azure has PowerApps. And we have already seen, Salesforce made a bonus play in this area - by buying Vlocity, they gained a verticalized version of Salesforce, and they also got a zero code platform.

You can experience low code in the consumer world as well with the IFTTT service or the Zapier service, both of which allow you to integrate multiple services together to form a workflow. We encourage you to check them out.

eCommerce Marketing Cloud Platforms Provide Key Differentiation

The online shopping industry is growing at an unprecedented rate. It is estimated that retail e-commerce sales worldwide will more than double between 2018 and 2023, surpassing $6.5 trillion in 2023. This trend opens a massive growth opportunity for eCommerce brands. However, with the increase in online shopping comes increased competition. With thousands of companies competing for the attention of the same shoppers, customers now expect much more from their online shopping experience.

This means eCommerce brands must distinguish themselves from the rest of the pack to gain a competitive advantage. It's no secret that personalized marketing is key to creating a great customer experience (CX). But because the needs and wants of users' can change in an instant, it's hard for eCommerce brands to keep up. For example, 76% of consumers now expect companies to understand their needs and expectations. Additionally, 48% of consumers have reported they left a brand's website and purchased somewhere else due to a poorly-curated experience.

To stand out in a crowded marketplace and keep shoppers more engaged, it is critical to have personalized marketing strategies in place. To do this effectively, these strategies must go beyond making decisions based purely on customer personas or a set of pre-defined rules.

That's where modern eCommerce Marketing Cloud platforms come into play. Leveraging these tools, retailers of all sizes can take their eCommerce marketing strategy to the next level to create a more tailored and unique customer journey. In fact, Gartner estimates that by 2020, smart personalization engines that recognize customer intent will enable digital businesses to increase their profits by up to 15%. In our next newsletter, we'll dive into some of the innovative players in this space. Stay tuned!

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