January by D’Ornano + Co.: what’s in store for European Tech this year and the birth of the “Jellyfish”, CES 2023 edition takeaways, and a look at winners and losers across Public and Private markets
This is our monthly newsletter dedicated to Tech x Investments.
Dear all,
First I would like address you my most sincere wishes for this new year, and would like to take a moment here to thank all our clients and partners at the firm. We constantly strive to anticipate your changing needs and to develop new services, and will continue to do so in this next year. Also a huge thanks to my team members who demonstrate continued dedication to the project and whom make it all possible.
2022 was hard, and perhaps more than hard I would say brutal. After two years of strong growth across the Private Markets, this was put on pause in large part due to macro-economic and geopolitical headwinds. These will remain in 2023 as we are still in the middle of the macro-economic cycle we entered in Q2 2022, and macro-economic timelines may seem longer than what Tech has used us too. But we are much more prepared and aware at this point which allows for cautious optimism in my view.
Tech was hit perhaps the hardest in 2022. The fact that money has become much more expensive particularly impacts these companies for which a core part of value creation rests in future earnings and Tech valuations were slashed in the public markets (see our What got us talking section below) and in the private markets for those companies that underwent financing rounds. Overall, 2023 will be a tough year for Tech as this will continue to materialize as companies will be forced to raised funds, not just because they are running out of cash but also so as not to lose ground.
To survive, companies will have to win the race to resilience. That may seem like a grim short-term prognosis, but we think this will lay a stronger long-term foundation. This will result in more robust economic models and back-to normal valuations that set the ground for deal-making to pick-up again. Better due diligence will help investors not only assess risks, but also confirm this robustness, reveal opportunities, and bring a (welcome) second pair of eyes.
So on for more adventures and have a great read!
Tech Predictions 2023: what’s in store for European Tech this year?
As we start 2023, here are seven predictions on what could be in store for Tech assets across Venture Capital and Private Equity in Europe. While forecasting the future is always risky business, our experience working with leading investors and entrepreneurs across asset classes gives us some confidence to gaze into our crystal ball and see what’s in store for dealmaking.
Takeaways from the CES 2023 edition
CES came roaring back this year as Las Vegas hosted the second post-pandemic edition of the world’s largest tech tradeshow. Attendance may still be down from the 2019 peak, but it was up 70% from last year’s hybrid edition as more than 100,000 people swarmed the event to take the pulse of this industry.
This is exactly why I attended this year. CES attracts the biggest brands in Tech and it remains THE place to see where the industry is heading and what trends are emerging. While historically a gadget show, there is a reason the event officially changed its name several years ago from the Consumer Electronics Show to just CES: Trends like mobile, cloud, SaaS, and video streaming are revolutionizing every aspect of the global economy.
That transformative dynamic was on full display at CES 2023. Here are just a few of my quick observations:
Web3 made its presence felt. While there wasn’t as much talk around crypto this year (maybe because of its brutal 2022?), blockchain is clearly gaining more attention and there was a big expansion in metaverse-related talks and product announcements. Brands are taking virtual worlds seriously, even if much of it is exploratory.
Sustainability was everywhere. The show dedicated a whole Hall to this topic where companies displayed their work in areas like energy, food, and clean water. This aligns with my view that ESG is an important mega-trend and Clean Tech represents a major opportunity for investors.
Wellbeing is a priority. Wandering the exhibitions, I saw lots of companies, big and small, that are focused on peace of mind, mental, and relaxation. This is a small but growing movement where tech believes it can make a big impact.
Gadgets are fading into the background. As referenced above, the hardware itself is no longer the source of big innovations. A decade ago, there was a kind of Golden Age of Hardware thanks to connected devices, smartphones, the cloud, and crowdfunding. But that seems to have run its course and funding for hardware companies is difficult. There are some exceptions for companies making devices that offer an educational benefit or touch on Web3 features (IE, headsets, virtual glasses).
Innovation is everywhere. France once again had one of the largest startup delegations at the show and Europe in general made a strong impression. It’s clearer than even that Silicon Valley no longer holds a monopoly on innovation (even if its presence and fundraising prowess remain unmatched). Israel continued to show why it’s earned its reputation as a Startup Nation.
So, what’s next?
Digitization. Connectivity is expanding its reach deeper into the home. I watched the demo of the new home assistance robot from Labrador Labs (backed by Amazon) and it was quite cool even if it may be far from mainstream. Meanwhile, major automobile manufacturers announced more connected car features while the agriculture industry embraced digitization. John Deere, for example, had a big AgTech exhibition to show the various way it’s driving digitization to reinvent farming.
HealthTech. Perhaps most interesting to me at CES were the continued breakthroughs in this sector with connected devices that are leveraging AI to improve monitoring and treatment. It’s easy to see how this combination may be the cornerstone of good health in the future. French scale-up Withings unveiled its home urinary lab, U-Scan, which places a connected disk inside the toilet bowl to provide regular monitoring of the body’s chemical balance. That kind of preventative potential will drive even more consumers into the market.
AI + ML. It was behind most of these companies. We’ll see even broader use cases as AI + ML becomes a fundamental trend this year.
Hardware. The business models around devices will continue to evolve. The winning hardware companies are producing integrated solutions that bundle equipment with software and service. Hardware is, in some ways, a trojan horse toward enabling the selling of services. Still, these companies are brutally exposed to inflation and supply chain shortages and surviving will be thriving in 2023.
Inflation. You can read my broader thoughts on this in the 2023 Predictions. But I’ll also note that the CTA, the U.S. trade industry association that organizes CES, produces a rich industry analysis every year. CTA projects that revenues for the U.S. Consumer Technology Industry will fall slightly this year, largely weighed down by inflation. Though sectors like services (gaming, apps), automotive, and health are forecasted to rise.
Like at every start of the year, we all wonder what is in store from a macro-economic standpoint, this being even more true after 2022 put macro in the spotlight. Though inflation seems to be easing, we are certainly not out of the woods. In this synthetic article, Madeleine Ngo uncovers her predictions for 2023.
Best and worst performing US stock market sectors in 2022 | Visual Capitalist
The worst year for the U.S. stock market since the 2008 crisis has come to a close. To summarize the past 12 months, Visual Capitalist has created an augmented version of the classic FinViz treemap, showing the final numbers posted for major U.S.-listed companies, sorted by sector and industry.
Like for public stocks, 2022 was a challenging year for start-ups. In the same way as for stocks (cf. supra), it was not equally difficult for every vertical. Using Pitchbook data, this article examines how deal value, deal count and valuations fared in 2022. Take a look here.
The Crossover Investors who Drove Last Year’s Record Funding Are Fleeing VC | Institutional Investor
Crossover (or “Non Traditional”) investors who participated in the mega-rounds of these past 2 years are expected to pursue their retreat from upper late-stage start-ups signaling a stronger crunch to come than for the rest of the industry. Down-rounds, (some) failures and the entry of other investors at this stage are the possible outcomes.
Tadaweb
D'Ornano + Co. has advised Wendel on its €15 million investment in Tadaweb, a scale-up technology company revolutionizing analyst intelligence with its efficient OSINT platform.
Vsora
D'Ornano + Co. has supported Otium Capital on its investment in VSORA, a company driving innovation in the autonomous vehicle sector with its energy-efficient, cutting-edge architecture.
Bungalow Booker
D'Ornano + Co. has assisted Campings.com in the acquisition of Bungalow Booker, No. 1 in outdoor accommodation reservations in the Netherlands.
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