WHERE IS VENTURE CAPITAL HEADED IN 2022?
"Even though the venture capital sector broke all records last year, it also saw substantial shifts in how it works and its standing in the start-up community."
Last year experienced seismic shifts brought about by large hedge funds. It also caused some veteran players to rethink their approach to the venture game. According to experts in the sector, some of these same trends, as well as the public market reaction to the pandemic and inflation, rising dependence on data, and even a shift in a VC's workday, will help define venture in 2022.
Many firms that saw a pandemic spike are now experiencing a comeback, reducing investor demand for previously hot segments. CrunchBase News' latest data shows that venture capital dollar volume peaked in November 2021. Since that apex, the value of venture investments has steadily declined throughout most months of this year before falling another $5 billion from March to April.
Mark Sherman, managing director of Telstra Ventures, said,
"I remain confident in my opinion that the world is only heading toward greater digitalization and software, but this year might be uneven. COVID, inflation, and many geopolitical crises might cause some turbulence this year."
VALUATIONS AND BIG FUNDS
If the market slows, some of the bigger businesses that have rapidly expanded their portfolios in recent years may respond negatively. A weaker market might also cause big funds to move more slowly and reduce values. Companies that raised venture money in 2021 are likely to keep that capital a little longer in the face of market uncertainty as interest rates rise.
COMPETING IN THE MARKET
"Those funds may have a difficult time competing. There's simply so much capital in venture right now."
That speed and tempo continue to have a significant impact on what used to be a modest cottage business of venture capital. With so many funds available and financing easier to get, experts in venture believe that investors will need to make the value-add they bring to a prospective portfolio company more apparent than ever before in this second quarter of 2022.
MORE COMPANIES AND DATA
This increasing competitiveness and multiplicity of startups have also resulted in another trend that many in the sector are discussing more this year: the use of data science to uncover investment prospects.
Only 564 new fintech startups were formed worldwide last year. The pace at which startups are established is practically hard to keep up with, and investors are increasingly turning to data to help manage the flood of new companies and prospects.
To keep up with the number of companies, investors are turning more to data science. In an era when performing due diligence on every company in a particular area is practically impossible. There is now a digital footprint to monitor startups rising via the ecosystem if you are mid to late-stage VC.