Tag: EC investor survey

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3 investors presage the future of startups and VC following SVB’s downfall

To put it mildly, the meteoric collapse of Silicon Valley Bank has been a historic time of confusion for everyone the startup ecosystem touches. VCs are wringing their hands (or not) over how they can help their portfolio companies; startup founders and CEOs are running about trying their very best to plan for the foreseeable future; and vendors and partners are either helping those affected or asking for reassurances that they’ll be paid or serviced properly.

Maëlle Gavet, CEO of Techstars, vividly describes what things have been like behind the scenes: “It’s been unbelievably intense from Thursday until when the Federal Reserve finally made an announcement saying that deposits were going to be guaranteed. It’s been both for TechStars as an operating company, and for the 3,500 portfolio companies we have. A portion of them were banking with SVB, either exclusively or partially. We had so many concerns. How would we pay employees and honor our bills? How do we make sure that the company survives the next week and then the next month and then the next six months? So, ‘intense’ — that’s the word I would use to describe the experience.”

We are encouraging companies to diversify where they do their banking to make sure they can withstand challenges and ensure business continuity. Niko Bonatsos, MD, General Catalyst

While many founders and VCs have shared similar experiences as they try to navigate this confusion, the future ahead is even hazier. The general consensus seems to be that SVB’s collapse may have far-reaching consequences for venture capital, startups and the entire financial sector in the U.S.

But what will those consequences be? To better understand how investors are thinking about this, we spoke to a few investors affected by the collapse and asked them about the long-term implications, how cash management is set to change, who’s been hurting the most and who will come away with a golden opportunity.

We surveyed:

Maëlle Gavet, CEO, Techstars

What are some of the unseen or longer-term consequences of the recent banking crisis?

There will be a shift away from what I call middle banking. It used to be that startups would bank with SVB or with other banks that are not the top four. Now there’s going to be this divergence towards having one bank account with a big bank and then trying experiments with others. There’s going to be an extreme shift in general in the financial industry when it comes to financing startups.

I also expect more regulation for the VC and startup world. Six months ago, when valuations started crashing, the world and D.C. were looking at it. Yes, valuations are going down, but it just impacts all these LPs that invested, so it’s basically back to normal.

D.C. didn’t really care about what was happening there. I think, in this case, they’re going to care about how the tech world operates because they’ve suddenly found themselves caught off guard over the weekend. The overall financing system in the United States is going to explode because of one bank in Silicon Valley. I would expect more regulation to happen.

Every time there is a negative incident, the tech ecosystem tries to reinvent itself and often falls back to its old habits. If SVB is not there anymore, how do you create financing for a startup? You need to think about fundraising in a different way. Maybe you need to back different companies.

We’re probably going to see consolidation in the VC class. It was already on the way, but this is probably going to accelerate it, because SVB was also a preeminent provider of loans for GPs to make their capital commitment polls.

3 investors presage the future of startups and VC following SVB’s downfall by Karan Bhasin originally published on TechCrunch

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7 investors reveal what’s hot in fintech in Q1 2023

The global downturn has impacted every sector, but fintech bore the brunt of it as public-market valuations fell off a cliff last year.

However, it appears that even though VCs are proceeding more cautiously than before and taking their time with due diligence, they are still investing.

CB Insights recently found that two of the largest global VC firms, Sequoia Capital and Andreessen Horowitz, actually backed more fintech companies in 2022 than any other category. In both cases, about 25% of their overall investments went into fintech startups.

And, while global fintech funding slid by 46% to $75.2 billion in 2022 from 2021, it was still up 52% compared to 2020 and made up 18% of all funding globally, proving that investors still have faith in fintech’s future.

You could even say some are bullish: “If anything, I expect our investment pace to increase this year as early-stage fintech companies prioritize operational discipline and product differentiation,” said Emmalynn Shaw, managing partner of Flourish Ventures.

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The tougher conditions created in the past year has resulted in down (and smaller) rounds, M&A, and an emphasis on fundamentals. Gone are the days of investing on a whim.

But for Ansaf Kareem, venture partner at Lightspeed, the tough times can be seen as a good thing because they often create the best companies. “If you study previous compression periods in the ecosystem (e.g., 2008 and 2000), not only have we seen outstanding companies being formed, we’ve also witnessed great venture firm performance during these windows,” he said.

“The last two years in the venture ecosystem were an anomaly, but I believe we are coming back to a healthy ‘normal.’ Diligence cycles have extended, better relationships with founders can be formed, investors can enter new spaces with more preparation, and a thoughtful approach to early-stage venture capital can emerge,” Kareem added.

