Why selling your virtual company will make you rich

BY David Rowat

Traditional businesses struggle to deal with technological advances, which is why virtual companies are worth more in a technology company exit.

Strategic Exits noticed a few years ago that is was easier to sell a virtual company (with no head office, few physical assets and a lot of flexibility) than a conventional bricks and mortar company, and that they were worth more in a technology company exit. Virtual companies are a vanguard of fundamental changes in how the technology companies leading the Fourth Productivity [1] Revolution operate.

In the 20th century, office workers were trapped in a rat race. They woke up, got ready, and went to the office, along with countless others, in a chaotic, yet orderly dance. Significant time, energy and money were wasted in supporting the bricks-and-mortar economy.

But thanks to recent technological advances, many companies and employees are escaping this exhausting ritual.

The current exponential increase in the rate of technological development is tied to the emergence of the virtual company with its advantages of agility, flexibility and financial efficiency.

Online videoconferencing tools and high-speed internet now allow for online communications to be seamless, no matter where in the world the speakers happen to be. This means that people can now work from anywhere (WFA) and collaborate with co-workers while avoiding the annoyance of a perpetual commute, or the isolation from working at home for eight hours a day.

There are three ingredients that make the virtual company a game-changer in the technology landscape:

  • Simple Structure: their unique and lean design allows them to exploit opportunities quickly and scale up efficiently when the need arises; unlike conventional companies with laborious slow internal processes.
  • Flexible Workplace: Virtual companies have no geographic restriction; they can source the best talent from around the world and entice them with the flexible work-life balance of a virtual environment. Many workers, especially working mothers, need the flexibility to choose when they work. The virtual environment is a godsend.
  • Financial Adaptability: Virtual companies can do business from anywhere in the world and have the flexibility to choose the jurisdiction in which they register. By choosing a jurisdiction with lower taxes and fewer regulations, they can operate more efficiently and reduce personal, corporate and exit taxes. Consequently, virtual companies are more valuable than comparable conventional rivals in a technology company exit.

The business world of the 20th century we all knew – structure, workstyles, the work-life balance of employees – is changing rapidly. Virtual companies will impact corporate valuations and even the concept of value in the 21st century. Indeed, virtual companies may lead the world into the Fourth Productivity Revolution. This new paradigm may upset everything you know about the tech industry. With these massive impacts, it is no mystery that virtual companies sell for more in an technology exit.

In a series of articles, we will unpack these different elements, and demonstrate why virtual companies sell for more.

 

[1] The previously labelled: “Industrial Revolution” applied to the manufacturing sector. Now renamed “Productivity Revolution” to encompass software and digital sectors. The First Revolution was the invention of steam and coal power in the late 1700s. The Second was the harnessing of electricity and the expansion of rail power in the late 1800s to early 1900s. The Third was the invention of computers in the mid-20th century.