COVID-19 Bolsters The Need For Investment In 5G

Andrew Weinberg, Founder, Managing Partner & CEO of Brightstar Capital Partners contributes to Forbes.com

5G infrastructure offers a huge opportunity post-COVID-19 QUALTEK LLC

The devastating COVID-19 pandemic is accelerating digital transformation of the ways we interact and do business. As Microsoft MSFT +4% CEO Satya Nadella recently noted, “We’ve seen two years’ worth of digital transformation in two months.”

A lasting consequence will be that more goods and services will be delivered electronically, more work and learning will be done remotely, and entities from businesses, to governments, to non-profit organizations will have to prioritize the adoption of digital technology.

5G technology will be an essential enabler of this transformation. The use cases it underpins in healthcare, manufacturing, mobility and retailing could add 3.5-5.5% to global GDP created in those domains over the next decade – a crucial contribution to the economic recovery following our current crisis with its unprecedented stimulus measures that stretch public-sector balance sheets.

Full disclosure, I’ve been involved in the wireless industry for nearly two decades and two of our portfolio companies are involved in the sector. This has given me insight into the importance of building out 5G across the U.S., and doing it right.

An opportunity for the U.S.

While much is made of China’s five-year commitment of $184 billion in 5G infrastructure, in truth there is no one country “winning the race.” Rather, a cluster of pioneering countries has emerged, including not only China and the U.S., but also South Korea, Australia, Qatar, Switzerland, Finland, Spain and The United Arab Emirates. Given the size of its market and the dynamic ecosystem of its private sector, the U.S. is well positioned to play a leading role in harnessing the power of 5G. But make no mistake, the public and private sectors need to focus and work together in order to take advantage of the opportunity.

The middle-market opportunity

As little as 15 years ago, a small company would face significant hurdles in setting up its technology systems. Servers needed to be bought or leased, software installed and security designed. Today, a combination of cloud computing and Software-as-a-Service (SaaS) has largely removed those hurdles, allowing smaller and younger companies to compete with incumbents.

5G will do the same again for the physical world. It will combine a quantum leap in bandwidth and resilience with Internet-of-Things (IoT) devices, of which over 40 billion are forecast to be connected by 2025. The opportunity will grow exponentially – over 75% per year just in 5G infrastructure over the next six years – and create immense value for startups and mid-market companies.

Imagine a regional water company using 5G and IoT to continuously monitor its pipelines, identifying and repairing the smallest leaks before they become an issue. Or an industrial equipment company remotely keeping an eye on its fleet, running diagnostics while the equipment is in use – and dispatching a team for pre-emptive maintenance in the evening.

A manufacturing company using augmented reality to give step-by-step instructions to workers on the shop floor, allowing them to undertake advanced tasks without waiting for specialist engineers or incurring costly machine downtime. 5G can make all of these dreams become reality, helping increase efficiency and reducing waste – in environmental, societal and economic terms.

What it will take

A few simple steps will be necessary for the U.S. to establish a leadership role in harnessing the benefits of 5G, which needs to be an important element of any federal infrastructure plan. I serve on the board of CTIA, the U.S. wireless industry association, where we work closely with the public sector to ensure such plans efficiently enable the roll-out of this crucial infrastructure by:

  • Harmonizing and coordinating state and local government rules and permitting processes
  • Allocating resource to training programs that ensure a supply of skilled labor
  • Fostering public-private partnerships to accelerate 5G innovation and development

I’d also add that necessary investments, from both the public and private sectors, need to be made with a patient mindset. If we have learned one thing from the transformational introduction of the internet, it is that bubbles and bursts should be avoided where at all possible. 5G will transform industries for decades, if not centuries. The next quarter will give only very limited guidance.

If we bring these steps together and make 5G a priority in the post COVID-19 world, I have no doubt that the U.S. will emerge as a global leader in the next wave of transformative technology. We’ve consistently risen to the challenge in the past, and we must do it again.

MEDIA CONTACT:

Zach Kouwe
Dukas Linden Public Relations
212-704-7385

Private Equity Will Show its True Colors in the COVID-19 Recovery

Andrew Weinberg, Founder, Managing Partner & CEO of Brightstar Capital Partners contributes to Forbes.com

As our country and economy try to deal with and recover from the COVID-19 pandemic, private equity will play a key role in helping many middle-market businesses survive and ultimately thrive. This may come as a surprise to some people, whose opinions of private equity have been formed by media portrayals that fail to accurately represent the value that private equity brings to the table. Unfortunately, the public image of private equity is still dominated by a narrative created 31 years ago in “Barbarians at the Gate” – where brazen dealmakers chased mega-deals with huge check books, adding large amounts of debt to the balance sheets of acquired companies in the pursuit of financial engineering.

This narrative of aggressive deal-making and big takeovers misses the vast majority of the value creation and activity of the private equity industry. Over 8,500 companies in the U.S. are backed by private equity, nearly twice the number listed on U.S. stock exchanges. The majority of those private equity-backed companies operate in the middle-market, with annual revenues of $25 million to $1 billion. Those are not the mega-deals that make headlines, but they represent the majority of private equity activity in the real economy. These middle market companies help drive our economy, accounting for a third of U.S. private sector gross GDP and jobs.

A more collaborative style of Private Equity

For families, founders and entrepreneurs who’ve built these middle market companies, partnering with a private equity firm means an infusion of capital to grow a local franchise into a regional franchise. It means being able to make necessary investments to upgrade critical systems, and consolidating fragmented suppliers into more meaningful, long-term relationships that grow with the company. And most importantly, it means access to expertise from executives who have previously led similar efforts and can guide a company towards its new, ambitious future.

This style of private equity is far less worried about trimming corporate excess than focused on scaling a business model beyond its initial proving ground. It is collaborative, rather than adversarial, with existing management. It often works with families, founders and entrepreneurs who have built the business from the ground up and are now looking to create a sustainable legacy both for their own family and the community where their business operates.

COVID-19 is a major test for the industry

In these unprecedented times due to COVID-19, companies of all shapes and sizes must navigate a sea of uncertainty. Firms like ours continue to stand shoulder to shoulder with our partners and are committed to doing what we’ve always done, adding value as part of a mutually beneficial relationship. Unlike many larger companies, middle-market businesses cannot readily tap public capital markets. They can and do turn to private equity firms to provide the necessary resources.

As liquidity crunches arise, private equity firms are able to use their financial expertise and relationships to help shore up a company’s financial situation. As supply chains are interrupted, firms are able to use the private equity firm’s sector experience and networks to find new paths forward. As manufacturing facilities and work environments must be re-configured in order to keep employees safe and abide by social distancing guidelines, firms are able to share and implement best practices across their portfolio of businesses. As communities struggle to cope with the impact of the virus, we support our portfolio companies in the local engagement that forms part of their middle-market DNA.

Impact through portfolio companies, not through headlines

The work is far from over – in the middle market, private equity is about scaling, improving and connecting companies to make them more resilient and successful. As the world is learning how to deal with the pandemic, business models will change and some industries will have to significantly transform. It is in those circumstances where our industry’s combination of patient capital, operational expertise and global networks make a difference. The proof will not be in headlines, but in the thousands of portfolio companies that emerge stronger and better equipped to move forward.

This is not to deny the importance of good deal making – of course a good entry point is important when investing. But I believe that at the end of this crisis, the private equity industry will not be measured by how many more deals we picked up at a good price. We will be judged by how we helped our portfolio companies and their communities succeed in a profoundly changed world.



See article on Forbes.com

MEDIA CONTACT:

Zach Kouwe
Dukas Linden Public Relations
212-704-7385