Challenging market conditions drive a sense of discipline and perspective that can be a gift. Emmalyn Shaw, managing partner, Flourish Ventures

So whether you’re seeking to raise your first round or your third, make sure you focus on fundamentals, save cash and don’t shy away from raising a down round if you think your idea may change the world, several investors said.

“Grow in a way that’s smart and sustainable for the long run,” advises Michael Sidgmore, a partner at Broadhaven Ventures. “We can’t control the macro environment, and today’s geopolitical climate means that there may always be the threat of exogenous shocks on the market. But the markets will bounce back at some point. So just grow in a manner that lets you focus on unit economics and profitability so that you can control your own destiny no matter what market we are in.”

To help TechCrunch+ readers understand what fintech investors are looking for right now (and what they’re not!) as well as what you should know before approaching them, we interviewed seven active investors over the last couple of weeks.

Spoiler alert: B2B payments and infrastructure remain on fire and most investors expect to see more flat and down rounds this year. Plus, they were gracious enough to share some of the advice they’re giving to their portfolio companies.

We spoke with:

Charles Birnbaum, partner, Bessemer Venture Partners

Many people are calling this a downturn. How has your investment thesis changed over the last year? Are you still closing deals at the same velocity?

We continue to invest in great companies regardless of the market. However, many entrepreneurs have opted to remain heads down and build more efficiently instead of testing this new valuation environment.

While our investment theses are always evolving, the shift in the macro environment has not changed which areas we are most excited about.

Do you expect to see more down rounds in 2023? Are you seeing more companies raising extensions or down rounds compared to 2021 and 2022?

We do expect more flat and down rounds to come later this year as runway tightens for many companies that raised more than two years ago.

Private market valuations, at any point in time, are not only a reflection of a team’s hard work and progress, but are also impacted by the financing environment.

What are you most excited about in the fintech space? What do you feel might be overhyped?

We see tremendous opportunity for innovation in the world of B2B payments. The infrastructure groundwork laid by modern developer platforms over the past decade and the upcoming catalysts in the real-time payments world, with the launch of FedNow, could spark much faster adoption.

We are excited to see how entrepreneurs leverage these tools to enhance our archaic B2B payments ecosystem.

Consumer fintech businesses without long-term, durable customer acquisition advantages are overhyped and will continue to struggle to live up to the lofty expectations set by investors over the past several years.

We’re expecting to see significant consolidation across the consumer fintech landscape this year.

What criteria do you use when deciding which companies to invest in? Would you say you are conducting more due diligence?

We look deep into all areas of innovation, including fintech, and focus on startups that align with our theses. We try to predict where there will be opportunities for seismic innovation before we find the entrepreneur. This helps us with diligence, as we work to understand the market before we make any investments.

We also work hard to perform due diligence on every investment opportunity we pursue by spending significant time with the company, with a deep market study, and as many references as possible on the teams we back.

Have fintechs gotten close to growing into their 2021 valuations? How many will not manage the task in 2023?

Given the sharp run up in valuation over the past few years in the private market and the precipitous fall in the public market over the past year, it is difficult to say how many companies have grown into 2021 valuations.

For the top tier of companies that were able to raise larger rounds, the reality is they don’t need to answer that question for quite some time.

What advice are you giving to your portfolio companies?

The most important thing for me is to not give the same advice across different companies. There is no one-size-fits-all solution. Every business is at a different point along their journey to find product-market fit, prove the sustainability of a business model, execute on a repeatable go-to-market motion, etc.

Rethinking growth targets, in light of the rising cost of capital, to focus more on efficiency in this environment is a consistent thread in board meetings these days.

How do you prefer to receive pitches? What’s the most important thing a founder should know before they get on a call with you?

From my experience, you often have to find the most exciting companies and earn the right to invest. We are always reaching out proactively to founders building in the areas where we have active investment theses.

We are also always looking at exciting opportunities that come in through referrals from entrepreneurs we work with or have worked with in the past, and other investors in the ecosystem. We do our best to review and evaluate inbound messages we receive.

Aunkur Arya, partner, Menlo Ventures

Many people are calling this a downturn. How has your investment thesis changed over the last year? Are you still closing deals at the same velocity?

We’re definitely seeing the reset we expected to see after a decade of operating in a macro environment where the cost of capital was near zero. It’s a difficult but very healthy reshuffling of the deck.

I’d say that our core theses within fintech have largely remained the same: we’re investing in developer infrastructure and embedded finance APIs, vertical banking, end-to-end consumer and business financial services, and the Office of the CFO. We’re also looking at thoughtful enterprise applications of AI that intersect with each of these segments of our fintech thesis.

