Bring on 2025

As we head into 2025, the economic news headlines make for uneasy reading. US corporate bankruptcies hit 14-year high. UK borrowing costs hit highest level since 1998.  Construction growth misses forecasts. Retail sales growth minimal in final quarter of 2024. And, in non-economic news, Meta to get rid of factcheckers.

Everywhere in the world, prosperity is increasingly concentrated. The big are getting bigger. The rich are getting richer. All while politics is becoming ever more polarised and incendiary.

In these troubling times, I find myself sustained by entrepreneurialism and the audacious ingenuity of the start-up world.

Think about the innovations that start-ups have delivered in the past 10-30 years. Search engines. Whatsapp. Video conferencing. E-commerce. Cloud storage and real-time analytics. Low-cost digital money remittance. Social media. Content streaming. Sharing of user generated content. Online payments. Online identify verification. Digital banking. Docusign. Commission-free online share trading. Insurance price comparison. Machine learning in healthcare. And, more recently, generative artificial intelligence.

Of course, we should be vigilant about the risks that these innovations carry (thinking here about social media controlled by self-interested billionaires), but undoubtedly the world has benefited greatly from these innovations. Global industries have been created or upended at rates previously unimaginable. It is also the case that many of these successful start-ups themselves emerged from economic down cycles.

In venture capital, it is disheartening to see that capital is now trending towards fewer funds with smaller funds receiving less allocation. This trend will thin out funding options for smaller, early-stage start-ups. Some will argue this is a good thing as under-performing start-ups were overfed in recent times. However, the success of the entire start-up ecosystem depends on funding on every stage. Raising funding and breaking through at the early stage is the hardest part of every entrepreneur’s journey. The consolidation of capital into mega VC firms also belies the fact that mega VC firms are generally not a good fit for small, early-stage start-ups.

At the same time, our Fund I portfolio successfully navigated a tough 2024. It was a challenging year, and it took remarkable resilience from all the founders. All the companies managed to grow their revenues in 2024 and many recalibrated their cost bases to reflect the realities of the current funding environment. Certainly, they head into 2025 in a stronger position.

While the economic headlines may be daunting, now is a time of great opportunity for bold and resilient start-up entrepreneurs. The venture environment is back to the basics, sharper and more interesting than in recent times. Looking forward to 2025. Bring it on!