“In a new environment, where things are struggling, and valuations have changed, some entrepreneurs are not so keen on taking money and creating a new valuation on their company that’s lower than the last valuation,” explains GP Bullhound partner Ben Prade. Photo: Courtesy of GP Bullhound

“In a new environment, where things are struggling, and valuations have changed, some entrepreneurs are not so keen on taking money and creating a new valuation on their company that’s lower than the last valuation,” explains GP Bullhound partner Ben Prade. Photo: Courtesy of GP Bullhound

Private equity player GP Bullhound presented its technology predictions for 2023. Delano sat down with partner Ben Prade to discuss the findings of the report.

Like every year for 15 years, GP Bullhound publishes its Technology Predictions report, selecting ten trends for investors and entrepreneurs to keep in mind in the year to come. Describing itself as an investor in growth stage software companies, the firm is well-placed to identify upcoming developments, says Ben Prade, who was visiting Luxembourg from the UK to present and discuss the firm’s findings with its local network of tech entrepreneurs and investors.

“We work really at the coalface of technology, with both active entrepreneurs now and entrepreneurs that are still part of our network,” Prade tells Delano. “We’re very fortunate to have around 250 technology entrepreneurs as investors in our fund.” Accompanying companies from growth rounds to the full of partial sale of their business and advising them later on in their investments, GP Bullhound is able to collect predictions among 180 so-called ‘bullhounders’ around the world who work in close rapport with tech entrepreneurs.

Out of this worldwide network of ecosystems comes a tech report, which over time has become a reference thanks to its enduringly correct predictions. Between 2011 and 2021, the firm hit an accuracy of 84% for its yearly trends.

Semiconductor supremacy, software driving sustainability

In the middle of an economic downturn, social unrest and intensifying climate crisis, “the world continues to look to technology for solutions,” says GP Bullhound. And its predictions for 2023 are aligned with this, as ESG-led principles are reflected in upcoming trends.

The PE firm predicts that natural language processing will be a watershed for business strategies; that interactivity and channel selections will change the world of ad stream; that continued cyberattacks will lead to new public and private security solutions; that robots will begin replacing some jobs or that geopolitics will play a crucial role in semiconductor domination.  It also predicts a technology-led push to sustainability and energy saving as well as the need for technology in retaining workforce.

GP Bullhound also expects social media platform TikTok to change the landscape for brands and creators. “What we’ve identified is that TikTok in itself is creating a new genre of companies around it. New styles and ways of advertising, new styles of creating social contents-- it has such an impact that it does create an economy separate to itself,” says Prade. “I think that’s what we’ve tried to identify. But, there are lots of headwinds for TikTok politically, that’s true.”

Get to profitability

But, while the report says “technology has not failed us” in the current economic downturn, the mass layoffs and Great Reshuffle the tech sector has been witnessing--Facebook parent company Meta on 15 March announced another cut of 10,000 jobs--can raise questions and bring forth hesitancy in tech entrepreneurs.

“I think there is a worry that some companies are putting off taking money,” says Prade. “In a new environment, where things are struggling, and valuations have changed, some entrepreneurs are not so keen on taking money and creating a new valuation on their company that’s lower than the last valuation.”

He continues: “I think it will be interesting to see that the good founders are taking money when they need it and if that involves a down round, that’s fine.” Prade however identifies a danger: “Some founders don’t want to admit to a down round and decrease the valuation of their company and are putting off raising money which leads them vulnerable to maybe running out of cash.”

“Our advice to founders at the moment would be to be pragmatic, to raise money when you can. If that involves a down round, it’s not the end of the world. Get to profitability as quickly as you can or break even.”

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