We continue to avoid balance-sheet heavy businesses that take undue risk to generate revenue, and ultimately look less like pure technology companies and more like insurance companies or lenders. These are the first businesses to suffer during a downturn because they’re heavily indexed to the macro environment.

We were less active in 2022, but are already seeing an uptick in deal flow in fintech in the first few months of 2023.

7 investors reveal what’s hot in fintech in Q1 2023 by Mary Ann Azevedo originally published on TechCrunch

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5 investors discuss Boston’s resilient tech ecosystem

City Spotlight: Boston


Boston has had a thriving tech startup ecosystem for a while, but things can change fast. After setting records in 2021 as “Zoom investing” took off, how are local startups faring in 2023?

To find out, ahead of TC City Spotlight: Boston, an extended TechCrunch Live event during which you’ll get to hear from local leaders on how startups can take advantage of Boston’s extensive resources, we gathered insights from five investors active in the area.

It seems Boston is faring well, and part of the reason for that appears to be that remote pitching is still a trend. “Fundraising has changed significantly and founders at all stages are now taking many first meetings on Zoom,” said Russ Wilcox, a partner at Pillar VC.

Attend the TechCrunch City Spotlight: Boston event on February 27, 2023.

Register for the free virtual event here.

However, in-person gatherings have also made a return and are sometimes preferred. “In-person events have picked back up in Boston, particularly around the innovation hubs across campuses, so we expect more serendipity to come back into the equation,” said Underscore VC general partner Lily Lyman.

‘Serendipity’ accurately describes a lot of what’s going on in Boston’s tight-knit tech community. As our very own Brian Heater previously noted, startups are often located in “a five- to ten-block radius a stone’s throw from MIT (and, for that matter, Harvard).”

That also explains why Boston startups are associated with ‘tough tech’. “Boston, world-class universities and hard tech all go together,” said Sanjiv Kalevar, a partner at OpenView.

This combination is also arguably what makes Boston more resilient in the current downturn. According to Rudina Seseri, founder and managing partner at Glasswing Ventures, “Boston remains a vibrant startup and VC market in 2023 […] Despite tough markets, a recessionary economy, and overall business pessimism, I am confident Boston will see a new wave of founders starting new companies.”

We spoke with:

Rudina Seseri, founder and managing partner, Glasswing Ventures

How would you describe the pace of venture capital dealmaking in Boston this year so far?

Boston remains a vibrant startup and VC market in 2023. The overall pace of funding has declined since 2021, but we are continuing to see high-potential companies and founders secure funding today.

We especially see this in the AI and security markets. Recent data published in the Pitchbook-NVCA Venture Monitor shows that Boston had roughly the same share of the number of VC deals in the U.S. between 2021 and 2022, and we expect that trend to continue or improve in 2023.

For a Boston-based founder, does fundraising in 2023 still involve a lot of Zoom calls? Does it depend on which stage their startup is at?

We continue to use Zoom calls during our diligence process. They give us the opportunity to be efficient with a founder’s time and meet them where they are.

Rudina Seseri, founder and managing partner, Glasswing Ventures

Rudina Seseri, founder and managing partner, Glasswing Ventures. Image Credits: Glasswing Ventures

Having said that, it is a priority for us to meet in person when we can. The founder-investor relationship is a lasting one. We enjoy building close bonds with our founders while also giving them the opportunity to meet our building partners.

Have Boston-based tech workers been as affected by layoffs as their peers in the Bay Area?

Every corner of tech has been affected. Yet, despite tough markets, a recessionary economy, and overall business pessimism, I am confident Boston will see a new wave of founders starting new companies.

Innovation shines the brightest in dark times, and it is in these times that transformative ideas are born. Among the technologists laid off from big tech companies recently, we expect many will find a fire in their bellies and build incredible products. Now is an excellent time for early-stage founders to implement their ideas.

Have in-person networking and startup community events in the Boston metropolitan area returned to pre-pandemic levels?

We have seen the number of events in the broader community tick up and are excited to keep bringing the community together as we head into the spring and summer. We host a wide range of ecosystem events, from networking for the AI and cybersecurity industries, to thought leadership sessions on making your first marketing hire. We will continue to push our ecosystem forward with gatherings at our office in the heart of Back Bay, around the area, or online.

What link do you see, if any, between two of Boston’s strengths: “Tough tech” and university spinouts?

These are inextricably linked. Boston’s academic rigor is a critical ingredient in delivering the transformative technology that pushes our economy and society forward.

