Dear SuperSeed LPs,

And then it was 2023.

Last year was a crazy, busy, hectic, turbulent year. It was exciting and – for many – quite frightening. The world emerged from the Pandemic to look into the face of inflation, a stock market crash and war in Ukraine.

And in the tech world, everything got turned upside-down.

It’s almost as if we’d been on autopilot for two years. Not a tranquil tour on the scenic route. But a journey on an ever-accelerating bullet-train, with rapid-fire investment cycles and capital galore.

Then suddenly, it all just stopped. The world stepped off the QE-crazy of the pandemic era. Less money and oxygen were given to faster grocery delivery with questionable unit economics. And we could all get back to the real work: building proper companies.

Major events of 2022

2022 saw some massive tech milestones emerge. It also saw some spectacular failures.

Some of the highlights:

• Tech stocks were down down down. Tech companies in S&P500 were down about 40%. SaaS companies in the EMCLOUD index down 51.5%.
• Crypto collapsed. FTX spectacularly so.
• Startups without proper unit economics were found out.
• The crazy war for talent in the tech sector came to an end. All major tech companies have now announced freezes or significant layoffs.

We shouldn’t downplay the trauma caused by these events. A lot of jobs have been lost. A lot of wealth has gone up in smoke. There are real-world repercussions, and for many, these are challenging.

But in many ways, the cleanout was overdue. Too much capital and too much human talent had been allocated to unproductive endeavours. And as we have been reminded (yet again), this ultimately destroys value.

So we needed to clear the decks. The process will continue in 2023, but we are well underway.

And in the meantime, there is so much exciting business to be getting on with. In 2022 we saw:

• Quantum leaps in AI with the public release of ChatGPT.
• Amazing next-generation (Web 3.0) companies come through.
• A refocus from “growth at all costs” to smart growth with proper unit economics.

What’s in store for 2023

So what will happen in 2023?

• A lot of 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.
• This means that 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.

On the tech side, this will be the year of AI. And when it comes to AI, 2023 will make 2022 look like a sleepy year. OpenAI made huge waves when they released ChatGPT in November last year. ChatGPT is a chatbot that sits on top of the GPT-3 language model. ChatGPT made GPT-3 universally accessible. And it shows us all the power of Large Language Models.

Well, GPT-4 is expected to arrive in early 2023. It has taken years to develop and has 100x more parameters than GPT-3. In simplified terms, parameters are the basic building blocks of an AI algorithm. So if GPT-3 is powerful, imagine what something 100x more powerful will be able to do.

Our plans for ’23

We continue to lean into AI as the main tech driver for change. This sits alongside two other major trends:

1. The reconfiguration of globalisation – primarily driven by US / China rivalry.
2. The reconfiguration of energy. 40% of the UK’s electricity supply in 2022 was from renewable sources. The US was behind at about 22%. But the trend is incontrovertible.

2023 will see nations continue to change their energy supply. And companies redesign their supply chains. And AI will be there every step of the way, helping us all be more productive.

This will profoundly change both geopolitics and economics. And provide ample opportunities for tech investors. Even if the outlook for inflation and interest rates looks higher than in the past few years.

SuperSeed II

In 2022 we started investing out of our new B2B SaaS fund – SuperSeed II. We hit the ground running, and have already had the opportunity to partner with eight great startup teams in the new fund. Our portfolio companies had a strong 2022. We were generally super proud of how the founders adjusted to the new economic reality, all while they kept growing their toplines. More detailed performance information will follow once accounts and audits are done. But we can already now say that 2022 was a solid start for the new fund.

In 2023 we look forward to continuing our work to back Europe’s smartest technical founders in B2B SaaS. And to help them build great companies that transform how business is done.

Thanks for all your help and support in 2022. We are excited to work with you to deliver on this incredible opportunity in 2023 and beyond.

Dan, Mads & Team SuperSeed