In our new series, we’re talking to our VCs and investors to hear their insights and market predictions for fintech, ecommerce and tech in 2023.
We spoke to Fatou Bintou Sagnang, Partner at Mubadala Capital Ventures and Juni board member, to hear her predictions on how the technology sector will develop this year. Fatou started her career at McKinsey & Company and has an MBA from Harvard Business School. She now invests in the finance, SaaS, and health technology sectors.
Fatou anticipates that 2023 will be a challenging year for the technology sector; but equally she maintains the belief that true innovation flourishes in times of uncertainty. Amidst global turbulence and a looming recession, she sees a real opportunity for disruption for those players that can help companies and customers face oncoming headwinds.
Getting creative when it comes to financing is more important than ever, and the downturn provides a real growth opportunity for businesses that offer innovative finance solutions. As traditional equity options dry up and lenders become more cautious, the market will need to offer up alternative ways to help companies get finance.
“We’re seeing some real innovation in the capital stack,” says Fatou. “This started before the market crisis, but we’re now seeing specific innovation around tools that help companies manage this crisis, which aren’t pure equity or debt.”
re:cap, for example, built a platform to help SaaS companies get non-dilutive finance. Here at Juni, we offer a mix of credit and financial tools for ecommerce SMEs.
Liquidity is another important focus area ripe for innovation. Whether it’s creating new solutions or iterating on existing financial tools, having different options to improve liquidity will become increasingly necessary.
“Fixed income instruments don’t apply to many smaller businesses - and that is a problem. Those that can underwrite and come up with creative terms to provide liquidity will increasingly become the go-to option for small businesses.”
That being said, this innovation comes with a caveat. “There’s a heightened sense of risk right now,” says Fatou. “Those offering credit will need to be cautious, and will need to focus on determining metrics to help identify what a good, credit-worthy company looks like.”
Tools for the CFO are another area which could see significant development this year as they look for reliable tech solutions that provide accurate data and insights. According to a survey by Deloitte, 91% of CFOs expect operating margins for UK corporates to decline over the next 12 months, and for cost cutting and increasing cash flow to become the main business priority.
“Any tool that can help CFOs manage their balance sheets with precision and predictability will see favourable adoption, even in a difficult market,” says Fatou. “Tools that go beyond offering pure financial planning to including the active management of balance sheets and PLs, will become invaluable.
Instead of creating just another back office, Fatou says these solutions have the potential to become “real business driving tools” if done correctly. In fact, we can expect most processes currently running on legacy software to get a shake-up going forward. Budgeting, resource planning (ERP) and data-driven supply chain management are some key areas that can really benefit from some technology-driven innovation.
“We have to invest in climate and energy positive technology,” says Fatou. We all know how pressing the need is to curb the growing impact of climate change, and the time to act is now.
Climate tech - or technologies that are explicitly focused on reducing GHG emissions, or addressing the impacts of global warming - has slowly emerged from the fringes to being integral to the future of our economy and society. According to TechNation’s 2022 Climate Tech Report, the number of emerging technology companies tackling the climate crisis has increased 4x since 2010, and globally there are 160 climate tech unicorns, valued at over $1bn.
While it is encouraging to see investment into climate tech continuing to reach new heights, climate-tech companies tend to take much longer to commercialise, and so investors and policy makers alike will need to ensure they continue prioritising the sector - particularly during this economic downturn.
The current geopolitical landscape is volatile, and we can expect this to remain the case for the foreseeable future. A range of industries have felt the immediate impact of these disruptions – from supply chains to energy – so we may not see much VC money going into those sectors. With that in mind, investors are warming up to a previously underserved and underfunded sector: deep tech.
Deep tech spans a wide range of topics, from companies leveraging artificial intelligence and machine learning to biotech and quantum computing, to name just a few. In the past, there has been less VC investment going into deep tech - in part because of the time it takes for these products to mature and reach mainstream adoption. But this is set to increase in the coming year.
“China has had a big hold on deep tech, and I think we’ll start to see a bit of repatriation there,” says Fatou. “It’s an exciting area because the horizon and risk-reward is more binary.”
With the number of European deep tech companies - and their funding - increasing, Europe could take on tech giants like China and USA to become another hub of innovation.
AI certainly isn’t a new trend, but it is an enduring one. The current boom with Generative AI is hard to miss, and Fatou is particularly interested in the infrastructure layer that will power this new innovation.
According to Fatou, there is an active debate happening in the investment space about the potential "killer use case" for GenAI, and about how applications will distinguish themselves. Whatever the outcome of this debate, one unequivocal truth is that many new companies will surface in the infrastructure stack that will offer tools and products to aid in model development and application building.
Generative AI uses machine learning algorithms to generate content. With the ability to create new images, text, audio and video, the potential impact of generative AI is vast.
At the time of writing this post, OpenAI’s ChatGPT and DALL-E have captured the interest of not just consumers - ChatGPT hit one million users just a week after launch indicating just how successful generative AI can be as a consumer product, but investors too. Microsoft announced a multibillion dollar investment into OpenAI just weeks ago.
While its application towards content creation has made headline news, generative AI is by no means limited to marketing content or consumer-facing websites. “Generative AI could offer exciting development to sales enablement or life sciences,” says Fatou. The implications of using these systems are broad and have real potential to revolutionise several industries.
With CFOs focussing on cutting costs, financial planning and optimising cash flow, it’s no wonder that the technology industry is prioritising precision and predictability. Whether it’s Artificial Intelligence, supply chain management or new technology offering better tools, there’s one clear thread between them all – helping customers plan for the future.
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