附近上门

Even as the venture capital industry shattered all records last year, it also continued to see significant changes to how it operates and its place in the startup ecosystem.

Last year saw seismic changes brought about by the likes of large hedge funds such as and pouring money into venture-backed startups and spiking valuations. It also saw some legacy players change the way they play the venture game, including 鈥檚 plans to change its fund structure.

Some of those same trends will help shape venture in 2022, as well as the public market response to the pandemic and inflation, a growing reliance on data, and even a change in a VC鈥檚 workday, according to those in the industry.

The market

The biggest factor that likely will define venture in 2022 could be the public market. While 2021 was the biggest year to date for IPOs鈥攚ith 399 offerings collectively raising $142.5 billion, according to IPO research firm 鈥攎any of these tech stocks have been met with a lukewarm reception by public investors, even after some initial pops.

Even the first few weeks of the new year have not been kind as the has and other policy-tightening moves that typically negatively affect tech stocks.

Since the start of the year, the Composite is down nearly 6.5 percent鈥攍ikely not the environment tech companies seek to go public.

鈥淚f the IPO market dries up, growth-equity investors will be left holding the bag,鈥� said , CEO and co-founder of .

How the market reacts likely could have a lot to do with how the seemingly never-ending pandemic plays out. Tusk said he sees the current COVID environment as a sort of 鈥渟uspension of disbelief.鈥�

If 2022 provides a road to more normalcy, valuations could come back to the real world, he said.

鈥淵ou have seen private valuations not supported by the public market,鈥� Tusk said. 鈥淰Cs have one set of reality right now. Public investors have another set of reality.鈥�

, managing director at , said he remains steadfast in his firm鈥檚 belief the world is only headed to more digitization and software, but agrees this year could be uneven.

鈥淭he year could provide some choppiness with COVID, inflation and several geopolitical issues swirling about,鈥� he said.

Valuations and big funds

If the market slows鈥攁nd there is no guarantee that will happen鈥攖here is a question of how some of the larger firms that rapidly expanded their portfolios in recent years, like Tiger and , will react.

鈥淲hat happens in a downturn?鈥� asked managing director at . 鈥淲e don鈥檛 know. Do they abandon the market?鈥�

Tiger, for instance, made 350 deals last year according to 附近上门 data, but is known for being relatively hands off with its investments. That approach could make it easier to leave the tech startup ecosystem if a downturn occurs.

A lesser market also could cause large funds to move more slowly and cut valuations, although Sherman points out the model for these firms is to spend more and faster.

鈥淭hey are commoditizing returns in the venture space by spending more and moving faster,鈥� he said. 鈥淚鈥檓 not sure that would change.鈥�

Competing in the market

That speed and pace continues to dramatically affect what used to be just the small cottage industry of venture capital.

With so much capital available and funding easier to get, some in venture predict another theme over the past few years that will continue in 2022 is that investors will need to make the value-add they bring to a potential portfolio company clearer than ever.

鈥淚 now spend about 20 percent of my week on the business development of (portfolio) companies,鈥� Butler said. 鈥淧eople really want to know what value-add an investor brings.鈥�

Tusk said investor value-add is one way some in the industry can compete against larger firms and funds. His firm focuses on regulated industries鈥攁 smaller area which helps weed out some investment competition and where it can show expertise.

鈥淚f you are in a niche 鈥� you can show you can provide value-add,鈥� he said.

He added the changing dynamics of investors having to bring more to the table to compete could eventually make it difficult for more generalist and mid-sized funds.

鈥淭hose funds may find it hard to compete,鈥� he聽 said. 鈥淭here鈥檚 just so much capital in venture now.鈥�

More companies and data

That increased competition鈥攁nd the proliferation of startups鈥攁lso brought about another change many in the industry are talking more about this year鈥攖he use of data science in finding investment opportunities.

Just last year, there were 564 new fintech companies founded globally. The rate at which startups are founded is nearly impossible to keep up with and investors are turning more to data to help manage information on the flood of new companies and opportunities.

鈥淚t鈥檚 like there is a new company every day,鈥� Butler said. 鈥淵ou need data sources to keep up.鈥�

Investors are turning more to data science to keep up with the volume of companies鈥攊n a period where it鈥檚 nearly impossible to perform due diligence on every company in a given space.

鈥淔ive or 10 years from now (venture capital) will be 50 percent humans and 50 percent data science,鈥� Sherman said. 鈥淚f you are mid- to late-stage VC, there is a digital footprint now to monitor companies coming up through the ecosystem.

鈥淰enture guys invest in this, and yet we didn鈥檛 start using it until five years ago,鈥� Sherman said with a laugh.

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