Tech bouncing back: Some wisdom from day one of Sifted Summit

This could be a great time to be a tech founder

Sifted Summit began with a session called Startup Revival: How European Tech is Bouncing Back.

Host John Thornhill of Sifted described a “polycrisis” that encompassed the wars in Ukraine and the Middle East, environmental degradation, poor productivity and disruptive technology.

But the panel discussion heard there were still grounds for optimism.

Although venture capital funding fell by 63% globally between 2021 and 2023, Alexandre Momeni, Partner at venture capital and private equity firm General Catalyst, said: “I do still think it’s the best time to be a founder ever in Europe.

“The quantity of dry powder that there is in the market – venture capital dollars that have been raised and not deployed – is sitting at an all-time high.”

He added: “We still have a very attractive talent base, we have more capital than ever, we now have some companies that are of a certain scale where we can hopefully believe that we’re going to have a few public exit outcomes, so I think the future is very bright.”

Mike Turner, Emerging Companies Partner at law firm Latham & Watkins, was more cautious. He said the past nine months had seen the most disturbance he had ever witnessed in the market.

“There are still some immense challenges to be solved. There are still a lot of companies trying to grow into the valuation they achieved in 2021-22 and those are challenges which we’ve still got to work through,” he said.

The “return to normality” was likely to be “pushed back to some point in 2025”, he added.

But he added: “I think it’s very encouraging that we are seeing a huge pipeline of good companies waiting to IPO and it’s not the quality of the company which is delaying their decision, it’s the fragility of the market.”

He added: “I think investors are getting smarter, I think they’re spending longer looking particularly at new sectors, spending a bit more time analysing investment opportunities.

“I think founders are getting smarter – they’re looking for quality investors, not just the highest valuation they could obtain. I think the process has consequently slowed down a bit but it’s encouraging.”

Also striking an upbeat tone was Anne Boden, founder and former CEO of Starling Bank. In an interview on the main stage, she told how she had spent time “listening and learning”, taking AI courses at MIT, since stepping down as boss of the challenger bank. She has also run a task force on getting more investment into female-led businesses.

“Entrepreneurship is hard. Everything we do is hard. Changing industries is hard. Nothing comes without pain and I’d like to be able to help the high-growth sector in the UK to get to a situation where we have more unicorns,” she said.

“Second time founders can be really arrogant in that just because they’ve done it once, they think they know all the answers and they can do it again – but they can’t.”

But she added: “I’m quite positive about the fintech founders. I think there’s going to be a group of fintech founders that will be starting new businesses. I think the fintech founders can do a huge amount of good in the next iteration of AI companies.”

AI talent is scarce – and costly

Any tech event is bound to be dominated by talk of AI. One speaker after another addressed the keen competition for talent in that field – and the high salaries that talent could command.

Georgie Smallwood, Chief Product, Data and Technology Officer at Moonpig, told an event called How to Hire an Engineering Team in the Era of AI: “There are not that many mathematically inclined software engineers that can also think business. That’s why the price is so high, because they’re so rare, but we can handle that if we start to set that as the base for what we’re expecting.”

Michelle Coventry, Head of Talent at Creandum, urged: “Be really clear with what the role is in setting up your team, your company, your organisation and demonstrate to talent how you’re going to progress and harness people’s superpowers. Without that clarity, how can someone decide whether they want to join you or join Meta?”

Another event, called GenAI x Fintech – A Dynamic Duo?, heard evidence of customer satisfaction being increased by the introduction of AI chatbots.

But Sarah Wernér, Co-Founder and CEO of Husmus, said: “It’s quite difficult to get hold of people who know what they’re doing in this space because the job market is so tough. Don’t be stingy with stock options or culture or anything like that because the great people are hard to find. We use mission as a lever in our recruitment.”

Not every use of AI is a money spinner

AI may be everywhere – but that doesn’t mean the economics of it always stack up.

Jonas Andrulis, Founder and CEO of AI research and application company Aleph Alpha, warned that the market was being skewed by the presence of the tech giants:

“There are technology giants that are basically seeing this not as a working business model in itself but as a tool to strengthen their existing monopoly chains,” he told the event The Age of AI: What’s Next for Europe?

“We and everybody else found out that these general purpose models that have gotten pretty good still are not able to solve the really valuable business problems that our customers have,” he added.

“When ChatGPT hit, we all thought office work would be gone in, like, six months. There would be no white collar work any more. But this has not turned out to be true because the problems in legal, compliance, manufacturing, government and security that our customers have cannot be solved by these models. So different solutions are necessary and wiring a bunch of money to Nvidia doesn’t work as a business model.”

Carina Namih, Partner in the investment fund Plural, said of AI: “There are certain things we just see again and again and for it to stand out, it has to have amazing traction. So AI note takers, AI sales tools, AI call centre tools, AI marketing copy – it’s things where it feels like a very thin wrapper that I think as an investor you’re very cautious about getting behind.”

Sustainable growth is a challenge for finance

A session titled Not All Heroes Wear Capes considered business growth from the point of view of the CFO.

Pierre Vergnes, CFO of the French health tech business Doctolib, spoke of the challenges of pacing investment.

“Hypergrowth is the same for everyone. When I signed there were 500 employees. Two months later when I joined, there were 800 – two years later, over 3,000,” he said.

“The most difficult part is trying not to be too early. I was CFO of a listed bank – what can be bigger than that, right? – so you know exactly how it looks when you are listed, being in 50 countries, that kind of thing, but that’s not the right solution now.”

Growing at the right pace was a “work of patience”, he said, because it was not possible to hire all the best experts for everything early on.

Rachel McShane, CFO of second hand clothing platform Depop, said: ”We’re essentially a scaleup given where we are in our lifecycle and are now part of a much bigger listed company in a market that’s scaling at pace.

“The question is ‘How do we capitalise on that?’ so this investment philosophy discussion comes up a lot. How do we consider near-term goals versus long-term objectives and what are the trade-offs? What I found really helpful is laying out the foundations with the business and the leadership around what is our investment philosophy and how do we think about short versus long-term goals and how do we think about what success looks like for us? There's a real balance to be struck.

“It’s an ongoing journey for every business and I think as you go through that lifecycle, your philosophy around investment will change depending on where you are along with the risk appetite of the company.”

Find out more

iplicit was at Sifted Summit to show how its award-winning accounting software can help tech businesses as their growth makes them too big or complex for entry-level finance systems. Visit us on stand C111 on day two of Sifted Summit or get in touch for a demonstration.