FUTURE PROMISE OF VC THROUGH A GLOBAL PANDEMIC
"When pandemic-induced lockdowns began to spread in March 2020, several venture capital investors were anxious about a long-overdue correction. Ironically, the epidemic catapulted the market into one of its most powerful bull markets on record."
VENTURE CAPITAL MARKET SHOWS SIGNS OF A SLOWDOWN
The late-stage transaction activity (which sets a new record for the deal count and investment amount in 2021) has slowed significantly in recent weeks. The bridge investors who helped the fast pace in 2021 may have overdosed in the last stages. While the change has had the greatest effect on late-stage businesses so far, the downturn is now affecting Series A startups as well.
The stakes are high, to be sure. If the venture market slows more in Quarter 2, the number of startups looking for money in a market that does not agree with their previous valuations might rise. And if that occurs, 2021's euphoria might turn into 2022's hangover.
According to CrunchBase statistics,
“Worldwide financing is decreasing. Startups collected $10 billion less in February than they did in January, the very first drop in years."
However, these figures are being compared to historical data. Despite a $10 billion decrease, February 2022 outperformed February 2021 by 24 percent.
TROUBLE OR BLUE SKIES AHEAD?
"Today's situation creates a great opportunity for the industry."
Just a year ago, we were gazing into the darkness of the pandemic, trying to figure out what the security measures would mean for professional and private life. Now, the money is still flowing in and shows no indications of slowing down.
For a multitude of known and unknown factors, the situation might suddenly change. However, analysts anticipate brighter skies shortly. The fundamentals of capital formation are solid, and investment possibilities in existing portfolio companies, as well as new investment themes, are at historic highs. Global experts predict a very long tail, and although we are still in the early stages, this is a genuinely transformative period in a "golden era" of venture capital and innovation.
WRAPPING UP
In conclusion, as we enter the second quarter of 2022, the future of venture capital is better than ever. There is enough funding available for investment, the epidemic is decreasing internationally as vaccinations are distributed, and the pandemic has highlighted the significance of VC's two core areas of investment: healthcare and technology. These favorable conditions should excite investors' interest in and capacity to support tomorrow's great startups.