20 people who matter in UK tech
por Tom Bristow, Annabelle Dickson, Oscar Williams

POLITICO / 2023-02-26 20:027
LONDON — Who pulls the strings in U.K. tech policy has never been more important.

A raft of upcoming legislation aims to hold tech companies to account while encouraging investment and innovation. But that's a difficult balance to strike and critics fear new rules could hold back some of the U.K.'s most promising industries.

Britain has enjoyed a dominant role in European's tech sector for a decade. But investment in the U.K. fell by 22 percent last year, while rising in rival countries like France.

The sector has been hampered by political instability and uncertainty about what the country's long-term position will be on key areas such as AI, semiconductors, digital competition and content moderation. Meanwhile, the EU has pulled ahead — while the U.K. government keeps promising action "soon," EU lawmakers have already passed or are close to agreeing much of the regulation the U.K. has been talking about.

The people on POLITICO's power list can change that. Prime Minister Rishi Sunak's decision to create a new Department of Science, Innovation and Technology (DSIT) gives key industries a singular focus in government many felt had been missing, though questions remain about exactly what the department will be able to achieve.

Here's who to watch in Westminster in the coming months. We've split our list into rule-makers, enforcers, fighters, advocates, influencers and VCs.

Rule-makers
Michelle Donelan

As secretary of state at the shiny new Department for Science, Innovation and Technology (DSIT), Donelan has to be on the inaugural POLITICO U.K. tech power list. She has the potential to be a big player in the world of technology after she was tasked by Sunak with ensuring the U.K. is "the most innovative economy in the world and a science and technology superpower." No pressure. Keep a close eye on her ambitious deputy George Freeman though. It is no secret that he harbors ambitions to make his Cabinet debut.

For those wanting to get into the nitty gritty of some of the biggest tech-facing portfolios, Paul Scully, one of Donelan's ministerial team, will be the man to know having shepherded the Online Safety Bill through its latest House of Commons stages. All three might want to keep a close eye on veteran Tory MP Bill Cash, who deserves a special mention after making Britain's exit from the European Union his life's work, and now has Big Tech in his sights. And don't forget arch-Boris Johnson loyalist Nadine Dorries, who lost her power when the ex-prime minister was ousted from Downing Street, but has strong views on the direction of government policy, particularly on online safety.

Rishi Sunak

OK, an obvious one, but the list wouldn't be complete without him. The prime minister's creation of DSIT at the start of February showed how much he wants government to focus on tech. He is putting millions of taxpayers' pounds into startups, while at the same time giving regulators more power to rein in Big Tech.

The former hedge fund manager has long invested in startups (his investments are now held in a blind trust meaning neither he nor we can see them). He has polished his "tech bro" credentials and seems more comfortable meeting tech billionaires like Bill Gates and answering questions from a chatbot than functioning in the real world of petrol stations, supermarkets and schools. But the extent to which Sunak can deliver his dream of transforming the U.K. into an innovation superpower depends on his political acumen, which will come under intense pressure as the next election approaches.

Photo by Carl Court/Getty Images
Beeban Kidron

Filmmaker-turned-peer Kidron has made her seat in the House of Lords count. Few peers (or indeed MPs) have had quite as big an impact on tech legislation as Kidron, most notably her push for the Digital Economy Act to include an Age Appropriate Design Code, a set of rules that apply to any search engine, social media platform or online marketplace with users in the country. Kidron now has changes to the Online Safety Bill in her sights. Elsewhere in parliament's unelected upper chamber, Tim Clement-Jones is a thoughtful voice on regulating artificial intelligence, and Tina Stowell now chairs the Lords' communications and digital committee — a key vehicle for scrutinizing the tech companies.

Darren Jones

Jones is Labour's go-to on tech policy. As chairman of parliament's business select committee, he made a splash with inquiries into the government's semiconductor strategy (or lack of) and probed plans for the U.K.'s post-Brexit competition policy. A future Labour government would surely call on his expertise. On the Labour frontbench, Alex Davies-Jones, who has the digital brief, is clearly worth knowing too. If the polls stay as they are, she could well be a tech minister before too long. Lucy Powell, as shadow culture secretary since 2021, has been the Labour voice on the Online Safety Bill. Behind the scenes look out for Tom Adeyoola who is playing a role in Labour's startup review.