We work very closely with universities and research labs in the area (including, but not limited to, the MIT and Harvard ecosystems) and back leading founders building AI and frontier technology products for the enterprise and security markets.

What’s the most interesting Boston-based company you’ve invested in recently?

One of our latest investments is in FeatureByte, an AI startup founded by the team that built the backbone for DataRobot. FeatureByte is a platform built specifically for data scientists to simplify the creation, serving, managing and monitoring of machine learning features.

Are you open to cold pitches? How can founders reach you?

Yes, we are open to cold pitches, but prefer warm ones if a founder is able! We are looking for strong founders leveraging AI and frontier technology to build applications and infrastructure for the enterprise and security markets. My email is: rudina@glasswing.vc.

Lily Lyman, general partner, Underscore VC

How would you describe the pace of venture capital dealmaking in Boston this year so far?

Looking across the data, it’s clear that the pace of venture dealmaking in Boston slowed in Q3 and Q4 of last year, like everywhere else, as investors and founders were trying to get a sense of the market dynamics.

But thus far in Q1, we are seeing strong, high-quality investment opportunities at the earliest stage. It’s a great time to invest in early-stage startups. Great founders are starting businesses that are cash-efficient and thinking about business models from Day 1, which helps them attract strong talent at a more affordable rate, face less competition, acquire customers more affordably and solve big problems.

What has changed, particularly at the later stages, are the length and depth of diligence processes. We are no longer seeing the hasty timelines we saw in 2021. Late-stage investors are digging deeper into business fundamentals and projections. Price discovery is harder in this market and late-stage investors are afraid to overpay.

For a Boston-based founder, does fundraising in 2023 still involve a lot of Zoom calls? Does it depend on which stage their startup is at?

5 investors discuss Boston’s resilient tech ecosystem by Anna Heim originally published on TechCrunch

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5 investors discuss Boston’s resilient tech ecosystem

City Spotlight: Boston


Boston has had a thriving tech startup ecosystem for a while, but things can change fast. After setting records in 2021 as “Zoom investing” took off, how are local startups faring in 2023?

To find out, ahead of TC City Spotlight: Boston, an extended TechCrunch Live event during which you’ll get to hear from local leaders on how startups can take advantage of Boston’s extensive resources, we gathered insights from five investors active in the area.

It seems Boston is faring well, and part of the reason for that appears to be that remote pitching is still a trend. “Fundraising has changed significantly and founders at all stages are now taking many first meetings on Zoom,” said Russ Wilcox, a partner at Pillar VC.

Attend the TechCrunch City Spotlight: Boston event on February 27, 2023.

Register for the free virtual event here.

However, in-person gatherings have also made a return and are sometimes preferred. “In-person events have picked back up in Boston, particularly around the innovation hubs across campuses, so we expect more serendipity to come back into the equation,” said Underscore VC general partner Lily Lyman.

‘Serendipity’ accurately describes a lot of what’s going on in Boston’s tight-knit tech community. As our very own Brian Heater previously noted, startups are often located in “a five- to ten-block radius a stone’s throw from MIT (and, for that matter, Harvard).”

That also explains why Boston startups are associated with ‘tough tech’. “Boston, world-class universities and hard tech all go together,” said Sanjiv Kalevar, a partner at OpenView.

This combination is also arguably what makes Boston more resilient in the current downturn. According to Rudina Seseri, founder and managing partner at Glasswing Ventures, “Boston remains a vibrant startup and VC market in 2023 […] Despite tough markets, a recessionary economy, and overall business pessimism, I am confident Boston will see a new wave of founders starting new companies.”

We spoke with:

Rudina Seseri, founder and managing partner, Glasswing Ventures

How would you describe the pace of venture capital dealmaking in Boston this year so far?

Boston remains a vibrant startup and VC market in 2023. The overall pace of funding has declined since 2021, but we are continuing to see high-potential companies and founders secure funding today.

We especially see this in the AI and security markets. Recent data published in the Pitchbook-NVCA Venture Monitor shows that Boston had roughly the same share of the number of VC deals in the U.S. between 2021 and 2022, and we expect that trend to continue or improve in 2023.

For a Boston-based founder, does fundraising in 2023 still involve a lot of Zoom calls? Does it depend on which stage their startup is at?

We continue to use Zoom calls during our diligence process. They give us the opportunity to be efficient with a founder’s time and meet them where they are.

Rudina Seseri, founder and managing partner, Glasswing Ventures

Rudina Seseri, founder and managing partner, Glasswing Ventures. Image Credits: Glasswing Ventures

Having said that, it is a priority for us to meet in person when we can. The founder-investor relationship is a lasting one. We enjoy building close bonds with our founders while also giving them the opportunity to meet our building partners.

