Dear Investors,

2022 already seems like a distant memory. But it is worth recapping what was a pivotal year.

Some of the key points were:

• Market crash. Especially for tech stocks
• War in Ukraine
• Crypto collapse
• Implosion of bad business models
• Layoffs at major tech firms

But also

• Incredible advances in AI (ChatGPT. MidJourney)
• A “back to basics” focus on building proper companies
• Startup valuations coming back to Earth

I covered some of the highlights and lowlights here.

SuperSeed in 2022

Public SaaS companies saw significant valuation drops in 2022. For Emcloud (Cloud/SaaS index) the median ARR multiple fell from 12.65x to 5.64x.

For SuperSeed portfolio companies, however, solid revenue more than made up for the multiple contraction.

Companies in our SuperSeed I portfolio doubled SaaS revenue (ARR) in 22, and SuperSeed II grew 204% (i.e. – to more than 3x).

As a result, valuations in both funds are up for 2022. IRR for SuperSeed I is now at 17.8%, with SuperSeed II at 29.7%.

What is ahead for 2023

Last month I outlined this thesis for the year ahead:

• Many startups deferred their raises in 2022 and will run out of money in 2023.
• Startups that need to raise will have a tough time. It’s just harder, even for good companies. And for the “not quite there (yet)” companies, it’s impossible.
• The cleanup will continue. We will see more startup failures as overfunded companies with poor business models run out of cash. They will be unable to raise the next round, and will merge or fold.
• Interest rate tightening will level off. But not as quickly as some people hope. Jerome Powell has been clear. “Whatever it takes” to combat inflation.
• Valuations will continue to be moderate. This is an investors’ market. Great returns will come out of this vintage.

The data essentially still support the above. One area where there might be some “good news” is inflation. Core inflation in the Euro-area and US inflation has pulled back rapidly. It is possible that we could see a soft landing this year – something many economists thought unlikely 1-2 months back.

Opportunities in tech (investing)

2023 will be the year of AI. 2022 saw AI landmarks like Alphafold (Protein folding), and ChatGPT announced.

But advances in AI go far beyond improvements to chatbots and protein folding. We see it fundamentally transforming how everything is designed and made.

Historically, the “making of things” has been a complicated process. Gathering and synthesizing requirements. Development design operations. Endless iterations. Configuring production systems to produce what was designed.

AI impacts this in so many ways. Three of the key ones are:

1. (Semi) automating the synthesis of requirements
2. Automating the translation of requirements into designs
3. Automating the actual production

The changes won’t happen overnight, and humans will continue to play a large role in how things are made.

But Generative AI gives us a tool to improve almost every step of the design and production process.

It’s powerful, and it promises massive productivity enhancements in the decade ahead.

The startups making it happen

Most of the big advances in 2022 came out of large corporates. AlphaFold was made by Deepmind, owned by Google. And ChatGPT (based on research from Google) was made by OpenAI (backed by Microsoft).

However, the next layer of innovation will come from startups. And we focus on partnering with the best founders that work in B2B SaaS. Entrepreneurs with deep expertise in both AI and specific industry domains.

Here are some examples of portfolio companies with powerful AI models.

AI Build

3D printing promises to change how we make things. From cars to aeroplanes to buildings. But to date, it has been hard to scale the technology beyond small objects like hearing aids and dental implants.

Enter AI Build.

Ai Build’s platform uses AI to convert design models into production models that can be printed in “large format”. Reliably. And at speed. This work used to take weeks of a specialist’s time. And using AI, it can now be done in minutes.

It has taken years of painstaking R&D for founders Daghan Cam and Michael Dasyllas to perfect the technology. As a result, they are already supporting Boeing and several of the world’s largest automotive manufacturers. Congratulations!

Garvis

Manufacturing companies make amazing things. But how many widgets should they make?

Garvis helps demand planners predict future demand. This means they don’t make too little (or too much), reducing both wastage and wasted opportunity.

Garvis founder Piet Buyck is a veteran of the demand forecasting space. He and his founding team: Anupam Aishwarya, Ranjith Narayanan and Geert Jan Van den Bogaerde have created a groundbreaking platform**.**

They are already supporting large corporates like J&J, Bosch, GSK & Coca-Cola, and there is much more to come. Congratulations!

ThingTrax

Manufacturing often involves manual assembly. And when factory workers assemble things, “stuff” can occasionally be forgotten. A screw left out. A widget misplaced. And who can blame them? It can be repetitive and tiresome.

Enter ThingTrax’s Lineview solution. It’s based on computer vision AI that analyses the manual assembly process. And gently reminds the assembly worker if something has been left out. Magic.

Founders Aman Gupta and Imran Shafqat, together with Paul Reader, are building an amazing company. They already serve a host of mid-market customers, but also global enterprises like Tata. And they are just getting started

The road ahead

SuperSeed’s mission is to help the best technical founders build SaaS companies that transform how business is done. We are seeing a Cambrian explosion in startups in 2023. Smart founders are pursuing new opportunities across industry, transport/logistics and enterprise. And as they do so, we are there to back them and help them make it all happen.