Susannah Storey

Storey was the first top civil servant to be announced at DSIT. Having moved across from what was then the Department for Digital, Culture, Media and Sport (DCMS), where she had been director general (DG) for digital and media policy, she now has the DG brief for digital, tech and telecoms. Much of her work will focus on helping to deliver big pieces of legislation including the Digital Markets Competition and Consumer Bill. The department also needs to get the Online Safety Bill over the line.

A regular on panel Q&As, Storey gave an insight into some of her policy thinking to the Open Data Institute in 2021. She said this was the key decade for making tech policy in the U.K. — but time is running out and she is keeping her eye on what other countries are doing. Before joining the civil service, she worked at Citigroup and Schroders in mergers and acquisitions. The other key player in the department is Permanent Secretary Sarah Munby, who moved across from BEIS.

Chief Technology Adviser … Sunak on the hunt

There are plans afoot to recruit a powerful new adviser in the Department for Science, Innovation and Technology. A new "chief technology adviser" would be tasked with working with the rest of the civil service to deliver the PM's science and tech vision, according to a Whitehall official.

Over in No. 10 Downing Street, Jean-Andre Prager is the well-regarded and long-serving special adviser who oversees DCMS in the No. 10 Downing Street policy unit, but with the work and pensions brief in his portfolio too. In a sign of just how important No. 10 sees DSIT, a well-placed official said, they are potentially on the hunt for a new tech point person at the heart of government. Don't expect the hire to be someone steeped in politics. "[Tech] isn't that political," the official said.

Over in the Treasury, Adam Memon, Hunt's economic adviser, is seen as an ally in tech land. A short stint on the digital markets unit at the Competition and Markets Authority has given him a valuable understanding of the subject. On the official side the Treasury's director of growth Joanna Key is seen a key player for industry.

Enforcers
Amy Jordan

The director of technology policy at Ofcom has a busy couple of years ahead as the regulator works out how to implement the mammoth Online Safety Bill. The timeline for this has already been moved several times, but Ofcom's latest estimates suggest it will take around two years from the bill becoming law to fully implement the new regulatory regime.

Jordan, an Oxford languages graduate, will be a key part of that work. She has spent most of her career in the civil service, firstly on the fast-track scheme, then working on cybersecurity at the World Economic Forum, before joining Ofcom almost three years ago. In a recent Q&A organized by techUK, she acknowledged the scale of the task Ofcom faces to get the bill working in the real world. The other key name in Ofcom is director for online harms, Richard Wronka. Also watch for Gill Whitehead from April, then she joins as group director of online safety. The former Google executive joins from the Digital Regulation Cooperation Forum where she is CEO.

Jacqui Ward

Chinese ownership of U.K. tech is one of the hottest political topics right now, and as director of Britain's Investment Security Unit, Ward has been tasked with screening and thwarting takeovers which could harm national security. Her unit has just moved into the powerful Cabinet Office after BEIS was broken up. It is just over a year since the National Security and Investment Act came into force and how its powers might be used remains a live issue for industry. While Ward will work behind the scenes, it is National Security Adviser Tim Barrow (remember him?) and Chancellor of the Duchy of Lancaster Oliver Dowden, who will be the public faces of potentially contentious decisions about whether takeovers should be blocked.

Sarah Cardell

The head of the Competition and Markets Authority (CMA) has only been in the post for a few months but is already making waves. "Major U.S. tech investors are impressed by Cardell," one industry lobbyist said. "They think she's very smart and wants to make a real impact. They're treading cautiously around tech deals requiring U.K. approval in a way they weren't before."

The Oxford graduate, who like so many in Westminster studied philosophy, politics and economics, has been at the CMA since 2013 and was previously its general counsel. The CMS is has an open investigation running into Google's ad tech and a high-profile case on Microsoft's planned takeover of Activision Blizzard. The CMA is also beefing up its digital markets unit ahead of the Digital Markets Competition and Consumer Bill which will give it new powers.

The fighters
Nick Clegg

Clegg was already a member of Mark Zuckerberg's inner circle before he was promoted last year, but in his new role as Meta's president of global affairs, he is officially as senior as the Facebook founder himself.

Having returned to London last summer, Clegg has a slate of chunky legislative briefs to get stuck into on this side of the Atlantic. His teams will closely monitor the progress of online safety and competition and data protection bills through the U.K. parliament, while gearing up for the Digital Services and Markets Acts in the EU. Clegg's promotion reflects just how significant lobbying has become to Meta, which is facing intense competition from Chinese-owned TikTok as well as investor jitters over its $36bn metaverse bet.

