september, 01 / 2022 by Stefanie Pollock and zachary Weiss
What Are The Current Venture Capital Industry Trends?
As the markets continue to decline, many companies cut back on spending and investing due to lost profits. So what does this mean for the Venture Capital industry trends in 2022?
A Predictable Downturn in the Economy
The economy has been changing rapidly in the past year causing the market to be very volatile. Market uncertainties have been driven by perceptions of geopolitical and monetary policy risks. Analyzing the economy from a macro standpoint, there are many aspects that are causing these uncertainties. Geopolitics - the Ukraine-Russia War has not only been devastating to the lives of thousands of people but has also bruised the growing economy immensely. Inflation - caused by commodity shortages and supply chain issues continues to raise prices and cause goods to be unaffordable. For example, energy prices have jumped even higher than they were during the pandemic; furthermore, there are millions of tons in grains and oilseeds stuck in Ukrainian seaports. As the markets continue to decline, many companies cut back on spending and investing due to lost profits. So what does this mean for venture capital firms?
Related: 9 Venture Capital Metrics Every VC Should Know [Explained]
The Role of Venture Capital
Venture capital, also known as the VC industry, has seen many changes in trends over the years, but amidst the volatility of the economy, it experienced an unprecedented 2020. Now, halfway through 2022, the industry continues to grow and is setting the stage for another consecutive record-setting year. The role of a VC is to invest in new and growing businesses with a fairly realistic potential for high growth and profits. The money that is used to invest comes from a variety of sources, including endowments, pension funds, corporations, investors, and more. There are various stages of venture capital investing. There's extremely early stage investing, also known as, seed or pre-seed investing, early-stage investing, institutionally called series A, and the later stage. The earliest stages can begin with one or two founders who do not even have a business plan or a finished product. These investments are bets on the individuals, their vision of the future and ability to create it. Later stages consist of companies that are still private. They are growing rapidly, but they are probably still losing money and need capital to invest in products and people. Venture capitals play a role across all stages of the spectrum.
Related: 5 Stages of Venture Capital Financing: Explained
The economy has been changing rapidly in the past year causing the market to be very volatile. Market uncertainties have been driven by perceptions of geopolitical and monetary policy risks. Analyzing the economy from a macro standpoint, there are many aspects that are causing these uncertainties. Geopolitics - the Ukraine-Russia War has not only been devastating to the lives of thousands of people but has also bruised the growing economy immensely. Inflation - caused by commodity shortages and supply chain issues continues to raise prices and cause goods to be unaffordable. For example, energy prices have jumped even higher than they were during the pandemic; furthermore, there are millions of tons in grains and oilseeds stuck in Ukrainian seaports. As the markets continue to decline, many companies cut back on spending and investing due to lost profits. So what does this mean for venture capital firms?
Related: 9 Venture Capital Metrics Every VC Should Know [Explained]
The Role of Venture Capital
Venture capital, also known as the VC industry, has seen many changes in trends over the years, but amidst the volatility of the economy, it experienced an unprecedented 2020. Now, halfway through 2022, the industry continues to grow and is setting the stage for another consecutive record-setting year. The role of a VC is to invest in new and growing businesses with a fairly realistic potential for high growth and profits. The money that is used to invest comes from a variety of sources, including endowments, pension funds, corporations, investors, and more. There are various stages of venture capital investing. There's extremely early stage investing, also known as, seed or pre-seed investing, early-stage investing, institutionally called series A, and the later stage. The earliest stages can begin with one or two founders who do not even have a business plan or a finished product. These investments are bets on the individuals, their vision of the future and ability to create it. Later stages consist of companies that are still private. They are growing rapidly, but they are probably still losing money and need capital to invest in products and people. Venture capitals play a role across all stages of the spectrum.
Related: 5 Stages of Venture Capital Financing: Explained
"Despite all the economic downfall, the current state of the VC industry is growing and healthy."
The Potential of Venture Capital
In the past couple of years the number of limited partners, LPs, has increased due to the observation that this asset class can drive outsized returns. Essentially, this means that when VCs make the right decisions and choose the correct company, the returns can be huge for investors. A lot of capital has really come into the market and continues to grow more globally. The pandemic caused many market disadvantages, but it also shined the light on the fact that great innovation can happen anywhere in the world. Successful companies that are worth tens of billions of dollars can be built on a global basis. Over $612 billion in venture capital activity was invested globally in 2021—a 108% increase from the year before. This excitement about the VC industry is occurring because data from the initial public offering market, the S&P 500, and the public markets reveal that startups that began 10 years ago are now worth tens of billions, or even sometimes hundreds of billions. These trends really show what a company or startup can be when things go right. Not coincidentally, as reported by Haley Brian in her 2021 report on the VC industry, the number of VC-backed companies - in the world - reaching more than $1 billion in post money valuation has substantially increased in recent years.
But the venture capital asset class isn't always a no lose scenario. The stark truth about the venture capital industry is that not every company will make it. It is extremely hard to start a company from scratch and to build it into a sustainable long-term company which means that there is quite high mortality in venture capital. The companies that make it, reap the rewards which can be very highly valued, but unfortunately not every company does make it. This causes a lot of competition in the market for both the best companies, customers, and talent. There are certainly challenges throughout the VC industry, but trends reveal optimism especially as the world becomes more digital there's an incredible amount of opportunity ahead to really change the way we work, transact, and communicate together.
Overall, there's never been a better time to be an enterprise investor
There's great global talent and amazing entrepreneurs that are coming up with incredible ideas that envision the future. There have been many advancements in the VC space regarding startups and their evolution amidst the pandemic. Despite the volatility around the world, the VC industry has experienced record-breaking results for consecutive years. In 2021 investments rose in every major region compared to 2020. North America and Europe lead this trend with their activity having more than doubled.
Pro Tip
Firms using Dialllog have all aspects of their VC lifecycle in one centralized and interconnected source, allowing them to work smarter and more efficiently. If you are interested in seeing the exciting possibilities Dialllog offers, book a live demo today.
Book A Live Demo
Firms using Dialllog have all aspects of their VC lifecycle in one centralized and interconnected source, allowing them to work smarter and more efficiently. If you are interested in seeing the exciting possibilities Dialllog offers, book a live demo today.
Book A Live Demo
As activity keeps growing, new and more efficient tools are needed by VCs to manage their workflow. A better tool to manager the workflow, allows VC teams to focus more on their decision making process and will eventually bring greater benefits.
That is why Dialllog was created. Dialllog is a Venture Capital CRM that seeks to overcome this pain point by integrating all aspects of a VC firm into one digitized source of information.
That is why Dialllog was created. Dialllog is a Venture Capital CRM that seeks to overcome this pain point by integrating all aspects of a VC firm into one digitized source of information.
What is Dialllog?
Dialllog is the first ecosystem relationship CRM software designed specifically for PE, VC and M&A funds to manage the full investment cycle.
No more endless Excel spreadsheets, docs, notes and emails. Dialllog brings all the sporadic information into one PE software to create data-driven workflows.