Don’t hold your breath for the Airbnb or Uber of finance … and other predictions for 2016

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Every year, Reuters Breakingviews puts out a book aiming to help readers figure out what will happen in global markets, business and economics. In this annual collection of short and provocative views, the commentary service of Thomson Reuters offers financial insight geared towards giving entrepreneurs a jump on trends likely to define the next 12 months.

What’s in store for 2016? Here’s a glimpse into three predictions:

  • The Uber or Airbnb of Finance Will Prove Elusive
    Nothing scares chief executives of established businesses like the notion that some millennial whiz kid from Silicon Valley will invent a better mousetrap and, to mix clichés, eat their lunch. Bankers aren’t too fussed, though. Their biggest worry is also their greatest protection: regulation.

Banking profit totaled $160 billion in the past 12 months in the United States, according to Federal Deposit Insurance Corporation figures. That explains why investors deposited $15 billion into financial technology companies in the first nine months of 2015, surpassing the $12 billion invested in all of 2014, according to CB Insights data analyzed by Accenture.

Much of that has funded startups embracing innovations in bitcoin’s back end, new lending models and payment systems. On their own, some — say, Venmo in payments, Avant in personal lending or Digital Asset Holdings in blockchain — may transform pieces of the financial-services firmament.

But investors hoping for the next Uber, Google or Amazon will be disappointed. Returns will be generated and new millionaires minted, but the fintech industry will find it tough to swipe away banking-industry profit to the extent their more disruptive Silicon Valley cousins have cut earnings in the newspaper, entertainment, taxi and hotel businesses … Read More

  • Capital Squeeze Will Spark Unicorn M&A Orgy
    A capital squeeze may stimulate an orgy among unicorns. Plentiful money has detached valuations on many hot private tech firms from reality. There are 144 of these private companies worth $1 billion or more, according to CB Insights. Curiously, about a third are valued at $1 billion on the dot. As capital becomes more expensive in 2016, selling to rivals or mating with other unicorns will become appealing.

Few of these young companies are cash-flow positive, so most will need capital infusions to survive. That spigot is slowly dwindling. Fidelity Investments recently marked down the value of its Snapchat and Zenefits holdings, and BlackRock slashed the value of its Dropbox stake. If massive asset managers pull back, private firms will be dependent on tinier venture capital outfits, which may be more demanding in their terms.

Even hardened angel investors are becoming skeptical. Marc Benioff, Salesforce.com’s founder, says he will no longer invest in unicorns because they have “manipulated private markets to obtain these values…”
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  • Virtual Reality Will Spring to Life in 2016

Newly launched headsets from Facebook, HTC, Sony and others will help turn the immersive artificial environments of virtual reality into what could soon become a $10-billion-a-year commercial reality.

For decades the dream of VR has remained unfulfilled. Nintendo’s 1995 “Virtual Boy” console, for example, was an infamous flop, complete with red-and-black wireframe graphics. Later equipment often made users nauseated, as eyes and body received conflicting information.

But advances in processing power now make for far smoother, more compelling experiences in VR and augmented reality, its less intense cousin. Tech giants and venture capitalists reckon the duo may become the next big computing platform after mobile. Investors have poured some $4 billion into AR and VR firms since 2010, PitchBook says.

This should start bearing fruit in the first half of 2016, as HTC’s Vive, Facebook’s Oculus Rift, and Sony’s PS VR headsets go on sale …
Read More

To learn more join us for the Reuters Breakingviews Predictions 2016 event — featuring, drinks, insights, and discussion with Editor-in-Chief Rob Cox and leaders from the Bay Area financial community — at the Nasdaq Entrepreneurial Center on Tuesday, February 23rd at 4pm. We look forward to seeing you @theCenter.

Reuters Breakingviews delivers agenda-setting financial insight, commenting daily on the big financial stories as they break in the United States, Europe, the Middle East, and Asia. Expert analysis is provided by a global team of 32 correspondents.

The Nasdaq Entrepreneurial Center is a San Francisco-based non-profit that educates, innovates, and connects current and aspiring entrepreneurs. We provide access to quality resources, including mentors, training, and networking.

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