Kenzo Tribouillard/AFP via Getty Images
Dom Hallas

As head of the startup trade body Coadec, Hallas is one of the best-connected people in U.K. tech. He attracted both Sunak and former Chancellor Kwasi Kwarteng to Coadec events and September's budget included several investor-friendly policy reforms first championed by his team.

But a more recent Treasury intervention has ruffled feathers. Coadec is resisting Chancellor Jeremy Hunt's plans to curb R&D tax cuts. Founders surveyed by the organization in January said the proposals were incentivizing them to speed up overseas expansion plans. The startup association isn't alone in pushing back on the proposals. The Federation of Small Businesses has warned the U.K. will become an "innovation wasteland" if Hunt follows through with the plans. This battle is likely to rage for some time and Hallas is unlikely to back down until he's secured a deal that will satisfy his members.

Neil Ross

Ross is responsible for shaping trade association techUK's approach to new regulation. A former researcher to two Labour MPs, Ross rapidly ascended the trade body's ranks since joining in 2019. Now associate director, he is tasked with finding coherent positions that represent techUK's diverse membership, from the Big Tech firms and software vendors to startups and telecoms operators. That's easier said than done, but when techUK speaks as the voice of the industry, ministers listen.

The protagonists
Poppy Wood

Reset.Tech has quickly but quietly become one of the most influential advocacy groups in the U.K. Launched in 2020 and funded by the Sadler and Omidyar foundations, Reset's British-wing is led by Poppy Wood, a former adviser to David Cameron turned tech policy pro. Wood's mission is to provide a counterweight to the Big Tech lobby and she has built networks connecting MPs and peers to whistle-blowers and former employees of the tech giants.

Wood's primary weapon is the all-party parliamentary group on digital regulation, which Reset manages. The APPG includes many MPs and peers who have brought forward amendments strengthening the Online Safety Bill in recent months. Wood is also expected to keep a close eye on the Digital Markets, Competition and Consumer Bill and data protection reforms once they arrive in parliament.

Cori Crider

This Texan human rights lawyer first made a name for herself in Whitehall shining a light on the government's work with Palantir during the pandemic. But Foxglove, the advocacy group she runs, has since broadened its focus. Crider's team is fighting Facebook over its treatment of content moderators in Kenya and wants to challenge the government's use of algorithms in benefit fraud investigations. Crider's also planning a parliamentary engagement campaign linked to the new £360m NHS data platform deal Palantir is looking to secure. Sympathetic MPs can expect to hear from her team soon.

Pablo Porciuncula/AFP via Getty Images
Influencers
Ashleigh Ainsley

We're very conscious of the lack of diversity on this list which makes organizations like Colour in Tech even more important. Ashleigh Ainsley, one of its co-founders, can point to some very impressive achievements since launching in 2016. More than 5,000 people have passed through its programs and the non-profit has been backed by the likes of Google, DeepMind, Meta and Microsoft. There's plenty still to do, though — BAME employees represent 15 percent of tech workers in the U.K. against 20 percent of the population.

Gerard Grech

Tech Nation, the organization Grech has led for almost a decade, is closing its doors at the end of March, but its CEO remains a powerful voice in tech. He sits on a DCMS advisory board and has plenty of success getting people to sit up and listen.

The former record company founder built his career in telecoms at Orange in the noughties before being invited by David Cameron to become the founder and CEO of Tech City UK, as it was then, in 2014. The outpouring of support for Tech Nation after it announced its closure has been striking. The organization helped a third of all U.K. tech companies which have scaled and helped thousands of workers through its visa scheme, so watch out for what Grech says and does next.

Gerard Grech (right) | Jeff Spicer/Getty Images for Advertising Week Europe
The money
Nathan Benaich

As founder of Air Street Captial, a small-scale venture capital fund, Benaich is by no means a heavy hitter when it comes to writing checks for startups. But when it comes to politics, he bats above his average. The Cambridge Ph.D grad was on the panel of Labour's recent start-up report; he got name-checked as a reviewer in the recent U.K.'s digital manifesto published by Tony Blair and William Hague; and participated in an off-the-record discussion on Labour's tech strategy in late January between Labour-favoring techies.

