Inside Tech Stars 2025: From IPOs to defense tech

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Mose Adigun: Hello and welcome to ‘What's the Deal?’ our investment banking series here on J.P. Morgan's Making Sense. I'm Mose Adigun, head of EMEA Tech M&A, and I'm excited to bring you insights from this year's TechStars conference, hosted in London this October. Joining me are three of J.P. Morgan's experts, Rosh Wijayarathna, co-head of EMEA Innovation Economy, David Bauer, co-head of America's Equity Capital Markets, and Matt Gehl, co-head of EMEA Tech Investment Banking. Together, we'll discuss the most important themes, innovations, and market developments that emerged from the conference. So let me start with you, Rosh. Which emerging technologies or innovation themes from the conference stood out to you, and how are they impacting the tech ecosystem today?

Rosh Wijayarathna: Firstly, thank you very much for having me, and it'll be no surprise to anyone that the underlying theme going through the conference was artificial intelligence. 40%, or just under 40% of venture capital being deployed into the European VC ecosystem has been on artificial intelligence, and that's still up from last year. I find that obviously very interesting. It's not particularly new for anyone to hear that AI is the thing. I try and go downstream and look at, okay, where is that then going to impact the VC ecosystem? The other thing that came out of the conference was the amount of focus on data centers, the amount of focus on GPUs, and that's where we're seeing a lot of activity both in the UK and on the continent, whether it's the Nordics, whether it's Italy, and that's also getting a lot of government support. Going downstream again, when you think about energy, nuclear power, we're seeing government's focus again on how can we accelerate the progress of being able to build small modular reactors to power the data centers. Again, nuclear power, data centers, of course it's thematic. People are talking about it already. What was really interesting that came out of the conference was the discussion on quantum computing and the energy efficiency off the back of quantum computing. And actually, if we crack that nut, the combination of quantum computing and AI coming together will be hugely powerful. And so for me, on that side, AI coming down to data centers, coming down to GPU, and then energy, and then quantum computing, they're all interlinked. Probably the only other sector that was highly thematic that we're seeing both in industry and at the conference is defense tech. That's now 4% or 5% of venture capital spend. Historically, it was 0.5% to 1%. And specifically in Germany, that is now 10% of venture capital spend.

Mose Adigun: Wow.

Rosh Wijayarathna: So it's really accelerating. It's the highest growth spend in terms of venture capital deployment we're seeing in Europe. German government have said they're going to increase percentage of GDP on defense by up to 5%. A 1% increase in spend represents $50 billion of spend coming to the defense sector. That won't all go to primes. In the conflict in Ukraine, over 9 million drones are being deployed for that conflict. That is not being provided by the primes. They don't have the agility yet to produce that level at that speed. And that requires fast growth technology businesses to be able to mobilize very quickly to what is the new face of warfare. Defense tech is a huge sector as well. I expect that to continue to grow.

Mose Adigun: And it's great to hear those big numbers coming from the European ecosystem as well. That's something that I found particularly interesting and pleasing to hear out of the conference. On that tack, Rosh, what did you observe about founder and investor approaches to growth and capital raising in today's innovation economy?

Rosh Wijayarathna: If we go back a step and just look at the macro themes, if we ignore 2021, venture capital deployment in Europe is averaging around $60 to $65 million for the last three years. We're on track again for that this year. That's well above pre-pandemic norms. Venture capital deployment is at essentially an all-time high, ignoring 2021-2022. Now, what does that mean for founders and the conversations that they're having? Over the last two or three years post-pandemic, we haven't seen a lot of exits. That puts a different kind of pressure on investors, their LPs, and requires a lot of patient capital. The way that investors are approaching it, and it's really important, the relationship you build between the investor and the founder. And I spoke about this a little bit, but I think the average relationship between a venture capitalist and the founder is about 10 years.

Mose Adigun: Yeah.

Rosh Wijayarathna: The average marriage in the U.S. is seven years. The amount of due diligence you put into your partner, I guarantee you, is a lot higher than the amount of due diligence you put into your investor.

