To catch you up, here's what you need to know from last weekend's news.
We've tried to highlight some of the most interesting news, but we're sure we missed some. Feel free to let us know what other stories caught your eye!
1.EU Eyes a New Tech Champion, But It's No ChatGPT
Europe's tech industry is falling behind the US and China, with Alphabet, Microsoft and Amazon controlling most of the global cloud market. The reason is not just regulations like GDPR, DMA and DSA, but also the high cost of failure in the EU. To address this, former Atos executive Olivier Coste recommends reducing the cost of failure, either by introducing a "flexicurity" approach to tech jobs or by paying European researchers better.
2.Private Equity’s Crafty Lawyers Offer Universal Lessons
The article warns that during the boom in private-equity deal financing, debt investors accepted weaker safeguards in loan contracts due to aggressive contractual terms pushed by lawyers representing private-equity clients. Regulators are investigating these practices, which led to a loss of power over due diligence for investors. Investors are advised to be cautious and do their own due diligence or follow someone reliable.
3.Revolut Claims Profitability as UK Banking License Hangs in Balance
Revolut, the British fintech company, is expected to sign off on its 2021 financial accounts, a move that could take the company closer to acquiring its UK banking license. The audit report, which is expected to confirm that the company is profitable, could help clear the way for Revolut to obtain a digital banking license from regulators, the Financial Conduct Authority and Prudential Regulation Authority. However, Revolut has faced pressure to improve its internal financial reporting controls in the past, and the company has had to make upgrades to “unsexy things like its back office and controls” to meet regulatory standards.
4.British Business Bank Chief Sees UK Firms Avoiding Default ‘Armageddon’
British businesses have avoided a wave of defaults despite concerns last year of an "Armageddon" scenario, according to the CEO of the British Business Bank, Louis Taylor. The bank had warned of a potential increase in default rates following the chaos caused by the pandemic, but Taylor says the situation is improving as interest rates, inflation and energy prices appear to be reaching their peak. The Bank of England has said default rates could still rise, but Taylor believes the situation is not as dire as feared. The bank's venture capital arm has also invested £1.3bn ($1.6bn) in young businesses over the past five years.
5.Finland Ramps Up Incentives in Competitive Race
Finland's audiovisual industry has grown over 40% in the past five years due to its upfront cash-back tax incentive, making it a popular destination for foreign co-productions. Recent productions, such as "A Rare Grand Alignment," showcase Finland's ability to create large-scale virtual sets for co-productions.
6.Tesla cofounder's advice to EV startups: Don't try to be Tesla
Martin Eberhard, the cofounder of Tesla, has some advice for companies looking to enter the electric vehicle (EV) space: don't try to compete directly with Tesla. Eberhard says too many companies are trying to beat Tesla at its own game, but that it's a recipe for failure. He cites Lucid as an example of a company making a mistake by trying to compete head-on with Tesla, saying they're making the same exact model. Instead, Eberhard suggests that companies should focus on different market segments and emulate Rivian's business plan of finding a new, lucrative market, such as the F-150 truck.
7.The appeal for executives of having private equity owners
A recent academic paper has explored the differences in how CEOs are selected at public and private companies. The study found that private equity firms sacked the existing CEO 70% of the time in nearly 200 deals between 2010 and 2016 above $1bn in value, and among the successor CEOs, more than 70% were external hires. The pay for CEOs at PE-backed companies was also highly lucrative, with private equity CEOs potentially earning between $9m and $17m annually. With public company investor activism heating up, working on behalf of a private equity firm could be an attractive if less visible place to manage a business.
8.Newly Public Companies are Going Back to Private
The IPO craze of the pandemic has slowed down, and some companies are going private again, even at a loss. The uncertain market, rising interest rates, and inflation are making investors favor low-risk options like bonds, while some companies are reassessing their attitude towards growth and risk. Meanwhile, US Treasury bills are seeing attractive returns, but a failure to raise the debt limit could lead to default.