Eileen Burbidge

Few VCs successfully straddle the worlds of politics and investment, but Burbidge is one of them. The London-based American founded Passion Captial in 2011 which has backed around 100 early-stage startups, including Monzo. She was awarded an MBE in 2015, is the Treasury's FinTech envoy and was part of David Cameron's Business Advisory Group. Her latest venture is Fertifa, a reproductive health company.

John Phillips/Getty Images for TechCrunch
Saul Klein

Another VC who has been close to government, Klein co-founded Lovefilm — the British version of Netfix — and his current outfits Zinc and LocalGlobe plow money into early stage start-ups. He focuses his investments local to the U.K. and northern Europe. After spending time in California, Klein has become a leading sounding board for repeated governments on what to do about tech and is a cheerleader for how the country (but mostly London) is one of the largest tech ecosystem in the world. He's currently a member of No. 10's Council for Science and Technology after previously being appointed as "Tech Envoy" to Israel under David Cameron's administration and serving as a advisor board member at DCMS. "Government can support this or not support that, but the waves (of technological change) are so much bigger," he told POLITICO.

Noam Galai/Getty Images for TechCrunch
Ilan Gur

With a budget of £800 million to invest in U.K. innovation, look out for the first chief executive of the new Advanced Research and Invention Agency (ARIA). The American is leading the U.K.'s answer to the U.S. Defense Advanced Research Projects Agency (DARPA) which spawned several groundbreaking technologies. It is one of the most high-profile of former Downing Street top adviser Dominic Cummings' surviving policies. Gur worked at the U.S. Department of Energy's agency for funding innovations, ARPA-E, for three years as a senior adviser so has experience investing public money in emerging tech.

"Aria itself it's a bold bet. The agency is really a grand experiment," he said in a documentary in February. It has been given a lot of public money to "bet on science" so will need to prove its worth fast — but that might be tricky, as its bets probably won't materialize for a decade, so Gur will need to manage government expectations.

Enviado do meu Galaxy

High Gas Prices Could Be The New Normal For Europe
por Irina Slav

Oilprice.com / 2023-02-26 20:0551


Last summer, in August, gas prices on the European market topped 340 euros per megawatt-hour.
China's demand for LNG is expected to rebound this year, intensifying competition for limited supply.
Despite relatively high storage levels, Europe is increasingly reliant on LNG spot markets.
In the winter of late 2022 and early 2023, Europe got lucky. It got very lucky. Gas storage sites were fuller than usual because of the massive LNG-buying effort the EU put into securing gas for the winter, and the winter itself turned out to be warmer than usual.

Yet luck, while a big part of Europe's success in making it through winter relatively unscathed despite decimated Russian gas supply, was not all of it. Europe made it because it had the money to pay such prices for LNG on the spot market, which made the fuel impossible to afford for many other countries, notably Pakistan and Bangladesh. And now it has to do it all over again.

"We do not expect filling storage to be as costly next summer as it was this past year," Aurora Energy Research senior analyst Jacob Mandel told Reuters this week. "That said, firms that rely on spot supply to fill storage, rather than hedge against future price jumps, will risk paying similar costs to last summer," he added.

Last summer, in August, gas prices on the European market topped 340 euros per megawatt-hour, which is more than $360. To prevent a repeat of this, the European Union approved a price cap mechanism that is triggered when the price of gas tops 180 euros per MWh, or $190.

The bloc also plans to buy gas jointly on the global market in a bid to ensure member states do not become competitors and that richer ones do not fill their storage sites at the expense of poorer ones.

But none of this would be enough in the face of fundamental factors. China's demand for LNG is expected to rebound this year, intensifying competition for limited supply. According to Energy Intelligence analysts, China's LNG demand will rise by 3 million tons in 2023, yet Europe will remain the prime destination for LNG globally. Because it has no choice.

Related: Three Fires At Pemex Facilities In One Day

"For this winter it is right to say that we are off the hook. If there are no last minute surprises, we should get through...maybe with some bruises here and there. But the question is...what happens next winter?"

The question comes from the head of the International Energy Agency, Fatih Birol, who talked to Reuters on the sidelines of the Munich Security Conference earlier this month. And that's not the first time Birol has warned again of premature calm in Europe.

"Even though we have enough LNG import terminals, there may not be enough gas to import and therefore it will not be easy this coming winter for Europe," Birol said, echoing earlier comments that Europe faces a deep supply gap with the disappearance of Russian pipeline flows via the now defunct Nord Stream infrastructure.

