The Covid-19 pandemic dramatically accelerated the development of, and investment in, new technology, significantly changing the way we work, operate and live. Yet since, the economic landscape has changed drastically, with high inflation and positive interest rates resulting in a considerable slowdown across the sector.
On 18th October 2022, Natixis Corporate & Investment Banking’s Explore Tech event returned for a second consecutive year, examining the current tech investment landscape and where digital assets stand in the current economy. To introduce the day’s events, Anne-Christine Champion, Co-Head of Natixis CIB, and Patrick Rouvillois, Head of Natixis CIB’s Tech Hub, addressed attendees, providing an overview of the changes the tech sector has seen since the previous year’s event.
This was followed by a presentation of the results of the Explore Tech study – which provided the basis of the day’s discussions – by Thibaut Cuillière, Head of Real Assets and Tech Research at Natixis CIB. You can read a full copy of the study here.
Video: Explore Tech 2022 at a glance
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How can corporates invest in new tech in times of crisis?
The event’s opening roundtable, “New tech innovation”, looked at the evolving tech investment landscape and the growing need to support innovation in the sector. Patrick Rouvillois, moderator of the session, outlined the issues the industry is currently facing amidst the European energy crisis, the ongoing conflict in Ukraine and rising inflation rates. These factors, he explained, have given place to a general cooldown within the tech sector – evidenced by the current 'crypto winter’.
Indeed, while the Covid-19 pandemic gave way to an initial boom in tech investment as the world moved online, capital sources have since withdrawn liquidity in an increasingly unstable environment. Jean-David Chamboredon, CEO of ISAI, noted: “Our business – whether we are in venture capital or technology – is inherently volatile. It moves in cycles, the most recent one lasting 12 years, which is extremely unusual. While we expected it to end in 2019, it was artificially boosted by the pandemic.”
Since, an increasingly unstable geopolitical landscape has given way to heightened protectionism by governments around the world, forcing technology companies – many of which are defined by the borderlessness of their teams and technology – to adapt. One solution, panellists agree, is to understand the development of technologies in a more long-term context.
For Clara Gaymard, Co-founder of Raise, taking this stance can present solutions – to issues such as climate change, for instance – as well as opportunities. “A lot of new businesses are created thanks to crisis. It opens the door to companies that wouldn’t have been needed before.” Of course, these new businesses require financing, and corporate venture capital (CVC) can be beneficial for start-ups and large businesses alike. Certainly, while it can provide growing businesses with much-needed liquidity, venture capital also gives large corporates the opportunity to enter new, disruptive sectors in a more hands-on manner.
Later in the discussion, Frédéric Plais, Founder and CEO of Platform.sh, highlighted that while the current crisis may have led to lower valuations and increased concerns for shareholders, for much of the sector, profitable growth is still achievable. “As long as entrepreneurs continue to secure new customers and renewals, the crisis will remain abstract,” he commented. Frédéric Mazzella, Founder and President of BlaBlaCar, supported on this point, stating “we are capable of developing new models and should not be afraid of doing so. We just need to be creative in how we do it.”
How can we develop new consumer cases for digital assets?
Following on from this discussion, Explore Tech’s second roundtable, “Digital assets”, examined the status of digital assets in the current economy. With digital assets, blockchain, NFTs, and other related technologies still in their infancy, the possibilities seem to be limitless.
For roundtable moderator Benedict Evans, Venture Partner and Independent Analyst, discussion around digital assets should: “set aside the explosion of noise we have seen in the last six-to-18 months, and ask: where are we with regards to building real services that can be deployed within businesses?”
For many consumers, digitally native technologies are still limited to the creative and communications industries – including art, gaming and music. It has taken more than a decade, for instance, for blockchain infrastructures to mature to the point that they can be adopted and used within business. But in the last 18 months, there has been significant interest in how these technologies can be used outside their traditional contexts – evidenced by the popularisation of NFTs for authentication.
As these technologies advance, so too will our ability to use them for new projects and underlying digital infrastructures across all industries. While he believes we are not quite there yet, Luc Jodet, Partner at XAnge and Co-founder of Arianee, notes that “we are starting to move out of the infrastructure phase into the mass market services stage with crypto.” He points to the success of his own company, Arianee, which mints NFTs for luxury brands, as an example of the increasing implementation of digital assets.
Yet while adoption is increasing among industries such as retail, for Lou Kerner, Partner at Blockchain Coinvestors, when it comes to the financial services industry, “adoption is excruciatingly slow”. That said, the number of consumers using decentralized finance (DeFi) and cryptocurrencies is considerable, and Thibaud Morin, Managing Partner at Level-up, believes that, in the future, digital assets have the potential to redefine the industry as we know it today.
How can corporates overcome the digital transition challenges?
For the event’s final roundtable of the afternoon, “Corporate tech transition”, speakers discussed the way in which corporates can navigate the evolving technical landscape in light of challenging macroeconomics, an evolving workforce and increasing digital disruption.
In France and beyond, market disruption has forced corporates to technologically transform their businesses. Philip Berlan, CEO of French retailer La Redoute, describes this as “the need to digitalize to survive”. Indeed, while historically, La Redoute was an order-by-mail business with a large paper catalogue, over the course of the past decade, online digital disruptors have forced the corporate to transform its entire operations.
So, how can a corporate ‘transform’? For the panelists joining moderator Alain Gallois, Global Head of Coverage and Head of EMEA at Natixis CIB, correct prioritization, focused leadership and strategic partnerships hold the answer.
