Interview, Podcast
Molly Alter, Partner (Northzone), $4B AUM | Software for Hardware, EU vs USA, Vertical AI, VC Biases
- European VC funding is projected to become the third most active year ever in 2024 if the current pace continues, with France emerging as a key AI hub and historical net IRRs for European funds outperforming North American ones over 10 and 15-year horizons.
- While the U.S. market offers higher volume and valuations suitable for hype-driven strategies, Europe presents a superior environment for generating returns for limited partners alongside exceptional founders.
- Regulatory restrictions are expected to catalyze innovation in sectors like fossil fuel and energy storage, paralleling how environmental rules have driven cleaner technology growth.
- Macro trends are pushing manufacturing teams toward efficiency, while leadership transitions at hardware firms from older executives to Gen X and millennials are accelerating the adoption of modern, cloud-based software tools.
- The AI hype cycle is creating an immediate imperative for hardware manufacturers to implement modern workflow software to avoid obsolescence, driving excitement in the software-for-hardware space and simulation/CAE tools.
- Existing technical debt in hardware software development and the historical dominance of tools like MATLAB and Simulink in firmware development are expected to be disrupted by an accelerating pace of execution.
- Software for hardware companies are anticipated to utilize program management as an entry point for "land and expand" strategies, while Workflow SaaS will serve as the critical delivery mechanism for AI differentiation and system engagement.
- Despite slowing SaaS growth rates and declining public multiples, the sector is not facing decline; instead, a "new wave of SaaS" is being identified for investment as a hybrid model combining AI, fintech, and B2B marketplaces.
- GovDash is characterized as a resilient, defensible hybrid SaaS business expected to scale significantly over time, with plans to potentially integrate procurement and billing functionalities to manage government supply purchasing.