- Freuda Akosa, Founder and CEO, Berry Health
- Fiona Murray, Board Member, NATO Innovation Fund
- Mike Turner, Partner, Latham & Watkins
- Alandre Momeni, Partner, General Catalyst
- Tessa Clarke, Co-Founder and CEO, Olio
- John Thornhill, Founder and Editorial Director, Sifted (Moderator)
Here are my takeaways:
Navigating the polycrisis
The term polycrisis describes the complex interplay of simultaneous challenges in geopolitics, the economy, and the climate. Each crisis is not isolated but interdependent, creating a cumulative effect that can exacerbate disruptions for startups. Geopolitical tensions, such as the war in Ukraine, have led to economic instability, with inflation and rising interest rates affecting both consumer confidence and corporate spending. Meanwhile, climate change remains an ever-present issue, further impacting how startups plan and scale their operations, especially those with environmental, social, and governance (ESG) commitments.
Sadly, ESG has slipped down the priority list for many companies as they pivot toward survival strategies. The harsh economic conditions have forced businesses to focus on short-term resilience, often pushing sustainability initiatives to the back burner. Thankfully this shift could be temporary as long-term investors and sovereign wealth funds begin to refocus on climate-aligned opportunities.
Access to capital: VC model vs. climate urgency
A significant challenge for European tech startups has been access to capital. Venture capital (VC) is in a precarious situation. The current VC model, based on high-risk, high-reward investing, is mismatched with the biggest challenges we need to solve, such as the scale and urgency of the climate crisis. While “failure is an option” in some places, climate-focused startups don’t have the luxury of multiple failed attempts. Solving the climate crisis requires rapid and scalable success, putting pressure on VCs to rethink their approach.
In parallel, the ongoing “VC winter” has led to a slowdown in investments. Rising interest rates, coupled with risk aversion from institutional investors, has created a more cautious funding environment. Startups that could have raised funds easily in 2021 are now facing greater scrutiny. Yet despite this, there is hope. There’s a big pipeline of companies waiting for the right moment to go public, and as market conditions stabilise, these liquidity events are set to reignite the capital markets.
A slow return to normality
The expectation is that things will begin to stabilise by the end of 2024, though the “new normal” may resemble 2019 more than the 2021 boom. The explosive growth and speculative excitement of 2021 (fuelled by Covid pent-up capital) were unsustainable, and the market is gradually adjusting to a more rational environment. This return to normality could provide a more solid foundation for startups to thrive, even though bad news is still on the horizon. Inflationary pressures, energy price hikes, and geopolitical uncertainties will continue to create headwinds.
The revival of mergers and acquisitions (M&A) is also expected to play a critical role in the recovery. While M&A activity has been largely absent this year, it’s predicted to make a comeback as larger tech firms look to absorb innovative startups that are struggling to scale independently. M&A will become a crucial lever for growth as companies seek to gain market share, enter new sectors, or acquire cutting-edge technologies.
IPOs: The liquidity event Europe needs
The European tech ecosystem is looking toward IPOs as a key milestone for its revival. With a significant number of companies primed to go public, IPOs could unlock liquidity, providing a much-needed cash influx to both founders and investors. These liquidity events could fuel new waves of innovation and investment across the ecosystem.
However, a critical question remains: Can Europe create its own version of NASDAQ? By 2026, the region may be well-positioned to foster its own vibrant IPO culture, supported by sovereign wealth funds and other long-term investors. At present, many European companies still see the New York Stock Exchange (NYSE) as a premium option due to its depth, liquidity, and global investor base. However, efforts are underway to develop European alternatives. For example, the London Stock Exchange (LSE) is striving to attract more tech IPOs, though it remains to be seen whether it can compete with NYSE’s appeal.
Shifts in investment geography
There is a notable shift in where investments are coming from. Sovereign wealth funds, especially those in the Middle East and Asia, are increasing their focus on European tech. These funds, with their long-term investment horizons and appetite for significant ownership stakes, can play a transformative role in the region’s startup ecosystem. As public markets become more receptive to tech IPOs, sovereign wealth funds are likely to be at the forefront, providing the capital needed for startups to scale globally.
Final thoughts: Europe’s crisis-driven progress
History shows that Europe often makes its most significant advances through crises, and the current polycrisis could spur the next wave of innovation. Despite the challenges, there’s optimism in the air for European tech. The crisis has forced a recalibration, pushing both investors and startups to focus on resilience, sustainability, and long-term growth. As capital markets stabilise and IPOs start unlocking value, Europe could be on the brink of a startup revival that not only recovers lost ground but propels the region to new heights in the global tech landscape.
The road ahead may be rocky, but the potential for a European tech resurgence is real. If the right structural changes occur—particularly in capital markets and investment models—the next decade could see Europe emerging as a global leader in technology, climate solutions, and innovation.
