It’s always so simple when you look back while looking to the future can create more anxiety than is useful, and (cheese alert) a wise person once told me that today is called the present because it’s a gift.
So in this letter, I’d like to quickly look back on the easy stuff, whilst committing the cardinal sin of predicting the future, all with a healthy dose of being very grateful and privileged to work with partners like you, the founders we meet, and the team we’ve built. What a gift.
One and done for ‘21
As another annus horribilis comes to a close for many, it’s worth reflecting on what could also be described as an annus mirabilis. The first Covid vaccine was granted regulatory approval in the UK on the 2nd of December 2020, and the first jab administered on the 8th. While it is frustrating that Covid has become a permanent houseguest, it is perhaps worthy to consider how far we’ve come in just 12 months, and how we’ve pulled together as a nation and global community.
As of today, 55% of the world population has received at least one shot. Yes, there have been many mistakes along the way, and politics has often been a single point of failure. But still – it’s a marvel how we’ve applied science, technology and human ingenuity to deliver solutions.
When was the last time we managed to get an innovation to more than half of the planet within 12 months?
If nothing else, it shows that we can collectively create change, and maybe this is a forerunner to solving climate change, as well as a starter-template for other challenges?
As Omicron is currently stealing headlines and rattling markets, I remain fundamentally optimistic for the year ahead. It might be bumpy but I expect that we will continue to find solutions to the global challenges that arise. And here at the local SuperSeed level, we’re extremely proud to invest in founders who are building the solutions businesses need to solve real problems.
In 2021 we invested in 5 incredible startups – Seyo, Kleene, Techsembly, Duel and Integrated Finance. Across Fund I we still have had no casualties, revenues are up nearly 5x over the last 18 months regardless of Covid and fund investors have enjoyed an IRR of 25% (net).
In the last few months, we slowed our investment activity as we focused on closing our Fund II, refining our processes, and building the pipeline for 2022. As we are closing the new fund, we thank the many investors who are partnering with us for the next phase of the journey. If you’d like an update on the fund, companies listed or co-investment opportunities do let me know.
What’s new for ‘22?
I see four major challenges ahead for 2022:
- Covid. There is a continued threat that future mutations will continue to impact the economy
- Climate. The rapidly accelerating threat that climate change could lead to significant economic disruption
- Geopolitical tension. Driven currently by two key flashpoints – China/Taiwan and Russia/Ukraine. Under pressure there may be more.
- Inflation & Interest rates. Partially as a result of supply chain bottlenecks, partially due to overheating in certain economic sectors.
These factors are currently causing jitters, and there are many views on what this could mean for both private and public markets. There is no doubt that these four factors could increase market volatility and shake valuations. However, as venture capital investors we take a longer-term view and are somewhat sheltered by investing in business and industrial automation, which we expect to do very well in the long term, regardless of the noise above.
Where are the Opportunities?
Supply chain disruptions are creating pressure to change how we make things. Following thirty years of off-shoring and labour arbitrage, the question is now no longer: where in the world can we find the lowest-paid labour. It’s rather: how can we make things in a way that is cost-effective, sustainable and resilient.
Add to that the (long overdue) ESG focus from investors and it’s obvious that we are heading out of one paradigm (labour arbitrage) and to another (business and industrial automation).
Sensors, AI, and advances in additive manufacturing now make it cost-effective to create and recycle things closer to where they are used. In this new world, low hourly labour rates are no longer the primary source of competitive advantage. This enables a retooling of the manufacturing base from the lowest hourly wage to one that is more about skill and expertise. This investment opportunity is right here and now as we enter 2022.
The prospect of higher inflation will further catalyse business automation. Because while inflation puts pressure on labour costs, it will at the same time improve the business case for investment in automation to balance the books.
Even though it may feel like we’re at the pinnacle of all things technical (every generation must feel the same), there is still so much to do from a technology perspective. We have the basic components, we have the R&D, we have the teams – all we now need to do is to develop the applications that will truly take business and manufacturing to the next level. It’s an exciting time to get involved. An opportunity we’ve seen for some time and will continue to lean into.
The 2022 Investment Strategy
Rolling this all into our 2022 pipeline the broad strategy remains unchanged: to partner with the smartest technical teams solving difficult problems, and transforming the way business & manufacturing is done.
With the above in mind, we’ve continued to build the pipeline and have a dozen promising startups lined up for investment. Looking at companies using software to:
- Transform how enterprise automates back-office processes
- Improve how consumer companies deliver customer happiness
- Reduces time and cost required to create large-scale infrastructure projects
- Replace Excel in financial services with next gen modelling tools
- Design sustainable cities and urban environments
Until Next Year…
Recently it’s been great to start face to face meetings again, go to events, and remind ourselves that Zoom isn’t always the answer.
We’d all love to see more of you in 2022.
Until then, best holiday season greetings from Dan, Mads and the SuperSeed team
This article is published by SuperSeed Ventures LLP, authorised and regulated by the Financial Conduct Authority. The article does not constitute substantive research or analysis and should not be construed as an investment recommendation.