Megabuyte CEOBarometer podcast with Ian Spence Megabuyte

Over the last year, I've been working on a major research project on AI strategy. The genesis of this research programme was an AI-focused panel session at the 2023 Megabuyte CEOStrategy Offsite. The depth of audience engagement in that panel session, but also what appeared to be a lack of clear thinking around strategy on AI, left me in little doubt that there was more research needed in this critical area.
So I set about sense checking that interpretation with multiple CEOs. And the consensus was clear - there is a strong desire, or perhaps imperative is a better word, to advance AI strategies despite prevailing uncertainties. The question, of course, is how? So, leveraging Megabuyte's expertise in transforming evidence-based analysis into actionable insights for CEOs, we set out to provide a contextualised AI strategy framework for the boards of UK scale-up and mid-market tech companies.
The objective for tech companies in applying this framework is to optimise shareholder value by leveraging AI in the most effective and appropriate way, focusing on its integration into product strategy, operations, and also into corporate strategy. Our research at Megabuyte indicates that the UK tech sector is entering a phase of disruption as seismic as that of the early 2000s.
In this context, strategic decisions made in the next two to three years will have undoubtedly have a disproportionate impact on shareholder value over the medium to long term. The future certainly presents both vast opportunities but also significant threats to growth and valuations. The key question is how we can determine what good looks like in terms of AI strategy.
At Megabuyte we're privileged to have unique access to some 500 tech company boards here in the UK, and over the past year we solicited the views from many of the CEOs and CTOs in that network, and we triangulated them with our own research in order to answer this vitally important question. Our Strategy Framework Report synthesises insights from these interviews along with our own research and is now available to download free of charge from our website.
In this special episode of the Megabuyte CEOBarometer, I will talk you through key takeaways from that report. But there's more in store. This report serves really as just Phase One of our research. The next step is to apply our framework to key technology sub sectors and delve deeper into the themes and get some more detailed insights within those parts of the market. And that will be for the benefit of our subscribers.
If you're already a Megabuyte subscriber and you're interested in participating in this element of the research, please just do drop me a line or contact the person you speak to most frequently at Megabuyte. I fundamentally believe that this is the single most important strategic decision that every tech company, and indeed every company full stop, will face over the next decade.
 

In April, some familiar trends became more pronounced in the UK tech sector - the most striking of which was the increasing juxtaposition of confidence levels between private equity and the capital markets. There were no fewer than four billion-dollar private equity deals announced - the Darktrace P2P and SBOs from Focus, Rimes, and Zellis – with only three small follow-on offerings in reply from the stock market. Soggy share prices once again only served to underline the stock market gloom, even if we did outperform NASDAQ for a change. Venture capital continues to bump along the bottom with another very quiet month for deals, as does M&A with another sub-50 transaction month, although both of those areas are actually showing underlying improvement if you look hard enough. Meanwhile, trading news from UK tech companies continued to be mixed, but, here again, the trend is gradually improving.
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Spotlight
Get involved in our AI Research Project 04m 18s
Your Monthly CEOBarometer
News Analysis 06m 06s
Capital Markets 14m 42s
Private Equity 18m 08s
Venture & Growth Capital 23m 08s
M&A 25m 26s
 
 

March was a busy month for public company results, painting a solid picture overall.  Nonetheless, there were notable exceptions as share prices and public company valuations remained stagnant. Looking at deal flow, a superficial analysis of the data suggests that activity levels in March mirrored those of January and February – and were notably lower than the levels achieved in Q1 2023. While this observation holds true, it overlooks some crucial underlying trends, the most striking of which is the significant surge in private equity activity, with deals up 2.5 times from March 2023. Similarly, although M&A deal statistics were generally lacklustre, this masks some really interesting M&A activity in the software sector, particularly in fintech. Venture capital fundraising rebounded after an exceptionally poor February, with fintech deals also playing a significant role.
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News Analysis 04m 55s
Capital Markets 12m 47s
Private Equity 15m 07s
Venture & Growth Capital 20m 25s
M&A 23m 59s

February in the UK tech sector continued to prove the notion that downturns are sudden and universal whereas recoveries are slow and patchy.
While some companies report improved trading, others are still finding it hard going, especially those focused on the financial services sector. Share prices were weak in the UK but much stronger in the US, evidencing an emerging (and worrying) trend that the UK is not benefiting from the AI bounce. Deal volumes remain subdued, with similar trends to the previous month with solid private equity numbers, ongoing weakness in M&A volumes, especially in ICT services, and essentially no fundraising activity in the capital markets. Meanwhile, February was a record low month for VC fundraising as later-stage deals completely evaporated but there is increasing evidence of an underlying recovery giving confidence for improved deal flow as we move through the year.
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News Analysis 05m 05s
Capital Markets 11m 44s
Private Equity 17m 49s
Venture & Growth Capital 21m 56s
M&A 24m 26s

It has been a rather subdued start to the year in most parts of the UK tech sector, but the overall picture does seem to be improving.
Trading news, of which there has been plenty, is broadly positive with the emphasis very much on utilising operational leverage to build back to the Rule of 40. Share prices on both sides of the Atlantic consolidated recent gains, but UK stock market corporate activity is still at rock-bottom. Once again, private equity activity was robust with SBOs leading the way, while VC and M&A activity continued the stable trends established in the last few months of 2023.
While it remains a bumpy ride, the recovery does seem slowly to be gathering momentum.
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News Analysis 04m 54s
Capital Markets 09m 47s
Private Equity 13m 41s
Venture & Growth Capital 19m 41s
M&A 23m 56s

As we kick off 2024, this month’s Megabuyte CEOBarometer follows a slightly different format.
In addition to reviewing all of the key share price and corporate activity trends for 2023, this month’s show is all about looking forward to the coming year and beyond. We present on our 10 key predictions for 2024, exploring tech demand trends, valuation dynamics, and the outlook for corporate activity. Focused on actionable insights, we also share five key recommendations for tech company Boards looking to capitalise on these trends.
So what of 2023? While the recovery was slower than expected to get going, the signs were there towards the end of the year, with stronger share prices and increased secondary buyout activity coming through.  As we look forward to 2024, we expect those signs of recovery to gather momentum, but there will undoubtedly still be bumps along the way given a patchy macro-economic recovery, ongoing geo-political uncertainly and continuing high interest rates.
So what will equip UK tech companies to successfully navigate those choppy waters as we head into the second half of the decade?  Our view is that it is those companies with progressive Chapter 2 and AI strategies that stand to take the lion’s share of the growth and attract premium valuations.
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2023 Year in Review 01m 53s
     - Share Prices 01m 53s
     - Deal Activity 05m 18s
2024 Key Trends 12m 40s
5 Key Recommendations for Boards 28m 46s