Investors won鈥檛 pump money into loss-making tech firms indefinitely.
That鈥檚 according to David Foreman, managing director of Praetura Ventures, who was speaking at the 鈥楾ech Barometer鈥� event at Fairmont Recruitment in Manchester.
He predicted investors would be more cautious in 2023 and less likely to accept huge losses in the hope of eventually turning a profit.
鈥淭he mood in startup land is more positive than the macro economic outlook but it鈥檚 still more challenging than this time last year,鈥� he said.
鈥淎 lot of high-net-worth individuals are being a lot more cautious with their money.
鈥淭he fundraise we鈥檝e just completed has probably been the hardest to date.
鈥淭he press is majoring on the failures of big VCs. Things like FTX and Klarna don鈥檛 help. They are not actually representative of what we do at the early stage in the UK.鈥�
Foreman said the negative headlines had caused a dip in confidence.
鈥淭he days of everyone accepting huge losses in the hope of future gains are probably dying out,鈥� he said.
鈥淚 read a report of US unicorns and how much money they鈥檙e losing year-on-year.
鈥淚t鈥檚 insane how much short-term losses people are prepared to withstand in the hope of future profits.
鈥淎t some point every business, and that鈥檚 what every startup has to go through, has to make a profit and that period has probably shortened.鈥�
He was joined on the panel by Patience Tucker, CEO of wi-Q, and Jack Donohue, CEO and founder of Fairmont Recruitment
Growing tech recruiter moves into Manchester city centre office
Praetura Ventures invested 拢3m into digital payments start-up wi-Q in September and Tucker said they were ramping up their growth.
Manchester-based currently employs 48 staff and is expanding into the US.
鈥淲e have a nice working space but I don鈥檛 make people come into the office,鈥� she said.
鈥淢y staff come in two or three days a week. Giving the staff the flexibility is key and I think it helps get the best out of them.鈥�
Donohue founded Fairmont Recruitment in 2018 and has plans to expand in the US and UK in 2023.
鈥淚n our industry there are people talking about upcoming failures in the economy but from a tech perspective in recruitment it鈥檚 all guns blazing,鈥� he said.
鈥淭here are some big lay-offs at the big tech companies but all that does is provide opportunities for the smaller organisations to get their hands on this talent.鈥�
David Levine, principal of Manchester Angels and serial entrepreneur, struck an upbeat note.
鈥淵ou hear a lot of doom and gloom but the reality on the coalface is that not much has changed,鈥� he said. 鈥淚t (the recession) is being talked up. The cost of living is insane when it comes the price of energy, food, transportation. The key for businesses is to keep focusing on the fundamentals.鈥