Dinner is Served: Investment Predictions for 2024

Published: 11 January 2024

By Douglas Hansen-Luke, Executive Chairman and Founder of Future Planet Capital (FPC) – Fund Manager of UKI2S

As we step into 2024 we wanted to reflect on what’s been going on here at FPC and particularly in the context of our early stage innovation-focussed fund UK Innovation & Science Seed Fund (UKI2S) . We’ve spent a lot of time discussing, exploring and working out how best to support the multitude of innovative ideas that our great founders of today are eager to bring to market. Because that’s my biggest finding thus far; your innovations are only as good as your ability to commercialise them.

So what happened in 2023?

Douglas Hansen-Luke
2023: The Big Shift.

At the end of 2022, cash inflow within the venture capital industry had dropped by 90%. Inflation was rapidly rising and interest rates were going up with it.

There was a profound sense of pessimism within the industry and so 2023 was spent working on existing portfolio companies – just trying to keep them alive.

Organisations needed to generate enough revenue to cover costs and break even with bridge rounds. Incredibly, many companies achieved that. I think it’s fair to say that the bleak clarity everyone had coming into 2023 set them up to over-achieve; the forecast under-promised, many ended up over-delivering.

It was a good year here at FPC – we grew our assets by 20% – mainly driven by investment from the government in their determination to commercialise and scale up… As for 2024… we will be very busy again but one issue will be top of mind.

The world of investment rests on what’s on your dinner plate.

“The climate crisis is a health crisis” – WHO Director-General Dr. Tedros Adhanom Ghebreyesus.

Climate change is no longer an existential threat for the decades ahead – it’s evidenced in the geopolitical realities we face today.

As we witnessed during COP28, some of the largest oil producers would not make commitments which specifically referenced the reduction of fossil fuels. And yet, the negative impact of continued fossil-fuel-driven climate change is undeniable – countries across the globe are facing water shortages, high levels of air pollution, financial poverty, loss of biodiversity and insufficient food security.

As a result, we’re facing crises of both environmental and human health. And it won’t stop there unless we focus on making drastic changes in one particular industry: food.

We must create sustainable food systems and work towards ensuring global food security, by disrupting and exploiting the innovation opportunities within the industry.

How can we do that? By increasing food system efficiencies. Reducing our reliance on fossil fuels, building clean energy into the infrastructure, increasing biodiversity, streamline operational processes and incorporate advanced technologies.

As Razan Al Mubarak, the U.N. Climate Change High-Level Champion for COP28 noted;

“Transforming our food systems is paramount to protecting nature, safeguarding food and nutrition security, and combating climate change.”

These types of global challenges drive FPC and everything we do as an impact-led, data-driven venture-capitalist. Which is why we’ve set our quarterly focus areas around Health, Oceans, Security and Climate Change. It’s all interlinked, and has the potential to help not only the UK but other nations across the globe to combat the biggest threat to humankind; climate change.

You can be patient with science, but we should never be patient with capital.

The UK government is planning to invest over £20 billion per annum on R&D, which is amazing. But less than £1 billion of that will be placed into commercially driven seed investment, bringing with it the risk that pure science will be emphasised at the expense of applied development and commercialisation. And as we’ve already discussed, the latter is critical if we’re to make serious progress in tackling climate change.

The UK has long played a game of patience and it’s time to change course – as we’ve seen before, overly patient capital comes with its own set of risks including founder fatigue and capital flight. That’s where UKI2S, the fund we manage for the Government, comes in; they inject that much needed commercial discipline into the development and expansion of science, to push it towards successful, impactful commercialisation.

2024, despite the still cautious market, could this be “The Year of Ambitious Growth?”

Thus far, the government and taxpayers have been funding venture and innovation in Britain. In our management of UKI2S, we want to build on what the British have already invested, by attracting private sector capital and foreign direct investment from sovereign funds.

With 45% of Britain’s GDP spent by the government and the nation’s brightest civil service recruits, it’s time to replicate that in the private sector. An essential component of our management of UKI2S is knowledge transfer – taking the very best ideas and tech from the government and its agencies to create high value, commercially successful companies – sharing is caring.

Food, founders and funding…

Thanks to falling inflation and interest rates levelling off, we ended the year on a high with a more positive forecast ahead, with potential to stimulate growth, increase revenue synergies, access industry-leading talent and expand into new markets through consolidation and M&A.

As a final note, I want to highlight the important role founders will play in achieving these climate-tackling ambitions. Those who thrive will have the adaptability, resilience and necessary skills to lead and grow teams. They must be willing to recruit the right people for growth, consider their impact through a global lens and work to define a strong product market fit.

If they have a strong drive for increasing profitability, creating exponential growth and realising outside returns, then it’s time to shrug off the pessimism, get your knife and fork out for a different plate of food – we have some really exciting years ahead of us.