Mose Adigun: When you put it in that context, yeah, absolutely.

Rosh Wijayarathna: And so especially if you're going through economic cycles where it's unpredictable, now it's about windows, you need to know the investor that you've got on board completely buys into your vision, completely buys into what you're building, and is not necessarily focused on when can I get liquidity out for my LPs. So that relationship needs to be really, really important. The other thing that we've seen, and this is quite a normal trend within Europe, is that growth capital is typically found outside of European VC. There are some, it's either U.S. VCs, it's either corporates, it's sovereign wealth funds. And we've seen that in some of the big billion dollar or billion euro raises in AI and infrastructure. Those investors have come from corporates, it's come from U.S. asset managers, U.S. VCs, sovereign wealth funds. There's an absence of European growth funds. That's okay. Our ecosystem are 20 years behind the U.S., so we can't expect to have multi-billion dollar asset under management funds yet. That will come once we've gone through a few more cycles of investment, exit, invest, exit, and these funds can go back to market. The challenge, though, at the moment is that with a lack of exit environment that is starting to come back, is that fund raisings, as in the actual funds raising themselves, is at a 10-year at least low. And the very best funds will continue to do okay and do well because they've got the track record. They can afford patience with their LPs. The earlier funds, the emerging funds, are probably going to struggle, unfortunately. And that's why we're seeing such low fundraisings. But in terms of how companies should be approaching it, with the dearth of exits that we've seen over the last two or three years, well, pandemic, it was all about growth while capital was cheap. Capital got expensive, so it was all about profit. We're now at a point where capital is coming back and it's about rule of 40, rule of 50. So companies are now gearing to, okay, something like 10% margin, 30% to 40% growth for the optimum valuation. They're not going to be able to time when they can exit because the market kind of defines that.

Mose Adigun: That's right.

Rosh Wijayarathna: But they need to be in the absolute position where they can pull the trigger as and when the markets are open.

Mose Adigun: Being ready and having the flexibility to choose your window.

Rosh Wijayarathna: 100%.

Mose Adigun: Yeah. Thank you, Rosh, for joining us on the podcast today. Next, we're going to talk to David Bauer, co-head of America's Equity Capital Markets. David, thank you so much for being here with us today.

David Bauer: Thanks Mose, thanks very much for having me. Appreciate it.

Mose Adigun: What's your outlook for tech IPOs and public market activity following the conference discussions?

David Bauer: Yeah, look, even before I answer that question, I think you could just feel the energy at the conference this year. It was buzzing with investors, companies. There was a notable change in dialogue and sentiment just around not only presenting companies and the big forums that we're hosting, but even just the conversations in the hallways. You could tell that there was a notable shift towards markets are feeling good, investor sentiment feels robust, let's make something happen and let's figure out ways to put capital to work to help fund companies to continue to grow. And so I think based on the past few years, you could just feel that at the conference, which is just great. So from overall sentiment perspective, felt very positive. And I think that translated into the kind of conversations we were having all week. The IPO pipeline remains strong. I think we're seeing a good follow through of both companies coming to market, investors making money. What started off as a AI crypto fueled IPO boom earlier this year has really brought into all sectors of tech. And I think we're encouraged by that. And look, I think there's a clear sentiment around EMEA right now that the tech landscape is shifting. I think people are looking to put money to work in the EMEA tech sector. And while the U.S. versus European listing is always a debate, I think what's great is that there's still a real pride of having European tech and having a European tech growth economy that feels like that's coming out right now. So I'd say generally skewed far more positive than we've seen in previous years. And look, just to put some perspective around that, to give everyone some data points, you know, coming out of the U.S., September was the busiest month we've seen since November of 2021. We saw 20 tech IPOs price raising just north of $16 billion, more than double last year's volume, which is incredible. And I think importantly, investor conviction remains very high and robust. And what we're seeing is the nice virtuous cycle of the IPO market working where deals are pricing well, issuers are being rewarded with relatively healthy valuations, but the market is trading up, investors are making money, and that keeps the IPO cycle going. So I think as long as we're being, you know, smart about pricing deals, putting the right syndicates together and the right allocations, I think that bodes well for the forward.

