For many investment bankers, Silicon Valley — not New York City — is the place to be.
Some of the most exciting deals of the year are coming out of the tech world, like Microsoft's megadeal for LinkedIn and Snapchat's highly anticipated initial public offering.
Business Insider spoke with five top internet bankers based in the West Coast about where to expect more innovation — and more deal activity — in the coming months and into next year.
They told us that after a lull in IPO activity in 2016, it looks as though it will pick up in 2017. And there's a strong case to be made for mergers and acquisitions, or M&A, activity taking off, too.
In the words of one of the five, Barclays' Kirk Kaludis: "The sheer number of clients here is pretty awe-inspiring. You just see a lot of new innovation coming out of the startup community."
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Kirk Kaludis — cohead of US technology investment banking, Barclays Investment Bank
When Kaludis thinks about M&A in the internet sector, he's focused on finding innovative companies that can be paired with large companies — or even mid- and small-cap ones — looking to bring innovation into their platforms.
"You see companies like Uber, Airbnb, and Snap, which are very young companies, continue to enjoy incredibly strong growth rates," he told Business Insider. "Those sorts of companies now are becoming real companies of scale with regard to hundreds of millions or even billions in revenue."
We could see more consolidation plays, he said, as more mature internet companies like AOL and Yahoo combine. His team is keeping a close eye on the internet IPO space, too.
"Probably the number one area that we're focused on is making sure that we're well positioned around those larger internet names that could get public as early as 2017 but also maybe into 2018," he said.
When looking for successful Silicon Valley startups, Kaludis said he tries to identify those with a clear and large market that can be monetized, most often via advertising.
Riaz Ladhabhoy — cohead of internet investment banking, Deutsche Bank
Deutsche Bank's Ladhabhoy expects to see a more positive stance from investors across the board next year.
"In M&A you'll continue to see a lot more cross-border transactions as well as cross-industry with internet in particular," he said, adding that he expects to see activity from the media and industrials sectors.
"Companies are sitting on cash, they're having a tough time figuring out build versus buy, they're having a tough time figuring out organic ways to grow, and there's a ton of stuff going on in the Valley."
In particular, Ladhabhoy said, he expects to see activity in e-health, sharing economy companies, autonomous driving, and augmented and virtual reality.
Ladhabhoy noted that a number of the tech IPOs in 2016 were in software — an area investors like in defensive times — but said he expects more internet deals to come next year.
Nick Giovanni — cohead of internet investment banking, Goldman Sachs
For Goldman Sachs' Giovanni, the most significant trend in the internet sector is the importance of scale.
"In many cases, scale allows a company to provide a better experience to the consumer and to have a better financial model," he told Business Insider. "We should expect M&A to continue as big companies get bigger to drive more value."
As for IPOs, Giovanni said that while activity was slower this year, it's important to focus on the longer-term trends.
"There are more significant private companies than there have ever been, more very well-capitalized large companies driving a very significant consolidation trend, and more innovation that is right around the corner."
When he is identifying the best internet companies to work with, Giovanni said he primarily looks for a large market opportunity — "not necessarily defined by an existing market but something that could be very large and transformative."
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