What does the term “tech company” mean?

Before the 2007/8 financial crisis, the banking sector was the sector which attracted the most attention from investors; nowadays, investors focus on the tech sector, the top three most valuable companies are all from the tech industry. This is not new actually that during the dot com bubble, many companies, which would be tech companies at today’s standard, attracted enormous investment. However, there is one key difference between today’s market and the market during the dot com bubble. Today the definition of a tech company has been quite broad while the dot com companies are merely those which have websites on the Internet. Tesla is a very good example that can help us understand how we define a tech company. Tesla can be seen as an auto company; however, if it was just a normal auto company, its market value would not be so high. Because it is seen by many as a tech company, its share price rocketed.

Tech companies nowadays are defined as those which use new technology or concept (WeWork) and have the potential to reshape the current experience. Let’s still use the Tesla example. Tesla is an auto company, but unlike traditional auto companies, Tesla produces electric vehicles by robots. Furthermore, Apple may be a better example. It is a tech company since it was founded, and it definitely reshape the world phone industry and it is fair to see that Apple invented the modern-day smartphone. Other successful tech companies, such as Netflix, Spotify, all reshape consumer behaviours to some degree. Once the behaviours are changed, for a short period, the tech companies will have monopoly power; then when the competition is increasing, they will still be able to maintain some degree of powerful market power for a long period. Such potential makes tech companies attractive to investors.