Mose Adigun: Absolutely.

David Bauer: The good news is we've seen healthy and good companies come to market. And so, you know, as you think about strong top line, margin expansion, good growth, visibility into the next kind of 24 months, those are the types of stories that the public markets wants to invest in. And so you're seeing that momentum build. I expect, and we're feeling it real time, as I mentioned at the conference, the pipeline remains active through the end of this year. We could see a handful of deals come to market through the balance of 2025. The amount of companies getting ready right now into 2026 is as busy as it's felt quite literally since 2021 as well. And so it feels like we're setting up for a pretty good runway into 2026. And then lastly, just as it relates to IPOs, I have to mention something I'm really proud of. J.P. Morgan is by far leading the way around the new issuance trends right now. We are number one in tech IPOs in North America. We're the number one global ECM bank, and we're the number one ECM bank in both Europe and the U.S. And so, you know, our market share is very real. We are feeling that we have great connectivity to investors, and we're able to give our issuers differentiated insight into how to come to market and how to set themselves up for a public market debut. And you can look at over the last couple of weeks, some of the notable ones that we've led, including StubHub, SMG in Europe, Netscope, Pattern, across the tech landscape, J.P. Morgan's a leader.

Mose Adigun: Let me double click on that AI point and it was a point that Rosh also mentioned. How are you seeing the focus on AI driving investment in the broader market?

David Bauer: Yeah, no question. And look, I think AI is top of mind for everyone right now. Anybody coming to market, has to have a lens towards what their AI story is. However, I think what's encouraging from our perspective is we are seeing a broadening of the market and investors looking towards other subsectors within tech and not just pure AI, as we saw earlier in the year. While certainly the VC community is deploying dollars in AI right now, we are seeing the public markets more diversified and looking at internet, software, consumer-oriented and fintech type sub-verticals within tech. And so I think that gives me confidence that there is a broadening of the market and it is not so just narrowly focused on one subset of the capital markets.

Mose Adigun: So David, in the current environment what advice would you give to tech companies preparing for an IPO or capital raise?

David Bauer: Yeah, it's funny. Companies right now are at a pretty interesting point where growth is coming back, growth is real, investors are paying for growth. And so I think management teams need to be dual-minded in that they need to be heads down running their business, ensuring that they're executing well, but at the same time spending the appropriate balance with investors and with the market, educating on their stories. One of the things we always tell our companies is that it's better to start earlier from an engagement perspective with investors and be able to map that out over a longer period of time versus having short bursts of a lot of activity where it detracts you from the business in a meaningful way. And so one of the things that we're really good at, at J.P. Morgan is matching enough companies with the right pockets of capital, managing their time, managing their schedules, putting them in front of the right investors so that they're engaged with people that are action-oriented and are looking to deploy capital. And I think the biggest thing too is investors want to see how companies execute. And so as you can map out, we met with an investor six to nine months ago, you revisit and you say, Hey, here's what we told you we were going to do. And here's what we delivered on. Here's how the trends of the business are progressing. So investors can really get comfortable with the story, really feel like they understand the management team. And so when that moment comes to say, Hey, we're ready to do a private round or, Hey, we're ready to go public and go to the IPO market. Investors feel very comfortable with the track record with the management teams. And look, a lot of that comes from having the right KPIs and showing sustainability of growth profitability scale is still very much a factor in today's market. And so wanting to show that there's an ability, not just at this moment, but in the future to really scale up and become a midsize market cap company. And so helping companies make sure that they're presenting that to the market in the right way. And then look, the big debate around Europe is, where do you list? And is it a European domestic listing? Is it coming across to the U.S.? Is it a combination of the two? There's no one right answer. It's a fluid and dynamic conversation that's going on. But one that J.P. Morgan is very well positioned to give the right advice, just given our global lens and our, frankly, agnostic perspective. And it's trying to find the right answer for the companies.