Have Boston-based tech workers been as affected by layoffs as their peers in the Bay Area?

Every corner of tech has been affected. Yet, despite tough markets, a recessionary economy, and overall business pessimism, I am confident Boston will see a new wave of founders starting new companies.

Innovation shines the brightest in dark times, and it is in these times that transformative ideas are born. Among the technologists laid off from big tech companies recently, we expect many will find a fire in their bellies and build incredible products. Now is an excellent time for early-stage founders to implement their ideas.

Have in-person networking and startup community events in the Boston metropolitan area returned to pre-pandemic levels?

We have seen the number of events in the broader community tick up and are excited to keep bringing the community together as we head into the spring and summer. We host a wide range of ecosystem events, from networking for the AI and cybersecurity industries, to thought leadership sessions on making your first marketing hire. We will continue to push our ecosystem forward with gatherings at our office in the heart of Back Bay, around the area, or online.

What link do you see, if any, between two of Boston’s strengths: “Tough tech” and university spinouts?

These are inextricably linked. Boston’s academic rigor is a critical ingredient in delivering the transformative technology that pushes our economy and society forward.

We work very closely with universities and research labs in the area (including, but not limited to, the MIT and Harvard ecosystems) and back leading founders building AI and frontier technology products for the enterprise and security markets.

What’s the most interesting Boston-based company you’ve invested in recently?

One of our latest investments is in FeatureByte, an AI startup founded by the team that built the backbone for DataRobot. FeatureByte is a platform built specifically for data scientists to simplify the creation, serving, managing and monitoring of machine learning features.

Are you open to cold pitches? How can founders reach you?

Yes, we are open to cold pitches, but prefer warm ones if a founder is able! We are looking for strong founders leveraging AI and frontier technology to build applications and infrastructure for the enterprise and security markets. My email is: rudina@glasswing.vc.

Lily Lyman, general partner, Underscore VC

How would you describe the pace of venture capital dealmaking in Boston this year so far?

Looking across the data, it’s clear that the pace of venture dealmaking in Boston slowed in Q3 and Q4 of last year, like everywhere else, as investors and founders were trying to get a sense of the market dynamics.

But thus far in Q1, we are seeing strong, high-quality investment opportunities at the earliest stage. It’s a great time to invest in early-stage startups. Great founders are starting businesses that are cash-efficient and thinking about business models from Day 1, which helps them attract strong talent at a more affordable rate, face less competition, acquire customers more affordably and solve big problems.

What has changed, particularly at the later stages, are the length and depth of diligence processes. We are no longer seeing the hasty timelines we saw in 2021. Late-stage investors are digging deeper into business fundamentals and projections. Price discovery is harder in this market and late-stage investors are afraid to overpay.

For a Boston-based founder, does fundraising in 2023 still involve a lot of Zoom calls? Does it depend on which stage their startup is at?

5 investors discuss Boston’s resilient tech ecosystem by Anna Heim originally published on TechCrunch

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Is ocean conservation the next climate tech? 7 investors explain why they’re all in

For an ecosystem that covers a majority of the planet, the oceans have basically been ignored by startups and investors alike.

Sure, plenty of money is spent on ocean-based industries, but most of today’s marine investments are into either extractive industries like fishing or oil and gas, or activities like shipping, which aren’t extractive, but don’t exactly benefit marine ecosystems.

But in recent years, there has been a sea change in perspectives. Founders and investors have started to look for opportunities to conserve, and even enhance, the ocean’s resources rather than exploit them.

“There is tremendous potential for the ocean to provide more food, more efficiently, with less environmental impact and even regeneratively,” said Reece Pacheco, a partner at Propeller.

And because the oceans take up so much of the planet and the space is relatively uncharted, there are plenty of opportunities for investors to find niches ripe with financial and environmental upsides.

“Our systems are at a point where it is more productive to work with nature than against it,” said Sanjeev Krishnan, chief investment officer at S2G Ventures. “While energy and agriculture are further along the J-curve, the oceans sector is more nascent, but presents an investable opportunity that impacts almost every sector of the global economy.”

In that way, ocean conservation tech mirrors climate tech, which has been growing so fast that some have called it “recession-proof.” Of course, some question whether any sector is truly recession-proof and that applies to ocean conservation tech as well.

That doesn’t mean that investors aren’t bullish, though. “I’m not sure I would characterize the ocean economy as recession-proof, but the investment opportunities are real from a venture capital perspective,” said Tim Agnew, general partner at Bold Ocean Ventures.

