While digital startups have made shopping or communication more convenient, Deep Tech startups solve our deep societal problems. Deep Tech startups will provide limitless, sustainable energy, as well as new materials for more efficient construction and an increase in food supplies while reducing the impact on the environment.
Deep Tech startups are based on three factors in which Europe is a world leader: a strong hardware component, non-easily replicable intellectual property coming from science, and talent with a high level of skills in engineering and science. Europe has one of the best education systems and is also attracting the best talent thanks to the startup visas that are spreading across most of Europe.
We only have a bottleneck that needs to be tackled: financial instruments adapted to the high risk and long term investments needed for Deep Tech startups.
The Metaverse, NFTs and crypto/blockchain are obviously very hyped at the moment and will continue to be so, but I’m genuinely excited about deep tech and the next-generation SaaS companies utilising product-led growth and open source distribution models. As we’ve passed the 'AI hype' we’ve seen some major outcomes, especially in the US (Snowflake, Databricks, Confluent, etc.), as companies of all sizes have started to process and store increasing amounts of data. But there are many promising European SaaS startups in the making that have enormous potential to produce companies equal to the Americans. UiPath has been a great example of this, but there’s plenty more to come.
As it stands, the European spinout process is more of a hindrance than a help to founders. This system needs to be overhauled, and replaced with a process that is standardised, transparent, and swift. Crucially, it must be designed with the needs of the entrepreneur in mind, rather than focusing on the risk aversion of their university. I started spinouts.fyi to shine a light on this issue, and would love to hear from you if you have a perspective on this vital topic.
As 'offline to online' has mostly finished playing out as a thesis, we believe we're now approaching an inflection point for an 'online to on-chain' migration: more and more value and data is moving onto better, more resilient, open rails that can be broadly referred to as Web3.
The design space for the on-chain economy is potentially vast and still mostly unexplored. The gravitational pull on an increasingly global, distributed pool of developers and communities is hard to resist, with new coordination mechanisms and incentives applied to some of the most pivotal and interesting problems of the modern world. Wagmi.
This will make crypto much more accessible to a mass audience and will drive innovation in the space. Central Eastern Europe, with the likes of Ramp Network or Tenderly coming from there, has an amazing density of Web3 talent and I am excited to back the next winners to emerge from the region.
Separately, the API-ification of infrastructure is a gamechanger. In our portfolio, we’ve seen this year the likes of Weavr, Primer, Appwrite and Liveblocks remove friction and complexity in building applications - both B2C and B2B.
On the gaming front, Play-To-Earn is profoundly changing the way games are designed and monetised. With Europe being home to some of the best gaming talent globally, I look forward to seeing teams from all across the continent following Sorare’s lead to build the next wave of Play-To-Earn games.
On the one hand, founders have understood that it is possible to solve for the complex and often somewhat hidden needs of enterprises, rather than just the obvious consumer needs they experience on a day to day basis. On the other hand, enterprises are facing strong pressure to increase performance.
Enterprises realise that to attract strong talent as well as optimise processes, they need to adopt solutions that enable their digital transformation.
As a result, demand for innovation is soaring and the initial reservations big companies had against startups are fading. Founders are capitalising on this shift, partnering with enterprises that move fast enough to digitalise, and disrupting those that stay behind.
I’m particularly enthusiastic about the possibilities offered by embedded finance, the integration of financial services into non-financial customer journeys. Starling is well-placed to grab the opportunities arising from this, through our Banking as a Service, or rather Starling as a Service, offering.
Not only that, ease-of-payment can become part of the marketing push. Car companies are already working on embedded finance processes where drivers can pay for anything from fuel to parking via vehicle voice assistants. There’s no need to get out of the driving seat.
I'm also excited by Central Bank Digital Currencies (CBDCs). In fact, I sit on the Bank of England's CBDC Engagement Forum. But I don't think they will disrupt the financial ecosystem in the coming year.
We found incredible founders building in ‘out of favour’ sectors like social networks (for example Organise which is building a network for people to improve their rights at work and Mirthy, a network for older adults). We also invested in the future of entertainment and gaming, including in virtual reality company SideQuest. I hope this goes beyond a trend and instead is a durable shift, given the potential that technology has to tackle the biggest challenges we face.