Finally, somebody called it. Poland has a Donald as President too but he seems less enthralled by criminal heads of state. Donald Tusk’s view on the latest Trump ‘peace’ plan for Ukraine was quite the zinger – “it would be good to know for sure who is the author of the plan and where was it created”. Answers on a postcard to the Kremlin. Sadly, Europe’s leaders have been generally slow to call out Agent Orange’s craven need to be Putin’s fluffer. Indeed, this risk aversion by Europe is not confined to geopolitics. Mario Draghi has given a blunt assessment of progress made by Europe since his high profile EU Competitiveness Report last year.
Draghi is unhappy about the slow pace of investment in innovation and the mobilisation of capital to scale the growth of Europe’s young companies. Worryingly, his initial estimate of innovation investment required of €800 billion has now jumped to €1.2 trillion as other economic regions accelerate their efforts to lead in healthcare, electrification, renewable energy and AI. Draghi’s words make for uncomfortable reading and go so far as to link this lack of risk courage to the existential threat to Ukraine and European sovereignty:
“One year on, Europe is therefore in a harder place. Our growth model is fading. Vulnerabilities are mounting. And there is no clear path to finance the investments we need. We’ve been reminded painfully that inaction threatens not only our competitiveness, but also our sovereignty,”
Inaction. Sounds familiar closer to home too. At our recent re-branding event for Spark Venture Funding, Fintan O’Toole in his guest address highlighted Ireland’s failings in housing, healthcare, infrastructure and SME support and identified a key contributing factor. Typically, Fintan did not mince his words. Citing the €150 billion or more of cash sitting in non-interest earning deposit accounts, he viewed this as symptomatic of a nation which “is afraid of risk”. The scars of the relatively recent Troika bail-out run deep but Mario Draghi is clearly saying the risks of inaction are far far worse. On a more positive note, we should remind ourselves of what can happen if investment bravery recovers again. In just the last 7 days, the European tech sector has been grabbing an unusually large share of the global financial headlines. Check out the following:
*Revolut completes a funding round including an investment from Nvidia at a $75 billion valuation. Last year the valuation was $45 billion.
*Lovable, the AI powered coding and developer platform, has reached annual recurring revenues (ARR) of $200 million and is raising money at a $6.3 billion valuation.
*Energy play, Fuse Energy, founded by Revolut alumni is raising money at a $5 billion valuation just 5 months after reaching ‘unicorn’ status ($1 billion). Again ARR acceleration has been stunning, moving from $100m to $300m of recurring revenues within months.
*Second-hand fashion market platform, Vinted, has reached the $1 billion revenue mark and is reported to be looking at a valuation close to $8 billion.
*Quantum Drones is also raising at a $3 billion valuation while payments player, Flatpay, has just raised funds at a $1.7 billion valuation.
All good in the ‘hood. But…here’s the really good bit. The geographic spread of these companies is pan-European with Sweden, UK, Lithuania, Germany and Denmark all represented.
In Ireland there are many young companies with the potential to join these headlines. Returning to the embarrassing €150 billion pool of funds sitting in Irish deposit accounts doing nothing, it cannot be overstated how big an impact could be made if even 10% of that money was used in risk appropriate manner. To be clear, riskier investments should form an essential but much smaller portion of any savings/investment portfolio. We are not talking about 30-50% asset allocations. Depending on age profiles and existing risk budgets, a 5-15% allocation to innovation and young companies should be considered. And, don’t forget we are in EIIS “season”. Investments in EIIS-eligible companies can bring tax rebates (and risk reductions) of 35-50%. It is amazing how many people are unaware of this excellent government scheme used to scale young businesses, create employment and enter new markets. From this writer’s perspective, we are in a global race. Spark Private’s own portfolio of deal opportunities currently open for investment are race leaders and can deliver exciting and diversified exposures to multiple high-growth markets.
Europe and Ireland urgently need to shake off their fears of risk. Frankly, Draghi is right: the risk of inaction could now be fatal for our economies and sovereignty. Think about that bank deposit shift, the EIIS de-risking opportunity and the speed of growth and wealth creation now possible in a global innovation economy growing at warp speed. There’s a ready-made EIIS portfolio available to curious investors which can help drive leadership and innovation in medical devices, digital currencies, e-transport, logistics infrastructure, AI and fintech. It’s worth taking a look and then considering the risk-reward of Moby, Social Voice, Quadrant, OOHPod, Nazare Point or Ostoform featuring in headlines like the ones above in just a few years from now.
