"While we have many reasons to be optimistic, it is evident that the current trends in the venture capital market provide us with even more."
The year 2020-2021 has been filled with difficulties and enormous instability. Growing fund sizes, a rise in the number of venture deals, and an emphasis on diversification have become trends in the venture capital sector that is here to stay and will impact investment decisions in the future.
"During the first quarter of 2021, global venture funding managed to reach an all-time high at $125 billion."
And it's no wonder that the venture capital market is more competitive than ever. That also means trend lines in this area affect which companies and industries will be dominant in coming years. In this article, we will discuss the top trends affecting the venture capital market right now.
ALTERNATIVE DATA
For some time already, investors have made decisions based on more than simply traditional sources of data such as press releases and financial statements. The element of the strength of alternative data stands in its variety. From credit and debit cards to social media, and satellite data to online job listings, almost anything can become a valuable source of information for investors.
Moreover, alternative data is a trend that is here to stay, since as the world changes, new forms of data develop to reflect it. So, this trend will most probably continue to influence venture capital in 2022 and even beyond.
MOVING TO ONLINE
The pandemic revolutionized the VC market's normal routine, and many fundraising procedures, events, startup-investor interactions, and even finalizing contracts and signing investment agreements are now taking place online. Market participants see this emerging trend as a good time-saving opportunity: startup companies have the opportunities to meet with more investors from all over the world, while VC funds use digital advancements to quickly analyze startups and build solid long-distance relationships that are challenging to handle in the offline world.
AUTOMATION AND TECHNOLOGY ADAPTION
People have always been excited about new technologies that they can learn to better their lives. Businesses are also increasingly depending on automation to improve productivity and remain competitive. As a consequence, the fintech sector has experienced a recent surge in market success, with many firms and routine customers benefitting from the industry's massive advancements.
CRYPTOCURRENCY
With a predicted worldwide blockchain industry of $39.7 billion by 2025, cryptocurrency is unlikely to fade away any soon. Its rising market size classifies it as a trend in and of itself. VCs have determined that cryptocurrency provides a more alternative financial strategy, as it's not as monitored as traditional investing. This strategy has proven to be highly beneficial for both VCs and businesses searching for more flexible methods to invest or get money.
VENTURE CAPITAL GENDER BALANCE
Although the number of senior female venture capitalists has grown in the previous two years, most major firms still have no women as major shareholders. To make venture capital more equitable, more women joined some well-known funds this year. This was a positive move. Equality in venture capital seems to be progressing, but more firms will need to truly commit in 2022 to shift the game.
WRAPPING UP
"Keep an eye on these venture capital trends. They're expected to continue shaking things up over the next several years."
As venture capital trends change and fade or grow into something huge, one thing that stays the same is the need for more knowledge. Therefore, it is anticipated that venture capital investors would continue to seek out new data sources while also leveraging those that are actually available.