This time it's different: Big tech investors

Robert Smith, chairman and chief executive officer of Vista Equity Partners
Patrick T. Fallon | Bloomberg | Getty Images
Robert Smith, chairman and chief executive officer of Vista Equity Partners

Big investors are dismissing talk of a technology market peak given what they call unprecedented advances in the sector.

"There's still a lot more opportunity," Robert Smith, founder and CEO of Vista Equity Partners, said when asked if this was a "market top" for the tech sector.

"Today we are witnessing the greatest era of innovation in our lifetime," Smith, who manages more than $14 billion of private equity investments in tech, explained Tuesday at The Wall Street Journal Private Equity Analyst Conference in New York.

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Other big-money investors at the event agreed that innovation would make the tech sector lucrative for years to come.

"We're still very bullish in the long term," said Deven Parekh, managing director at Insight Venture Partners, a private equity and venture capital firm that has raised more than $10 billion since 1995.

Ian Loring, a managing director at $75 billion Bain Capital, was another tech bull.

"Where's the biggest productivity improvement coming from still?" he asked, noting that the world can only grow through population or productivity increases. "A long time ago it was autos and manufacturing. Today it's tech."

"At some level we continue to be hugely interested in tech," Loring added, noting opportunities in security, cloud computing and mobility technology companies.

Ian Sigalow, co-founder of $600 million venture capital firm Greycroft Partners, referenced the high use of technology by innovative companies in industries traditionally seen as outside the tech sector like Tesla (automotive), Nest (hardware and devices) and Plated (food services).

"The world is changing and I think technology is at the forefront of that," Sigalow said.

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Investors at the conference did warily acknowledge the relatively high prices of technology companies.

"We are proceeding with caution around valuations. They look as high as they've ever been," Loring said.

He gave the example of Bain's purchase of online education company Skillsoft at 10 times earnings before interest, taxes, depreciation and amortization in 2010. The firm then sold the business to Charterhouse Capital Partners for 13.5 times EBITDA in March 2014.

"It's just at a really, really frothy level," Loring said of the deal.

Sigalow predicted that valuations would continue to climb for the next 12 to 18 months given the continued low cost of borrowing from near-zero interest rates. He added that investors are cautious and watching valuation numbers closely, not a traditional sign of a market top.

"We still have a while to go on this," Sigalow said.

Panelists at a tech-focused discussion were asked what the top sectors would be in five years.

Loring said driverless cars and the expansion of the so-called sharing economy, especially for businesses; Sigalow of Greycroft said it would be virtual reality; and Parekh of Insight Venture noted personalized health, such as diagnostics from wearable devices like watches.