GP Bullhound’s managing partner Hugh Campbell has warned that the tech sector can’t ignore what’s going in the broader economy.
Speaking at the recent Northern Tech Awards 2022, he said the combination of the war in Ukraine, rising interest and inflation rates, and the growing cost of living crisis has created a ‘drumbeat of negativity’.
However Campbell said it was a time for patience rather than panic and stressed there were grounds for optimism.
He told a packed Manchester’s Albert Hall that a lot had changed since the last awards ceremony in Leeds in November 2021.
“If we only knew then what we know now,” he told an audience of 250 entrepreneurs and leaders of tech. “We were at peak tech, with the Nasdaq at 16,000 – now it stands at 11,000, down 35%. And many tech stocks have fared much, much worse.
“But putting the public markets to one side for a moment we continue to see an incredibly strong run of funding rounds and M&A for businesses in our community.
“Just amongst the previous winners at these awards we’ve had TVSquared in Edinburgh, which sold to Innovid for $160m.
“Crisp in Leeds has just sold to Kroll for a large but undisclosed sum. And the LADbible IPO, back in December, priced at £360m.
“And we are not just selling but buying too with Sykes continuing their shopping spree with acquisition after acquisition.”
He said while there was no ‘quick fix’ to the global challenges he added: “This is a time for hard work and patience. It is not a time to panic.
“We can’t of course ignore what’s going in the broader economy. Free money is gone. SaaS valuations are back to levels not seen since 2017, 5x is the old 15x.
“And whilst valuations remain robust for faster growing companies, particularly in the B2B space, it is tough for those growing more slowly and those reliant on consumer discretionary spend.
“For many, common sense will require CEOs to throttle back growth – we had the Great Recession, Great Resignation and now the Great Belt Tightening – companies with poor business models and poor unit economics will get exposed. Where investor priorities had been ‘growth, growth and growth’, it’s now ‘growth, profitability and cash’.”
Campbell concluded: “No doubt the coming months will test our resilience once again – but as the Sage of Omaha, Warren Buffett, once said ‘it is only when the tide goes out do you discover who’s been swimming naked’.”