Speaking at the inaugural Pathfounders London Mixer — the first in a series — a panel of VCs and experts tackled the thorny subjects of the white-hot era of AI, what’s next for deeptech, and the future of so-called ‘sovereign’ technologies — all amid the background of, at times, quite chaotic geopolitical tensions.
Sitar Teli, Managing Partner, Connect Ventures, commented on the recent effect of AI on public markets: “What we're seeing is a lot of excitement [about AI] in the private markets, and a lot of panic in the public markets. And sometimes it’s hard to square those two things. But there is a lot of valid correction in the public markets when it comes to, particularly, SaaS. Not because it's suddenly worthless, but because it's worth less than it was before? The multiples are coming down. It doesn't mean it's going to zero. There is a correction in terms of what the value of those businesses is.”
Of the private, VC-driven markets, she added, “This is one of the most exciting times to be a VC. AI is one of the most fundamental technologies we've seen, and it genuinely feels very exciting. On the flip side, I have never seen so many bad ideas in my life.”
Teli described venture investing right now as looking like a “barbell” in terms of deployment: “You have some VCs that are deploying a lot, and then you have others [deploying] very little. We're definitely in the second bucket. We’re seeing a lot of companies that are in red ocean areas. For example, Avatar-based language learning. And you go to the App Store, and there's 30 of them. We're seeing a lot of bad ideas, and no one has any differentiation or defensibility.”
On the issue of sovereignty Ana Barjasic, founder, Connectology — who was a four-year board member of the European Innovation Council (at 10 billion euros, the largest Innovation Fund in Europe) — said the EU was — suddenly faced with the full scale invasion of Ukraine — had to deal with the prospect of needing to add ‘dual-use’ technology to its investment thesis: “This was a very dramatic moment. However, [the question arose] who decides what is ‘sovereign’ tech?. And if you are engaging with public funds like the EIC, it's very important to understand that potentially, the growth of your company will be limited as a result of whatever the definition of the ‘sovereign’ tech is.”
Alex van Someren, of Capricorn Consulting, a former VC who recently exited as the UK's Chief Scientific Adviser for National Security, said that in the era of increasing geopolitical threats from the likes of Russia and China, “if you're an entrepreneur, it’s stopped being optional to deal with governments. You are going to have to confront having a better understanding of how governments work, how governments think, and build government relations. That is a pain in the ass, and I assure you it will be torturous and annoying. But at the same time, I think it will serve you very well to spend the time trying to understand how that works, because actually, you do not have a choice.”
He added that export regulations, dual-use regulations, sources of funding, access to supply chain,s and sovereignty, “are all things which governments have the ability to control.” Entrepreneurs are increasingly likely to find themselves faced with legal issues around their technologies. “That is actually quite a profound change, and it wasn't the case a few years ago,” he said.
On Deeptech and dual-use investing, Manjari Chandran-Ramesh, Partner in the Early Stage Fund of Amadeus Capital Partners, said: “I’ve been doing deep tech investing for the last 11 years, and Amadeus Capital has been doing it for 30 years, way before it became cool. And now it's actually cool! We have generalist investors coming to us and saying, ‘Hey, I love this quantum’ or ‘I love this robotics. Let me invest in this. Teach me more’.”
However, she said startups needed to be wary about how much money they get from government institutions. “It's possible to manage it such that you are still able to exit to the US, or sell to other countries, but it requires very careful handling,” she said.
The panel also concurred that there was now a generation of founders who were ‘AI-native’ — many being on the younger side who had simply grown up developing with AI tools and behaved and produced products in a fundamentally different way from previous generations of founders.
“The last three deals we did were built by people who just grew up with AI,” said Teli. “ They're in their late 20s, and they started coding when they were teenagers. They read the original AI paper that came out in 2017, and they started working with the technology super, super early, back when it was deep learning, and then transitioned into generative AI. And they've never known a world of building product without it.”
The panel also emphasised how Europe could have the ‘edge’ in the realm of quantum computing.
Later, during round table networking sessions, attendees chewed the fat over subjects such as “What does an exit look like in 2026” and “What to build in the era of AI”.
The entire panel discussion will soon be available on the Pathfounders YouTube channel, and the audio will be available via the Pathfounders Podcast (available on Apple iTunes and Spotify).