Even some of the most intractable and high-profile problems facing the world’s oceans, like plastic pollution, are inspiring investors to dive in.

“People have been looking at solving these problems in the wrong way,” said Daniela Fernandez, managing partner at Seabird Ventures. “Profitability and scalability depend on the approach and business model that is being implemented to solve the plastic pollution crisis. We have to think beyond community beach cleanups — there are actually extremely investable approaches to solving the plastic problem.”

Investors like Fernandez are looking with fresh eyes at both new problems like plastic pollution and old ones like aquaculture and fisheries management. In the process, they’re betting that innovative approaches to solving those problems will not just create returns, but create disruptions and innovations that spill over into adjacent sectors.

“Part of our thesis is that ocean conservation technologies can solve big problems for big ocean-going industries and adjacent industries,” said Kate Danaher, managing director at S2G Ventures.

But, she added, there’s still more room to grow. “We need to make the case to even more climate-focused and generalist investors.”

To get a better idea of how startups and investors are thinking about ocean conservation tech and the opportunities therein, we spoke with:

Tim Agnew, general partner, Bold Ocean Ventures

What is your investment thesis for ocean conservation tech in 2023? What sort of growth are you expecting in the sector?  

Our investment thesis is focused on innovations that modernize the seafood supply chain, expand production in a sustainable way and address the impacts of climate change. We believe this investment opportunity is in its early stages and will be a major theme over the next decade as it becomes clearer how impactful the ocean can be in addressing the climate crisis and feeding a growing, more urbanized population.

Ocean-related businesses are at the beginning stages of adopting new technologies to increase efficiencies and productivity.

Is there a meaningful distinction between the tech used by startups focused on coastal regions and the tech built for the open ocean?  

Answer is yes and no. Ocean shipping and ocean wind are obviously very different animals from kelp aquaculture and climate resiliency, but both are migrating toward more tech-enabled solutions, including digital technologies, artificial intelligence, data gathering and analysis.

A lot of the problems facing the oceans, like plastic pollution, don’t seem to have much potential for profit. Is that a fair assessment, or have we been looking at these problems in the wrong way? 

We just looked at a company that has a booming business of gathering plastic bottles on beaches, separating the types of plastic and selling to companies that are anxious to be able to offer recycled bottles or other products.

There is considerable research going into the transition from plastic packaging to biodegradable packaging. There is plenty of potential for profitable businesses, although the process of cleaning up the oceans is going to require time and money.

What technology are you excited about that has the most potential to create new markets?  

Seafood traceability solutions; ropeless traps; microalgae and seaweed are a hugely untapped resource with multiple market opportunities; ocean and weather data collection and analysis.

The ocean today only accounts for 15% of the world’s protein and 2% of its calories. What is the potential for the oceans to provide more, and what should that look like?  

The oceans will provide more food that has a much lower carbon footprint than land-based animal protein. Shifting demand from beef to seafood could have a major impact on GHG reduction. Seafood aquaculture, both on- and offshore, is growing much faster than wild-caught seafood, and will become a major source of high-quality protein.

What are some of the keystone problems that an ocean-based food system faces? 

Social license concerns about aquaculture, species sustainability and the need to broaden consumer tastes to reduce pressure on overfishing.

From aquaculture to kelp farming, there is a range of options to get more food from the oceans. Which do you think is the most promising?  

RAS and closed system aquaculture.

4 investors discuss the next big wave for alternative seafood startups

Peter Bryant, program director (oceans), Builders Initiative, and Kate Danaher, managing director (oceans and seafood), S2G Ventures

What is your investment thesis for ocean conservation tech in 2023? What sort of growth are you expecting in the sector? 

Peter Bryant: We invest in technologies and business models that enhance the conservation, regeneration and resilience of ecosystems, optimize the production of and use of resources derived from the ocean, and provide consumers with a sustainable, traceable and secure food.

Kate Danaher: Part of our thesis is that ocean conservation technologies can solve big problems for big ocean-going and adjacent industries. Innovations that create deflationary solutions like saving fuel, lowering water usage or can build diverse revenue streams through multiple industries will be best positioned to weather this economic winter, raise capital, and gain traction in the market.

As these types of innovations begin to show commercial results and have a positive environmental impact, we expect that investment in the sector will continue to increase, spurring more oceans-focused funds and increased interest from broader climate funds.

What role have impact investors played in ocean conservation? Investor networks? 

Bryant: Within ocean conservation, there are technologies and entire sub-sectors that are still developing and need patient capital for R&D, reaching product-market fit, and in some cases, creating new markets. Patient capital lets commercially viable companies de-risk themselves and provide them with the runway they need to hit milestones to attract more traditional capital.