The prioritization investments, for instance, is key. Pierre-Yves Calloc’h, Chief Digital Officer at Pernod Ricard, discussed the company’s decision to focus its artificial intelligence strategy on several specific projects. Notably, it optimized its salesforce’s productivity through the use of a digital assistant and harnessed marketing investments by analyzing the ways in which different forms of advertisement performed across different markets.
Panelists also agreed that the tone set from the most senior members of the business was of utmost importance. David Jones, Founder and CEO of the Brandtech Group, acknowledged the role of Covid-19 in accelerating the digital transformation of most businesses, leaving many in a better position than they were before the pandemic. Now, he explained, it is down to CEOs to empower and support Chief Digital Officers (CDOs) and Chief Technology Officers (CTOs) through their companies’ digital transformations.
Looking forward, Vanessa Lyon, Managing Director and Senior Partner at BCG, acknowledges there will be a significant workplace shift as the last wave of baby boomers retires. In response, ongoing competition to upskill employees and recruit new talent will continue to be a significant preoccupation. However, rather than replacing staff, the tech transition is also equipping many corporates with the tools to engage with a new generation of automated alternatives, including new Internet of Things (IoT) platforms, or even to create a metadata-enabled control room using augmented reality – saving on both costs and resources.
To conclude the event, Nicolas Namias, CEO at Natixis, summarized the day’s activities, emphasizing the current challenges facing corporates globally as a result of market uncertainty – be they environmental, social, or economic. In light of this, Namias emphasized Natixis CIB’s dedication to supporting its clients with their tech transitions through its dedicated Tech Hub, as well as the opportunities that will undoubtedly arise from the current crisis with respect to technological innovation. “This is the third large crisis we have seen in the past 20 years. But what is different this time is that technology will provide the solutions to the issues we are facing today.”
Definitions
NFTs
Non-fungible Tokens (NFTs) are a type of blockchain-based digital identifier that cannot be copied, substituted, or subdivided. They can be used to verify authenticity and ownership (as of a specific digital asset and specific rights relating to it).
Tokenization
Tokenization is the process of digitally representing an existing off-chain asset on a distributed ledger. There are several different types of ‘tokens’, including payment tokens, stablecoins, utility tokens and security tokens.
Blockchain
Blockchain is a decentralised, shared database infrastructure. Blocks of data entries and transactions are chained together in an immutable format that allows network participants to view and add data while limiting record changes. Cryptography and key management ensure data integrity and participant authentication.
Metaverse
Iterations of the metaverse generally involve fully immersive, photorealistic parallel realities accessed via VR or AR interfaces, in which individuals go about their daily lives as digital avatars to transcend the space-time limitations of their physical existence.
THREE QUESTIONS FOR PATRICK ROUVILLOIS, Head of Tech Hub at Natixis Corporate & Investment Banking : “CEOs are now looking to new innovation in digital technology to stay ahead of the competition”
1: What do clients need to initiate their digital transition?
Since the internet became accessible to the public nearly thirty years ago, the tech transition has been progressively gaining traction among businesses worldwide. Yet for many, the Covid-19 pandemic was the catalyst that truly accelerated their adoption of new tech – forcing businesses from across sectors to rethink the role of digital in their overall strategies.
As our latest Explore Tech survey indicates, nearly half of businesses have begun their digital transition, with CEOs now looking to digital technology as a means of staying ahead of their competitors. However, technological innovation continues to pose a significant cost and resource challenge to large corporates – particularly as they fight to compete with disruptive start-ups emerging in their industries.
This challenge brings to light a crucial issue: how can corporates digitally transform their businesses in order to remain competitive? First, they need to understand what is happening. Passive investment in venture capital (VC) through limited partnerships (LPs) can be a good starting point for those looking to be involved in start-up and scale-up innovations while maintaining limited liability. But it’s through corporate VC that corporates can have direct involvement at board level. Being more hands-on, several corporates have created portfolios of digital ventures created by their own teams to explore and test new business opportunities, ranging from new products to new disruptors.
What’s more, corporates are increasingly looking to transform the core of their businesses to become more tech-centric. This is being achieved through the creation of digital centers, the recruitment of new talent and, more and more, through dedicated funding that needs to be supported by the company’s equity story.
2: How do you support your clients in this approach?
The turbulence of the Covid-19 pandemic environment has underscored that each client requires a comprehensive digital approach to build tailored solutions that meet their specific business needs. We are able to support all of our clients in this area – from start-ups to large corporates, including Big Tech and funds. With the need for tailored solutions in mind, in 2021, Natixis launched its dedicated Tech Hub, which works with Natixis CIB divisions and other Groupe BPCE companies to offer clients customized solutions in areas such as mergers and acquisitions (M&A), capital structuring, equity and debt raising, and capital markets. It aims to promotes the creation of strategies for market leaders seeking to gain a competitive advantage using cutting-edge technological business models and innovative financing techniques.
3: Can you give us an example of clients you have recently supported in their digital transformation?
Across sectors, our team works hard to help clients address challenges related to digital innovation. Recently, we advised a major corporate on how one of their undervalued digital divisions should be structured to attract third-party investments. For another, we structured a loan to specifically support their digital journey. We recently structured a creative loan for a French car rental start-up to finance their new fleet of vehicles, for instance. And, as our Big Tech and fund clients continue to accelerate their global business growth, we have witnessed a growing interest in trade finance solutions. Meanwhile, Clipperton, our growth finance specialist in Europe, is supporting our start-up and scale-up clients, through capital raises in a wide range of sectors. Of note, we have been involved with a number of Big Tech companies in Asia, providing a variety of financing structures to support their digital transformation.
