Startup Life/Analysis/ Reader predictions: What’s in store for European tech 2023 We asked Sifted readers about hiring, fundraising, diversity — and more. Here’s what they told us By Kai Nicol-Schwarz 4 January 2023 \Startup Life How to keep the cofounder spark alive By Jing Ouyang 22 February 2023 Startup Life/Analysis/ Reader predictions: What’s in store for European tech 2023 We asked Sifted readers about hiring, fundraising, diversity — and more. Here’s what they told us By Kai Nicol-Schwarz 4 January 2023 As the dust settled on the rollercoaster that was 2022 in startup Europe, we asked you — our readers — to gaze into your crystal ball and tell us your predictions for European tech in 2023. We heard from 103 founders and startup operators from a range of sectors, on everything from hiring to fundraising and remote working to diversity and inclusion. Here’s what you had to say. Fundraising fears will keep founders up at night Not being able to raise money is Sifted readers’ biggest concern for 2023 — and of the half who say they’re planning to try to raise this year, two thirds say they expect it to be more difficult than it was in 2022. A number of early-stage founders tell us they’d heard seed-stage rounds were slowing down. “The VC environment is more wary of investing in the early stages of companies when not enough traction has yet been reached,” says a serial entrepreneur. “It’s a chicken and egg problem, because you can’t get traction without money.” Later-stage capital is also at risk, says another, as VCs “feel pressured to support their legacy portfolio through bridge and downrounds, rather than writing them off”. The state of the public markets — where a number of European tech giants have suffered this year — is to blame for investor caution, others tell us. “Most angels and LPs have a big portion of their cash locked in public markets, making it more difficult for VCs to call capital, and for angels to optimise their investment strategies,” one says. But while sectors that saw huge hype during the days of free-flowing cash in 2021 — like fintech, mobility and grocery delivery — will have funding stripped back, says one respondent, the amount of dry powder still floating around is also cause for positivity, others say. Despite the investment slowdown, Atomico’s State of European Tech report predicted that VCs could have record amounts of cash to play with in 2022. “VCs are sitting on raised cash that has not been deployed — macroeconomic, social and political headwinds will ease,” one serial founder tells Sifted. Other founders and startup operators are worried about the impact the macroeconomic environment will have on their clients spending power. One founder says that while their startup is bootstrapped, they’re still “at mercy” to their clients’ fundraising success. “Cash is always king, and where our clients may have challenges we will need to be cautious of knock-on effects,” says another. It will get easier to hire talent Many respondents say they’re optimistic about hiring in 2023 — highlighting just how much has changed in startup Europe over the last 12 months. In February, 92% of respondents to a reader survey said it was more difficult to hire for roles than it was the year before, with 63% saying that was down to how much funding was available to startups. But as late-stage funding has dried up across the tech scene in the second half of 2022, many major startups are looking to preserve their cash runway by cutting costs and reducing headcount. The result: masses of experienced and talented tech workers are on the hunt for new jobs, and lots of smaller startups hope to use the opportunity to attract great employees who otherwise might have thrown their hat in with scaleups and Big Tech. On the other hand, some readers have concerns about the impact a recession will have on workers’ appetite to change jobs, especially at a startup — where the risk of everything going kaput is higher. Remote working is here to stay Three quarters of readers say that they think remote working is here to stay in 2023, with a number of them commenting on how much it opens up otherwise unreachable talent pools. “Talent is more or less evenly distributed globally but opportunities are not,” says one founder. “Why limit yourself only to the talent that lives in the same region or is lucky enough to be allowed to move there?” The shift to hybrid working has also had major benefits to startup workers with families. “I can now have dinner and tuck my kids into bed when I finish work, rather than be at the mercy of the transport system and miss those important parts of my day,” says one startup employee. But the flexibility comes with its downsides to business owners, says one founder who has to grapple with paying to keep an office open five days a week when employees generally only come in two or three days. Another founder told us that communication suffers between teams and it’s difficult to coach junior employees when working remotely — and there are signs that some tech companies across Europe are taking steps to reduce the number of remote employees. According to data from flexible workspace platform Flexa Careers, there’s been a 35% drop in the number of European startups advertising fully-remote roles in the last 12 months More people will become digital nomads There’s been a wave of startup founders and operators ditching their desks for one of Europe’s digital nomad villages since the world opened up post-pandemic. It’s a trend that’s only set to increase in 2023, as workers wise up to potential tax breaks and companies offer the lifestyle as a perk to attract talent, according to Sifted readers. “We’ll see the number of digital nomads increase due to the tax incentives, lifestyle changes and overall dissatisfaction with traditional corporate working born from the pandemic and the Great Resignation,” says one startup manager. But it remains to be seen whether or not this is a good thing for the digital nomad destinations themselves, they add. Locals in Madeira — the location of the world’s first digital nomad village — voiced their concerns over digital nomads putting pressure on local housing stock, causing the cost of living to rise and not integrating with the community. Will funding for underrepresented groups improve? European tech has a big diversity problem. According to the State of European Tech report, funding for all-women founding teams has dropped from 3% to 1% since 2018, and just 0.7% of total unicorn funding is raised by startups with entirely ethnic minority founding teams. The jury is still out among Sifted readers on whether or not this will improve in 2023. One reader says that because the figures are currently so appalling the only way to go is up, and others mention growing outrage among the startup community about the lack of funding for underrepresented communities. “I think the tables are turning here. It’s no longer acceptable and more people are calling out BS when they see it,” one founder says. But there doesn’t seem to be much proof that change is happening on a systematic level across European tech, and just 35% of startups have a recruitment programme in place to reach people from diverse backgrounds. The problem is that founders from underrepresented backgrounds are still considered risky investments by investors — and worsening economic conditions will only make VCs more risk-averse, one respondent says. “Unfortunately we’ll need a generational change before people from underrepresented backgrounds — like language minorities, LGBTQ, people with disabilities and immigrants — stop being perceived as ‘risky’.” A lack of self-awareness on the part of investors is also a key driver of inequality, and VCs need to become more representative themselves before the benefits will trickle down to founders, another says. According to one report, just 11% of people working in VC and PE were Asian, and only 3% were Black. Kai Nicol-Schwarz is a reporter at Sifted. He tweets from @NicolSchwarzK. 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