Impact investors have also catalyzed the growth of the ocean investment landscape by providing the first capital into ocean funds. Before 2018, there were only a handful of ocean-focused funds; however, in the last 18 months, more than 18 ocean-focused funds have been launched.

This is exciting not only because it will lead to hundreds of millions of new dollars invested in the oceans, but also because it demonstrates that venture and growth equity investors have seen the potential of oceans and are willing to set up funds with an oceans-focus. Impact investors who are willing to invest early in these funds are playing a pivotal role in attracting the capital needed to grow the investment landscape in oceans.

Is ocean conservation the next climate tech? 7 investors explain why they’re all in by Tim De Chant originally published on TechCrunch

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After a record 2022, 8 investors explain why it’s ‘still just Day 1’ for Africa’s startup ecosystem

Last year was a good 12 months of firsts for African tech startups.

For the first time, the sector attracted over 1,100 unique investors in 2022, which in turn resulted in a record fundraising haul of $6.5 billion, according to data from Partech.

In fact, even some of the excesses of 2021 were eclipsed when the number of investments on the continent rose higher in 2022 than they had a year earlier, boosted by early-stage firms flocking to fund startups in the wake of landmark exits of homegrown companies like Jumia and Paystack.

What drove such volumes when the rest of the world was reining back the collective enthusiasm of 2021? To find out, we polled a few investors who had the highest volume of deals in Africa last year.

It turns out that while later-stage investors, mostly international VC firms, grabbed headlines by writing immense checks, pre-seed and seed-stage investors were instrumental to the growth of the continent’s tech ecosystem.

In Africa, incubators, accelerators, angels and seed investors easily outnumber larger funds — simply because it’s much harder to raise a large fund here. They accounted for more than 70% of the 1,100+ investors that participated in at least one deal on the continent last year.

“This shows that Africa’s investment landscape is still very promising because it continues to grow, and there’s increasing interest in multiple startup ecosystems, including nascent ecosystems. There’s also been an increase in syndicates and investment groups consisting of Africans at home and in the diaspora, as well as an increase in the number of founders of later-stage companies who are now investing in other founders,” said Kola Aina, general partner at Ventures Platform.

“These are all indications of a growing ecosystem,” he added.

However, the investor community also recognizes that there’s still a long way to go and a slew of opportunities left to tap.

“We are slowly building a more durable capital base for African tech. Having 1,000 active investors is not enough,” said Stephen Deng, founder and partner of DFS Lab. “We need thousands of active investors that support the different startup stages, especially on the growth side, offering both equity and debt.”

That said, Africa didn’t go unscathed — several investors noted that they did see deal flow and cadence slow down in 2022 and expect investors to be more careful about who they invest in and at what point.

“We definitely noticed deals were happening slower,” said Karima El Hakim, country director of Plug and Play Egypt.

“A round that would’ve closed in one or two months in 2021 took three or four months in 2022 [ … ] We have definitely seen valuations tighten, and a lot of startups have pivoted into less cash-intensive business models.”

Read on to find out what these prolific investors have to say about hot startup sectors in Africa, investment trends, their predictions for 2023, how to pitch them and more.

We spoke with:

Kola Aina, general partner, Ventures Platform

Your firm was among the African investors that wrote the most checks to startups in the seed stage last year. How do you balance writing so many checks and funding the best companies?

We go back to first principles, starting with the core of our thesis. We also have a very wide top funnel such that in 2022, we made initial contact with over 2,500 startups and ideas, and eventually only partnered with less than 1% of that top of the funnel. We also get strong referrals from our community of founders, which improves our signal-to-noise ratio.

There’s a pretty strict house process, regardless of how many deals we do. Over time we’ve continuously optimized that process to ensure we are efficient in how we review deals and how soon we can give founders feedback.

Firms that back a lot of startups are often criticized for not doing their due diligence and labeled lazy for using “spray and pray” tactics. How does this affect the investment landscape? Has this led to unrealistic valuations?

Markets are cyclical — founders and investors adapt to prevailing market conditions. Today, the market dictates a slower and more deliberate pace in the face of global economic uncertainty. This is a development we welcome, as it means that our penchant for due diligence and rigor is now back in vogue. The investment landscape remains unchanged even if things are a little slower; startups with strong fundamentals and good traction will attract capital and do well.

The most active African investors were involved in 15-20 deals, according to a report on African VC activity in 2022. How was that volume of deals possible in a year when investors retreated heavily? Will we see similar numbers in 2023, or will things change?

