PRIVATE INVESTMENT AND INNOVATION

It is no secret that some of the most exciting companies around today are private. Businesses choosing to remain private is nothing new, but in today’s world of rapid technological innovation, many of the world’s most exciting businesses are staying private for longer.

Innovation is often what make private businesses so valuable, with many acting as pioneers in their industries. A host of private companies both new and old place innovation at the heart of their plans, including some visionaries known to be somewhat vocal when it comes to investments. It is clear that the private aerospace industry has taken off in recent years. Led by the vision of business heavyweights Elon Musk, Jeff Bezos and Richard Branson, SpaceX, Blue Origin and Virgin Galactic have all made important forays into chartered space flights.

SpaceX Founder and CEO Elon Musk has been the architect of an attractive business through the firm’s innovation and lofty ambitions, including a successful mission to transport two astronauts to the International Space Station (ISS) in May 2020, and the aim to crew a mission to Mars by 2024. Innovation is arguably what makes the company such an exciting prospect. Unlike traditional rockets, those developed by SpaceX are reusable. Although the firm’s Falcon 9 and Falcon Heavy crafts cost US$62m and US$90m to book, respectively, they can be used as many as ten times, significantly reducing the overall cost.

Although SpaceX was recently valued at US$52bn by Morgan Stanley, Musk has suggested that SpaceX will remain private as the firm’s long-term goals don’t align with the short-term demands of retail investors.

While SpaceX is exciting as it has disrupted the aerospace sector since bursting onto the scene, some private firms in other industries are much more well-established. S.C. Johnson, the global company with a family of household cleaning brands under its umbrella, has grown steadily since being founded in 1886.

Many of its best-known innovations, including the brands Glade and Pledge, were developed in the firm’s Research Tower, in place at its US headquarters since 1950. By being well-established and diversifying its product offering in the long-term, the firm has become a well-respected player in its industry and, in doing so, has built a strong reputation for itself.

Over time, this reputation has led to the S.C Johnson family reaching a net worth of US$30bn, while its household cleaning products business has an estimated US$10.5bn in annual sales. The Group’s household products arm is just one branch of the business, but by evolving and innovating over the long-term, it has grown into a global, trusted brand.

Remaining innovative and engaging with consumers are two stumbling blocks that traditional businesses often face and can often separate market leaders from underperformers. In the world of sport, many of the large professional clubs are privately-owned. Although some, particularly in football, have been the subject of supporter-led takeovers by local supporters’ trusts, most are owned and financed by private investors. However, in a world where European football has a global appeal, owners are exploring innovative ways to widen their clubs’ reach. While remaining private and not selling any of their actual shares, a growing number of the world’s leading football clubs are promoting “fan tokens.”

Fan tokens are described by cryptocurrency website CoinMarketCap as “a form of cryptocurrency that give holders access to a variety of fan-related membership perks like voting on club decisions, rewards, merchandise designs and unique experiences.”

A growing number of the world’s biggest football clubs, including Barcelona, Paris Saint-Germain and Inter Milan now offer fan tokens having partnered with Socios.com, the platform which offers these fan tokens.

With COVID-19 restrictions meaning that supporters were unable to attend games in person, clubs re-focused their efforts on providing enhanced digital experiences to fans to keep them engaged. According to a 2021 report by Stats Perform, 75% of respondents in the sports industry felt that the previous twelve months in the COVID-19 era had given them new insights about engaging fans, while 72% said that their organisation was looking into investing in new technology this year. Similar schemes have been launched by teams in Formula 1, cricket and esports but there have been negative reactions in some quarters, with supporter’s groups suggesting that if clubs promote unregulated cryptocurrencies to their fans they should also promote education around what is often an investing minefield. Although businesses, not just those in professional sport, are looking to the digital space in which to stay innovative, some plans may be better received by consumers than others.

No two business, though, will follow the same plans and, while there are many eye-catching firms that have gone public, innovation in private companies is equally important.

redmayne.co.uk