As we have entered 2023, many speak about it as a tricky year for Venture Capital. There are definitely reasons for such statements, as we saw the fall of VC investments throughout last year and the trend is obvious.
In the third quarter of 2022, VC funding totaled just $81 billion, according to Crunchbase. That’s 33 percent ($40 billion) less than the previous quarter, and 53 percent ($90 billion) less than in 2021. As Forbes puts it, “some people are calling 2022 the year the party ended. Others are calling it the hangover, or even the new normal. What we can all agree on is that 2022 was a year of reckoning for the venture capital (VC) industry.”
Looking at the current tech trends and VC predictions, some assumptions are easy to make: AI will thrive, supply chain problems aren’t going anywhere, and climate tech visibility will grow.
In terms of investments, experts agree that of all rounds, it’s seed valuations that are likely to remain high. As Mar Hershenson, Managing Partner, Pear VC puts it, “Seed valuations will remain high, because everyone sees seed as the lowest risk spot in the market.”
Another interesting comment by Mar Henshenson, as quoted by Forbes:
“Recessions are a great time to build significant companies (discontinuity leads to opportunity). Generally in a recession the lack of money forces people to be more creative, solve only problems that people are truly willing to pay for (even when the budget is tight), and be more frugal, only spending on things that move the needle.” And as Forbes flipped it, “the downturn will push startup founders to build painkillers, not vitamins.”
And while those opinions are interesting, insightful, and they sure have their merit, where does it put startup founders? And what does it take to actually “build painkillers, not vitamins”?
At Bigspace Investments, we are convinced that strong ideas and dedicated teams will prevail. And while ticket sizes may decrease and companies will be forced to be more frugal with their spend, this is the time to be creative and come up with great solutions on a smaller budget.
In terms of the industries, the utmost potential will remain with SaaS, Fintech, Cybersecurity, Legal & Legaltech, MedTech, Apps and Marketplace companies. Climate Tech is coming strong into play, and we are excited to see the new project pitches.
So what to expect in 2023 Venture Capital? Times may be tough, but the rule of thumb remains: those who are dedicated, work hard and think outside the box, are the ones who will ultimately succeed. If this sounds like you, reach out to Bigspace Investments to discuss your high-growth tech product.