The venture capital industry has been hotter than ever, with global venture funding reaching an estimated $195 billion in the first quarter of 2022. As the industry continues to grow, it’s important to keep an eye on the trends and predictions that will shape the future of venture capital in the coming years. Here are some of the most important trends that will impact the industry:
- The Number of Mega-Deals Continues to Increase
The number of unicorn startups – privately held companies that have reached a $1 billion valuation – has increased rapidly in recent years. Back in 2015, there were only 142 unicorns in the world, but according to CB Insights, there are now 1,203 unicorns with a collective value of $3.9 trillion. This is due to the increasing number of venture rounds worth at least $100 million, which has been steadily increasing since the second half of 2020. In January of 2021 alone, 38 new unicorns were created, and in October, 43 new startups joined the unicorn list. A lot of this new capital is coming from a few massive funds, and the median fund size in the US grew by 69% in 2020 to $75 million – the largest since 2008. This trend is expected to continue in the coming years, leading to the creation of more highly valued startups.
- Equity Crowdfunding Gives Normal People Access to Venture Assets
Equity crowdfunding platforms allow non-traditional (and even unaccredited) investors to have access to startups by pooling their money with other small investors. There are basically two ways that equity crowdfunding platforms allow unaccredited investors to access private companies: Regulation Crowdfunding (CF) and Regulation A+. In 2020, Crowdwise estimated that $214.9 million was raised through equity crowdfunding platforms, more than double 2019’s number. As of early 2021, the SEC raised the cap to $5 million in a 12-month period, giving unaccredited investors access to significantly larger funding rounds. This trend is expected to continue, giving more people the opportunity to invest in startups and potentially earn impressive returns.
- The Rise of ESG Investing
Environmental, social, and governance (ESG) investing has been gaining popularity in recent years, and this trend is expected to continue in the venture capital industry. Many investors are now looking for companies that prioritize sustainability, diversity, and social responsibility. This means that startups that prioritize ESG will likely have an easier time securing funding from investors who prioritize these values. In the coming years, we can expect to see more venture capital funds dedicated to ESG investing.
- The Growth of Alternative Assets
As traditional asset classes such as stocks and bonds become more volatile, investors are increasingly turning to alternative assets such as real estate, cryptocurrencies, and art. The venture capital industry is no exception, and we can expect to see more investors diversifying their portfolios by investing in startups. This trend is expected to continue in the coming years, as investors seek out new opportunities for growth and returns.
Takeaway
The future of venture capital is a topic that demands attention and anticipation from both investors and startups alike. The industry is undergoing a rapid transformation, and keeping an eye on the trends and predictions that will shape its trajectory is essential.
Undoubtedly, the rise of highly valued startups is a trend that will persist in the years to come. This phenomenon is fueled by the explosive growth of the technology sector, as well as the growing demand for innovative solutions across multiple industries. Additionally, equity crowdfunding is emerging as an accessible and viable option for a larger pool of investors to tap into the venture capital ecosystem, which will only enhance the industry’s momentum.
In addition, environmental, social, and governance (ESG) investing and alternative assets are set to play an increasingly pivotal role in the industry. Investors are becoming more discerning, prioritizing socially responsible and sustainable investments, which are factors that are more important now than ever before. Moreover, the rise of alternative assets such as art, collectibles, and cryptocurrencies presents an exciting and potentially lucrative opportunity for venture capitalists to diversify their portfolios.
As the industry continues to grow and evolve, it is critical for both investors and startups to remain informed and adaptable in order to succeed. Being proactive and staying on top of emerging trends and developments will be key in seizing new opportunities, mitigating risk, and ensuring long-term success in the venture capital space.
In conclusion, the future of venture capital is bright, and it’s essential to be prepared for the changes and opportunities that are on the horizon. By staying informed, being flexible, and embracing innovation, both investors and startups can position themselves to thrive in the coming years.