That gap was estimated at 30 billion cubic meters by the International Energy Agency. According to its head, this year will see 23 billion cu m in additional supply. China is returning to business as usual, which means higher gas demand, while in the United States, gas drillers are reducing output because U.S. gas prices are near record lows.

The European political leaders could take solace in the fact that there is plenty of gas in storage left from last winter, but that can't be much of a consolation because the governments that paid for that gas made a loss on it. They made a loss because they didn't hedge future sales, and they didn't hedge probably because they expected the gas to be used during the winter.

On top of all this, as several market analysts, notably Reuters' John Kemp, have observed, the EU's gas storage does not cover 100 percent of consumption. In fact, taken together, the total storage capacity in the bloc covers about a quarter of total gas demand.

Besides, gas storage capacity is distributed unevenly among member states, so while some countries could satisfy close to 100 percent of their demand for gas from storage, Germany, for instance, cannot. So it's building LNG import terminals.

Argus reported this week that Germany plans to become the world's fourth-largest LNG importer by 2030, with a capacity of close to 71 million tons. That's the same Germany that refused to sign long-term LNG supply deals with Qatar because of its energy transition plans. Yet it may soon become the largest LNG importer after China, Japan, and South Korea. 

Those 70.7 million tons of liquefied gas would need to come from somewhere, and it will, from Qatar and the United States but mostly from the latter, whose producers are more flexible than QatarEnergy and gladly sell their LNG on the spot market—at respectively higher prices.

What all the latest developments in Europe's natural gas space suggest is that the EU will continue paying much higher prices for the gas it consumes than it used to before 2022. Governments will probably continue to shield the most vulnerable groups with state funds. That's a lot of additional expenses that weren't necessary just two years ago—and a persistent inflation driver for European economies.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:

Enviado do meu Galaxy

How the titans of tech investing are staying warm over the VC winter
Economist/Business & Finance / 2023-02-26 22:00

Business | VCetacean evolution
Venture capital's bruised whales are rethinking their strategies
Feb 26th 2023 | SAN FRANCISCO
Venture capitalists are not known for their humility. But the world's biggest investors in innovation have been striking a more humble tone of late. In a recent letter to investors Tiger Global, a hedge fund turned venture-capital (VC) investor, reportedly admitted that it had "underestimated" inflation and "overestimated" the boost the pandemic would give to the tech startups in its portfolio. In November Sequoia, a Silicon Valley VC blue blood, apologised to investors in its funds after the spectacular blow-up of FTX, a now defunct crypto-trading platform that it had backed. Speaking in January, Jeffrey Pichet Jaensubhakij, the chief investment officer of GIC, one of Singapore's sovereign-wealth funds, said that he was "thinking much more soberly" about startup investing.


The VC giants' newfound contrition comes on the back of a gigantic tech crash. The tech-heavy NASDAQ index fell by a third in 2022, making it one of the worst years on record and drawing comparisons with the dotcom bust of 2000-01. According to the Silicon Valley Bank, a tech-focused lender, between the fourth quarters of 2021 and 2022, the average value of recently listed tech stocks in America dropped by 63%. And the plunging public valuations dragged down private ones (see chart 1). The value of older, larger private firms ("late-stage" in the lingo) fell by 56% after funds marked down their assets or the firms raised new capital at lower valuations.


This has, predictably, had a chilling effect on the business of investing in startups. Soaring inflation and rising interest rates made companies whose promised profits lie primarily in the distant future look less attractive today. Scandals like FTX did not help. After a decade-long bull run, the amount of money flowing into startups globally declined by a third in 2022, calculates CB Insights, a data provider (see chart 2). In the final three months of 2022 it fell to $66bn, two-thirds lower than a year earlier; the number of mega-rounds, in which startups raise more than $100m, fell by 71%. Unicorns, the supposedly uncommon private firms valued at more than $1bn, became rarer again: the number of new ones contracted by 86%.

This turmoil is forcing the biggest venture investors—call them the VC whales—to shift their strategies. For Silicon Valley, it signals a reversion to a forgotten style of venture capitalism, with fewer deep-pocketed tourists splashing the cash and more bets on young companies by Silicon Valley stalwarts.

