For years, anyone looking for a successful business role model could turn to the world of technology and fintech. (once Europe’s most valuable private tech company) has garnered huge valuations as investors have funded its growth.

But as inflation rises rapidly and the macroeconomic environment deteriorates, unprofitable companies focused on increasing consumer numbers appear increasingly at risk. The valuation fell from $46 billion to less than $7 billion in a funding round this summer.

For business students coming of age in the age of “disruptors,” the lesson must be clear. The days of making easy money are over and growing at any cost is no longer a sensible mantra. Technology companies that rule the future must be built on sustainable foundations.

The need to do things beyond the conventional way of doing things is partly a reflection of pre-pandemic trends. There is a growing realization that simply emphasizing scaling up is not enough.

“Traditionally, venture capital has been focused on revenue growth,” says Nalin Patel, lead analyst for private capital Europe, Middle East and Africa at data provider PitchBook. “To become an anomaly and dominate an industry, you need to scale massively.”

That model has been rolled out across tech companies, from payments to food and grocery delivery, where dozens of companies have battled each other for years. This competition has been intensified by the pandemic.

However, that approach has led to market oversaturation. Individual restaurants may do business with specific food delivery companies, but they rarely distinguish between the latter businesses.

“There are some advantages in terms of reducing costs for our customers,” adds Patel. “But question marks remain as to whether it is just duplication of effort. companies are likely to succeed.”

woman with preo card

Summary: Smart payment card providers like Pleo balance business fundamentals with modern startup culture.

The same is true for buy now pay later, a popular form of short-term credit. The service has different players with different nuances, but they are all fighting for the same customer, and often the same space on the retailer’s checkout his page.

Patel says innovation is the key to a successful company of the future. “It’s about focusing on what’s unique, not what’s just to grow and add to the wider landscape.”

Investors are becoming increasingly risk averse in the face of rising inflation. Even venture capital groups that were once willing to give away large sums of money now want companies to prove they have a path to profitability.

Aman Behzad, founder and managing partner of fintech advisory firm Royal Park Partners, says the companies best suited for future success combine two attributes from different generations of technology.

“beginning, [it is] People with solid fundamentals and long-term vision,” he says. Big tech leaders such as Apple and Microsoft have been successful at building long-term value for their shareholders while prioritizing products that solve distinct problems.

“Second, the post-2010 ‘tech darling’ management style culture is equally important,” adds Behzad. Having the right talent and ability to drive change within an organization helps companies retain top talent and continue building strong products.

Technology companies often focus on one of these aspects, he said, either focusing on solving short-term problems or adopting outdated corporate practices. The best companies don’t have to compromise.”

Some of the most promising sectors in this regard are B2B software and infrastructure providers, Behzad said. He believes that companies such as UK Cloud his banking his business Thought Machine and smart his payment cards his provider his Pleo combine long-term business fundamentals with modern start-up culture. I think.

“With a limited focus on best-in-class products and services that deliver business value, there is no need to track market trends or integrate buzzword capabilities as other companies of our generation sometimes do. No,” he adds.

Patel agrees that B2B companies are in some ways better suited to falling consumer spending and rising costs of living around the world. “Consumer-facing companies may spend more or less depending on economic and employment conditions, but B2B could become a regular business model,” he says.

He points to a $160 million funding round by London-based Thought Machine, which doubled its valuation to $2.7 billion in May. Among the investors were banks such as Morgan Stanley, JP Morgan and Lloyd’s Banking Group.

“Large banks are plagued with legacy IT infrastructure issues that lead to all sorts of inefficiencies,” says Patel. “B2B software companies can become the true core of what our clients do.”

Students may not be familiar with these brands as “sexy” generic names, but that’s not a bad thing, Behzad says. “Visibility is not a sign of success. Revenue, models and where customers come from are important. The business case must be based here and now, rather than addressing the needs of a virtual market that does not yet exist. ”


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