FTI Consulting News Bytes – 10th March 2023
With International Women’s Day this week, we begin by first looking at how female founders are still held back by a glass ceiling in which the vast majority of VC funding goes to male counterparts. We then turn to look at how recently listed technology groups in the US have burnt through more than $12bn of cash in 2022, before moving on to discuss AI’s impact on journalism – with The Express and The Mirror publishing their first articles written using artificial intelligence this week. Finally, we look at how crypto-bank Silvergate plans to wind down operations in the face of turmoil in digital currency markets, before finishing with the news that the Dutch government will restrict exports of some semiconductor technology to “protect national security.”
This week’s news
The glass ceiling and its hold on female founders
Against the backdrop of International Women’s Day this week, a Reuters Breakingviews column explores the ways in which the glass ceiling that holds back female entrepreneurs “remains intact.” Despite progress being made in the two decades since boardroom quotas were first introduced, journalist Lisa Jucca notes that female entrepreneurs capture only a fraction of available venture capital cash. Here, she discusses how although female business founders made up 40% of the total in the United States in 2021, a percentage that has been relatively unchanged since 1996, companies founded by an all-female team in 2022 captured only $4.6 billion, or just 2% of total US venture capital money, according to the PitchBook-NVCA Venture Monitor. Whilst US startups with both female and male founders did better, securing 17.2% of the venture capital funding, the piece notes that new companies run by all-male teams continue to retain the biggest share. Lisa further points to a 2019 study by the Boston Consulting Group, stating that “If women and men were given the same chances to found and support a business, it could add up to $5 trillion to global GDP.”
IPO cash crunch
It was reported this week that recently listed tech groups in the US had burnt through more than $12bn of cash in 2022. According to Dealogic, 150 tech groups raised at least $100m each through IPOs in 2020 and 2021. But with resulting proceeds running low, many of these firms now face a choice between “expensive capital raises, extreme cost cutting, or takeover by private equity groups and larger rivals,” according to the Financial Times. In light of the recent market downturn, there has been a renewed focus on profitability and cash generation in tech circles that have traditionally championed top-line growth. However, an analysis run by the FT showed that of the 91 recently listed tech groups that have reported results in the year so far, only 17% reported a net profit. Around half were lossmaking at an operational level during the year, with an average share price decline of 35% since listing. According to Layoffs.fyi, at least 38 of these tech groups have announced job cuts since listing. Private equity continues to circle many of these names that need to scale for growth through combinations into platform businesses, reported by the FT. In the fight for capital, recently listed tech companies must now prove they have a viable product or target market to ensure a sustainable financial future.
AI takes on journalism
This week, UK news outlets The Express and The Mirror published their first articles written using artificial intelligence. According to The Guardian, the articles were published on local news site InYourArea.co.uk, one of which was “Seven Things to do in Newport”, after Jim Mullen, the chief executive of Reach, spotted an opportunity to automate content based primarily on data and lists. Here, Mullen alleviated concerns of the impact of AI on journalists, saying they should not fear being replaced by machines.“There are loads of ethics around AI and journalistic content,” Mullen said. “The way I look at it, we produce lots of content based on actual data. It can be put together in a well-read [piece] that I think AI can do. We are trying to apply it to areas we already get traffic to allow journalists to focus on content that editors want written.”
Another blow for crypto
On Wednesday, the go-to bank for the crypto industry, Silvergate, announced plans to close operations in the face of market turmoil for digital currencies. Having evolved into the largest crypto bank in the US (with up to $14bn in customer deposits in the second half of 2021), the recent collapse of FTX, which delivered shockwaves across the crypto world, sent Silvergate’s fortunes tumbling. According to the Financial Times, the bank “long used its ties to FTX as a way to market the bank to crypto clients.” Following the FTX fallout, Silvergate’s customers had rushed in recent months to pull money out of the bank, with up to $8bn in outflows back in January, forcing the bank to sell assets at substantial losses to fund the run. Sherrod Brown, chair of the Senate Banking Committee, commented this week that “today we are seeing what can happen when a bank is over-reliant on a risky, volatile sector like cryptocurrencies”, reported by the FT.
Netherlands moves to restrict some semiconductor exports
Amongst others, CNBC this week reports that the Dutch government is pressing ahead with export restrictions on “advanced” semiconductor manufacturing equipment, following political pressure from the United States. The piece contends that the Netherlands has recently become “embroiled” in political tensions between the United States and China, with the former “looking to ensure that the most advanced chip technology is not used by Beijing.” The article highlights that the nation is home to ASML, one of the world’s top manufacturers of machines that make semiconductors, and adding the US’ concerns about the extensive military and advanced artificial intelligence applications of the chips. “Given the technological developments and the geopolitical context, the government has come to the conclusion that the existing export control framework for specific equipment used for the manufacture of semiconductors needs to be expanded, in the interests of national and international security,” the country’s Foreign Trade Minister Liesje Schreinemacher said in a letter to parliament on Wednesday.
Top Tweets of the week
- Bill Gates, co-founder of Microsoft: Throughout our work in global health, technology, innovation, and climate change, we see the essential contributions of women everywhere. https://t.co/2EtdISBmg2
- Mark Gurman, Chief Correspondent for Bloomberg: NEW: Apple is re-shuffling the management of its international businesses to put a bigger focus on India, which could be the company’s next China. That comes after its VP of Sales for India, Eastern Europe, Middle East, Africa and Mediterranean retired. https://t.co/kupTKUSx9l
- BBC Panorama: Dozens of current and former Twitter employees have spoken out – some for the first time – about the chaos at the company since Elon Musk took over BBC Panorama with @mariannaspring is on @BBCOne and @BBCiPlayer at 8pm tonight https://t.co/lDzrV0QPnB https://t.co/Hgq8DikU3p
Number of week
100m – The number of daily active users on Microsoft Bing, following the launch of its AI-powered Bing Chat feature – according to The Verge.
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