Misadventure capital
To understand the scale of VC's reversal of fortune, consider its earlier bonanza. Between 2012 and 2021 annual global investments grew roughly ten-fold, to $638bn. Conventional VC firms faced competition from a new breed of investor from beyond Silicon Valley. These included hedge funds, the venture arms of multinational companies, from Shell to Samsung, and the world's sovereign-wealth funds, some of which began investing in startups directly. Dealmaking turned frenetic. In 2021 Tiger Global inked almost one new deal a day. Across VC-dom activity "was a bit unhinged", says Roelof Botha, boss of Sequoia Capital, "but rational", given that low interest rates meant that money was virtually free. And "if you weren't doing it, your competitor was."

What passed for rationality in the boom times now looks somewhat insane. The downturn has spooked the VC funds' main sources of capital—their limited partners (LPs). This group, which includes everyone from family offices and university endowments to industrial firms and pension funds, is growing more nervous. And stingier: lower returns from their current investments leaves LPs with less capital to redeploy, and collapsing stockmarkets have left many of them overallocated to private firms, whose valuations take longer to adjust and whose share of some LPs' portfolios thus suddenly exceeds their quotas. Preqin, a data firm, finds that in the last quarter of 2022 new money flowing into VC funds fell to $21bn, its lowest level since 2015.

What new VC funding there is increasingly flows into mega-funds. Data from PitchBook, a research firm, show that in America in 2022 funds worth more than $1bn accounted for 57% of all capital, up from 20% in 2018. How the VC whales behind these outsize pools of capital adapt to the VC winter will determine the shape of the industry in the years to come.

The venture cetaceans can be divided into three big subspecies, each typified by big-name investors. The startups they finance range from the newly founded in need of "seed" funding, to the somewhat older, later stage firms that are looking to rapidly grow. First there is the conventional Silicon Valley royalty, such as Sequoia and Andreessen Horowitz. The second group comprises the private tourists, such as Tiger and its New York hedge-fund rival, Coatue, as well as SoftBank, a gung-ho Japanese investment house. Then there are the sovereign-wealth funds, such as Singapore's GIC and Temasek, Saudi Arabia's Public Investment Fund (PIF) and Mubadala of the United Arab Emirates. As well as investing directly, these entities are LPs in other VC funds; PIF, for example, is a large backer of SoftBank's Vision Fund.

Together these nine institutions ploughed more than $200bn into startups in 2021 alone, or roughly a third of the global total (not counting the state funds' indirect investments as LPs). All nine have been badly damaged by last year's crash. Sequoia's crossover fund, which invested in both public and private firms, reportedly lost two-fifths of its value in 2022. Temasek's listed holdings on American exchanges shrank by about the same. SoftBank's mammoth Vision Funds, which together raised around $150bn, lost more than $60bn, wiping out their previous gains. In a sign that things were terrible, its typically garrulous boss, Son Masayoshi, sat out its latest earnings call on February 7th. Tiger reportedly lost over half of the value of its flagship hedge fund and marked down its private investments by about a quarter, torching $42bn in value and leading one VC grandee to speculate that the hedge fund might turn itself into a family office.

All three groups have reined in their investments. But each has responded to the downturn in distinct ways. That is in part because it has affected them to different degrees.

The private outsiders have been hardest hit. The combined number of startup investments by the three firms in our sample fell by 76% between the second half of 2021 and the same period in 2022. Tiger has lowered the target for its latest fund from $6bn to $5bn; its previous one raised $13bn. In October Phillipe Laffont, Coatue's boss, said that the hedge fund was holding 70-80% of its assets in cash. The firm has also raised $2bn for its "tactical solutions fund", designed to give mature startups access to debt and other resources, as an alternative to raising equity at diminished valuations during a market downturn. SoftBank has all but stopped investing in new startups. Instead, in the second half of 2022 most of its capital went to well-performing portfolio firms, says Lydia Jett, a partner at the Vision Fund.

The other two groups are also retrenching, but not as drastically. According to data from PitchBook, in the second half of 2022 the number of deals struck by Sequoia and Andreessen Horowitz fell by a combined 47%. Direct investments by the four sovereign funds in our sample slowed by a more modest 31% in the same period, no doubt thanks to their governments' deep pockets and longer time horizons.

