“The world has changed. And I have the impression that it is not yet completely clear how radically it has changed ”. Carlo Gualandri he is the founder and CEO of Soldo, a fintech startup he founded in London in 2015. After the last investment round in July 2021, Soldo has reached a valuation of 1.7 billion dollars. Gualandri is one of the pioneers of the digital economy in Italy.
He co-founded Matrix e Virgiliolaunched Digital Game (sold in 2015 for 115 million) and participated in the startup phase of Fineco in 1999. He experienced from within the swelling and bursting of the first bubble that involved technology companies, that of 2000. And today he is convinced that another bubble on technology has already burst, with effects that we will learn about in the coming months .
Gualandri, are we facing a new technology bubble after 20 years?
“We are in it. The bubble already burst two or three months ago. Until December, the technology sector experienced a powerful phase of growth on the markets. The money available seemed endless and players entered the market who did not know anything about technology companies, but had a lot of liquidity to invest. Startups were financed that received billionaire valuations without anyone bothering to understand if behind those companies there were the fundamentals to grow, or a real business model. A bit like it happened in 2000 “.
What happened now?
“It happened that the money ran out. That liquidity is gone. And that tech companies that have been financed with millions of dollars in recent years continue to burn cash because they have done so so far by pursuing an aggressive approach to the market. They could do it because after each investment round they imagined that others would follow, on even more important valuations. After the subrime crisis, the economy experienced 15 years of stimulus. And techs have driven the growth of equity and investment markets. But today, amidst the squeeze of central banks, little growth and inflation, there are no longer the forces to continue to support growth ”.
What clues make you sure the bubble has burst?
“Just look at the valuation of companies listed on Nasdaq: from December to today, those of companies that make serious products like Apple, Google and Amazon have collapsed (between 20 and 30 percent of the market value, ed); the technologies that have been listed in the last year as Affirm have come to lose 90% of their value. Startups valued in the billions are starting to lay off staff and reduce ambitions. Not to mention funds that have invested in technology companies such as Softbank or Tiger, which have recorded billionaire losses ”.
How does this remind you of what happened in 2000?
“The mechanisms are the same. Back then, however, the internet was still something new and madness was generated on this sector that led companies to billionaire valuations just because they added “.com” to their name. I was in my early thirties at the time. There was a phrase that was used to describe the climate that reigned at the time: long boom”.
That is to say?
“It’s all beautiful, the future goes in only one direction, everyone grows and will grow in a crazy way. This climate was well represented by the American magazine Wired. To read it then everything seemed perfect. It is in this climate that the conditions for the outbreak of the dotcom were created: rivers of money flowed into companies that had no prerequisite for growth, sometimes no idea to stand up ”.
Why hasn’t the technology market created antibodies in 20 years to prevent history from repeating itself?
“Do you want my personal opinion?”
I would like.
“There are no antibodies to greed.”
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Can you explain?
“These mechanisms on the markets have always been repeated. And it’s not just about techs. No one has ever learned anything from mistakes in the world of finance. Not because the operators are stupid, but because nobody gives a damn about learning. If a fund earns a percentage of the money invested, the interest of its managers is to have three-figure salaries by investing other people’s money. If they skip the bottom, they still earned three zeros for quite a while. They will think: I will be out of work, but I am a millionaire “.
However, this causes damage to funds and savers.
“Seen from a historical perspective, it is a hiccup. A lot of people will lose money, it happens, it has already happened. But there are also positive elements in this process ”.
Which?
“The market is as if it cleans itself of useless companies, overvalued startups, ideas with no future. As happened after 2000, many companies will go bankrupt, many will get hurt, but new companies will emerge and others will consolidate. Other Google will be born, other Amazon, while the follies like Pet.com at the time of the dotcom will disappear “.
In what sector do you expect the next ones to be born?
“My company deals with fintech: here, I believe the revolution of traditional finance made by the technological one has not yet been fully accomplished. But there is also the metaverse, although it is a term that for now means little and appears more marketing than anything else. Yet it moves in the perspective that internet consumption will be increasingly immersive and I believe that it will go in that direction “.
Which ones will disappear?
“Many innovations that have emerged in recent years make no sense. Or they are simply not sustainable. Do I really need a service that makes me order the fries in 10 minutes and bring them home? It is no coincidence that startups such as Gorillas and Getir are among the first to suffer strongly from this new phase of the market. Uber, for example, burned a lot of cash before realizing it was time to invoice. But what is the innovation of what is called the gig economy? In the case of Uber, the mere fact of calling a taxi via the app. Not to mention the thousands of rental bicycles that have ended up in landfills. The market has already begun to get rid of companies that did not have anything sustainable “.
Is there a difference between 2000 and today?
“There is, and it is the role of venture capitalists. They are sitting on billions today. And it’s not like they can tell their investors: well, we were wrong, get your money back. The money is still there. There will be months, maybe years when they won’t put them in new innovative companies, they will wait for the market to settle, for the bubble to deflate. Please note that at the moment no one has a new formula for evaluating these companies. But the situation will calm down and they will resume investing “.
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How will their approach change?
“There will probably no longer be the same criteria as before. No more streams of funding for business models that don’t know where they are headed. They will become more normal criteria, closer to reality ”.
Why hasn’t the most normal thing been done up to now, the thing closest to reality?
“The perceived always delays a little compared to what happens in reality”.
A bit like if you were living in a dream in the bubble phase.
“At the outbreak of the dotcom we woke up from a dream, from the belief that everything was wonderful.”
Some Italian venture capitalists believe that this new phase could be good news for Italian startups. Do you agree?
“The insularity of Italian startups has protected them from mega valuations. They remained small, they got a few investment rounds but with that money they managed to grow on their market without billions to waste. Today they are more protected, they could play a new game “.
However, many complain that in any case the money invested is scarce, it is difficult to grow in this way, it is also difficult to consolidate their business.
“This is true, Italian venture capital funds are small and have few investment rounds. And then there is also the unknown factor that you get a large company on the market and cancel the good you have done. Think of those Italian food delivery startups that disappeared when Deliveroo and Glovo arrived in Italy. So far these companies have been able to do good and bad times on the market because they had huge liquidity resources. But that time is over. To paraphrase a sentence of Marc Andreessen at the time of the dotcom, a new nuclear winter of the internet has arrived ”.