Goldman is (not) a Tech Company.

People at the helm of the 146-year old investment bank never miss the opportunity to mention that Goldman Sachs is a Technology Company. The slogan was mentioned once again by the company’s COO at the Technology and Internet Conference 2016 organised by GS this week. This move to Tech is understandable. Bankers have seen some tough times after the crisis of 2008. A deadly coctail of technology and regulation is pushing their business model off the cliff. Market making has bad outlooks for the future. Thanks to technology, t is now easier to find a match between a buyer and a seller of a particular bond or a derivative. What little illiquidity there was in certain types of securities has disappeared and there is now less need for the banker to perform the role of intermediation. The ‘boutique-ness’ of fixed income trading has therefore been replaced by low margin big scale trading. Like Ford’s factories, a number of largest investment banks have been able to reap benefits of scale and become ‘flow monsters’ by making market in very large volumes.

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The Technology claim is far from being a desparate cry, however. It is easily justifiable, as over 9,000 of GS workforce are Engineers and IT specialists, even if in reality their work consists of little more than building and maintaing the institution’s internal infrastructure. At best, they would be working on the development of a GS-branded messaging product (no disrespect there, the replacement of eMails for flowing messaging solutions is becoming a great topic in many corporations with the notable success of Slack).

This does not discourage GS to play the patron of Tech and invest in the industry. In 2015, GS’s main area of growth was M&A, recording a 40% increase year-on-year to reach $3.47bn. The trend has been seen across the industry, as 2015 was a record year for M&A.In a small note in their 8-k report, however, GS does not fail to mention that their “investment banking transaction backlog increased compared with the end of 2014”.

GS is making the effort to stay close to the unicorns such as Uber, because they have reached dangerously high valuations, yet remain private. Many of the unicorns have protection clauses for their first shareholders, such as anti-dilution adjustments (which retroactively reduce the price of the stock an investor purchased if the company raises funds in a non-IPO future financing at a lower price). Unicorns will have to go to market eventually to give a return to their original backers. When they do, GS will be the first to manage the process.

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