Taken together, venture capitalists' slowing pace of investment has left them with a record amount of capital that LPs had already pledged to stump up but that has yet to be put to use. Last year the amount of this "dry powder" was just shy of $300bn in America alone (see chart 3). According to data from PitchBook, our five private whales are sitting on a combined $50bn or so; the sovereign investors hold their numbers close to their chest but are likely to be of a similar order of magnitude, all told. Some of it may wait a long while to be deployed, if it ever is. But some will find grateful recipients. Who those recipients are also depends on which group of whales you look at.


Conventional VCs and the hedge funds are focusing on younger "early-stage" firms. in part because volatility in the public markets makes it harder to value more mature companies that hope to list in the near future. Mr Botha says that Sequoia has doubled the number of "seed" deals with the youngest companies in 2022, compared with 2021. In January the firm launched its fifth seed fund, worth $195m. Last April Andreessen Horowitz launched an "accelerator" programme to nurture startups. About half the startups Tiger backed in 2022 were worth $50m or less, compared with just a fifth in 2021, according to PitchBook.

Early-stage firms are unlikely to be the only recipient of VC cash. David DiPietro, head of private equity at T. Rowe Price, a fund-management group, thinks that startups selling "must-have" products, such as cyber-security services, or cost-cutting tools, such as budgeting software, should fare well. Money will also keep flowing to well-managed businesses with strong balance-sheets., expects Kelly Rodriques, chief executive of Forge, a marketplace for private securities. Firms with buzzy new technologies, such as artificial-intelligence chatbots and other forms of whizzy "generative AI", are also likely to attract investments—especially if those technologies already work in practice and underpin a viable business model.

Another category of startups likely to gain favour comprises those involved in industries that governments deem strategic. In America, that means climate-friendly technology and advanced manufacturing, on which Uncle Sam is showering subsidies and government contracts. Some 8% of the deals all our whales made in the second half of 2022 involved firms working on technologies to combat climate change, for example, up from 2% in the same period of 2021. Last year Andreessen Horowitz launched an "American Dynamism" fund, which partly invests in firms that rely on government procurement, such as Anduril, a defence-tech startup.

Sovereign-wealth funds are likely to be looking elsewhere. Seed deals are simply too small for them: whereas the typical early-stage American company is worth about $50m, in 2021 the median value of startups backed by the sovereign funds was a whopping $650m. And to them, what counts as "must-have" startups is somewhat different, determined less by the market or other states' strategic imperatives, and more by their own governments' nation-building plans.

On February 16th PIF said it would take a stake in VSPO, a Chinese platform for video-game tournaments. This is part of a plan dreamed up by Muhammad bin Salman, the Saudi crown prince, to invest $38bn in "e-sports" by 2030 and make Saudi Arabia a gamer's mecca. Temasek invests heavily in firms that develop technology to boost food production. In the past year it backed Upside Foods, a startup selling lab-grown meat, and InnovaFeed, a maker of insect-based protein. This is motivated by Singapore's goal of locally producing 30% of the city-state's nutritional needs by 2030, up from about 10% in 2020. Rohit Sipahimalani, chief investment officer of Temasek, thinks that over the next few years his focus will shift towards "breakthrough innovation rather than incremental innovation", on the back of government support of strategic tech.

One group of firms is likely to see less investment from our whales, however: those in China. The Communist Party's harsh two-year crackdown on consumer technology may be easing but the VC titans remain wary of what was until recently one of the world's hottest startup scenes. An executive at a big venture fund says that in the past, foreign investors in China knew that the government would be respectful of their capital. Now, he sighs, it feels like the government "has pulled the rug out from underneath us".

Tiger has said that there is a "high bar" for new investments in China. GIC has reportedly scaled back its investments in China-focused private funds. Mr Sipahimalani of Temasek says diplomatically that he is trying to avoid investing in "areas caught in the cross-hairs of US-China tension". Sequoia is reportedly asking external experts to screen new investments made by its Chinese arm into quantum computing and semiconductors, two such contentious areas. All told, the number of our whales' deals with Chinese startups fell from 22% of the total in 2021 to 16% in 2022.

After the dotcom crunch VC investments needed nearly two decades to return to their previous peak. Today's tech industry is more mature, startups' balance-sheets are stronger and, according to the Silicon Valley Bank, their peak valuations relative to sales are lower than in 2000-01. This time the whales of VC are unlikely to need 20 years to nurse their wounds. But the experience will have lasting effects on the sort of businesses they back. ■

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The controversial German publisher thinks it can conquer the digital news market

Enviado do meu Galaxy