Mose Adigun: David, thank you so much for being here with us on the podcast.

David Bauer: Awesome. Thanks so much for having me.

Mose Adigun: Next up we’ve got Matt Gehl, who is co-head of EMEA Tech Investment Banking. Matt, thank you for being with us here today. What were the most notable trends in tech M&A and investment banking discussed at the conference?

Matt Gehl: Thanks, Mose, good to be here today. Couple of things I'd highlight. First was the return of the strategic buyer in scale. We've seen strategic buyers doing more tactical, smaller deals over the past several years, but really this year we've seen strategic buyers coming in and paying large multiples in large size for technology companies, whether it started with Google buying Wiz earlier this year up through the DoorDash acquisition of Deliveroo, which closed just before the conference. The strategic buyers have become a very viable exit route and actively discussed and talked about by everyone throughout the conference. The second thing has been the return of the IPO, what that means for the exit market. It really provides an incremental alternative for an M&A deal. In many cases, you might only have a few buyers for your business, whether they be private, equity, or strategic. So bringing the IPO threat, even if it's not really the first preference into the mix, has really changed the dynamics for an exit process and given us just that incremental competitive attention. Final thing is private equity as a buyer for these businesses. We've seen private equity buying private equity businesses, taking companies private for the past couple of years. We're increasingly seeing private equity spend time on venture capital-backed portfolios. We had a huge number of private equity guys at our conference meeting these VC-backed companies. These VC-backed companies are now much larger, in many cases quite profitable. And so we're gonna see private equity become an increasingly likely exit route beyond just a strategic buyer and IPO for some of these companies going forward.

Mose Adigun: Going a bit deeper on that dual track point you just mentioned, how are EMEA tech companies currently thinking about their exit strategies? Are most still looking towards a sale to a U.S. company or a U.S. IPO? Or are we seeing increased activity and optimism around European buyers and actually European IPOs?

Matt Gehl: So I think, yeah, answer is yes, yes, yes to all of those.

Mose Adigun: Yes, good!

Matt Gehl: But I think the biggest thing that's changed is the resumption of the IPO markets, which for some of the more sizable businesses gives them an alternative. In cases where you're a very large business, in some cases you're almost too big for some strategics, you're too big for some private equity. So adding in the IPO threat is very helpful if there might only be one or two strategics or three or four private equity guys that can buy you. See, the majority of private equity companies, of course, would still prefer to sell the company because it could provide a full exit for them versus an IPO that's still a two to a three-year exit process after the IPO, given the need to sell down. So the preference is there, but the IPO is providing a really attractive option. As far as the strategic, I don't really ever have the discussion about whether it's gonna be a U.S. or a European buyer. To be honest, if you're a seller, you don't really care. The only time that really matters is when you start talking about geopolitical risks. And so in some sensitive areas, like, for instance, in semiconductors or AI, people will have a preference to potentially bring in a European buyer for a European seller with the thinking that potentially either the U.S. or China will not view it as negatively if it's a Europe-to-Europe deal versus if Europe is selling to a U.S. buyer, potentially China would see that as a bit more adversarial, or if you're a European business selling into an Asia-backed buyer, maybe the U.S. is gonna get more involved. So it's much more around that rather than I'd prefer to sell to an American or a U.S. company. They'd all, for the most part, like to sell for the highest price if you're an investor. And if you're a CEO, you like to sell the business to a combination of the highest price and the best home for your business and for your employees going forward.

Mose Adigun: Great, thank you very much, Matt.

Matt Gehl: My pleasure, thanks for having me.

Mose Adigun: That wraps up our discussion of the key themes from the Tech Stars Conference 2025. We covered the latest in Tech M&A, innovation trends, capital raising strategies, and the outlook for public markets. For a deeper dive, be sure to check out our key takeaways article. Just follow the link in the episode description on jpmorgan.com. Thank you to our guests Matt, Rosh and David for sharing your perspectives, and thank you to our listeners for joining us. Until next time.

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