Despite the gloomy macroeconomic conditions, many investors still believe in what is possible in Africa. We expect to make more investments this year within the context of a few market trends, such as lower valuations, more emphasis on profitability and capital efficiency, more cost reduction initiatives, and opportunities for corporate buyers with strong balance sheets to acquire startups.

“We did see some unrealistic valuations in 2021 — it was almost as if founders forgot how to build with, say, $200,000. I stayed away from such deals.” Olumide Soyombo, co-founder, Voltron Capital

What differences did you notice in the investment landscape in 2022 compared to 2021? Were deals less or more competitive?

For global venture capital, 2021 was an outlier. But last year was when things started to cool down, starting with public markets and then manifesting at the late-stage startup cycle.

The challenging market conditions impacted fundraising — we noticed that, in comparison to 2021, some rounds took longer to close, some founders had to raise less than they initially planned, and at more conservative valuations. Sadly, some investors pulled out of deals.

We also noticed an increase in debt funding, which doubled from 2021 to $1.5 billion, which we believe is an indication of the maturity of the ecosystem and the growing/diverse financial needs of entrepreneurs.

Did your investment strategies change along with the current market conditions?

Not really; if anything, we feel the market geared down to where we were: favoring diligence and rigor over speed.

The African tech market in 2022, for the first time, had over 1,100 active investors and saw more deals signed compared to 2021. What does this say about the current state of Africa’s investment landscape?

This shows that Africa’s investment landscape is still very promising because it continues to grow, and there’s increasing interest in multiple startup ecosystems (including nascent ecosystems).

There’s also been an increase in syndicates and investment groups consisting of Africans at home and in the diaspora, as well as an increase in the number of founders of later-stage companies who are now investing in other founders.

These are all indications of a growing ecosystem.

Looking forward, which sectors will you continue to keep an eye on, and which trends do you expect to take off? Why?

We have seven key areas of interest that we remain committed to: financial services and insurance, life science and health tech, edtech and digital talent accelerators, enterprise SaaS, digital infrastructure, agtech, and food security.

That said, we follow innovations closely and are open to exploring new verticals. Currently, we’re excited about AI and climate technologies, because they offer an unprecedented opportunity to create a better, more sustainable future for all while ensuring Africa is not left behind.

How do you prefer to receive pitches? What’s the most important thing a founder should know before they get on a call with you?

Warm introductions are very nice, but not always accessible to every founder; this is why we have a channel for receiving decks through the application link on our website.

The investment team reviews decks and arranges meetings with founders building companies that align with our thesis.

Our thesis is the most important thing founders should be aware of because that’s our initial criteria for screening. We are an early-stage fund that invests in market-creating innovations solving for non-consumption in Africa.

In 2023, we’re looking to invest in more companies in Francophone West Africa, and East and North Africa. We are also looking forward to backing more female-led companies, and we are usually very excited to invest in pre-seed companies.

Zachariah George, managing partner, Launch Africa Ventures

Your firm was among the African investors that wrote the most checks to startups in the seed stage last year. How do you balance writing so many checks and funding the best companies?

We have strong relationships with most of the continent’s leading incubators, accelerators and venture-building studios. We can cherry-pick the top companies graduating from these programs before their demo days, which is a win-win for both the programs and for us.

Similarly, our solid relationships with Series A and Series B VC funds on the continent (and globally) creates an environment where they refer great companies to us that they really like, but are just a bit too early stage for them.

The most active African investors were involved in 15-20 deals, according to a report on African VC activity in 2022. How was that volume of deals possible in a year when investors retreated heavily? Will we see similar numbers in 2023 or will things change?

Africa accounts for about 17% of the world’s population, around 4% of the world’s GDP, but only about 1% of global venture capital.

This capital funding-economic value-target addressable market arbitrage opportunity is blatant and is constantly being tapped into (and rightly so) by investors who have done their homework.

They understand African technology-driven ventures will continue to grow and scale from:

  • increased consumer purchasing power.
  • higher penetration of smartphones.
  • better digital connectivity through both e-commerce and social-commerce.
  • greater corporate-startup collaboration from a channel distribution and customer acquisition perspective.

I expect to see similar numbers in 2023, and hopefully even better.

What differences did you notice in the investment landscape in 2022 compared to 2021? Were deals less or more competitive? Did your investment strategies change along with the current market conditions?

Last year was definitely a more circumspect and cautious investment landscape compared to the bull-run in African VC in 2021. Deals were a lot more competitive in 2021, because some founders were able to raise at often unrealistic valuations.

After a record 2022, 8 investors explain why it’s ‘still just Day 1’ for Africa’s startup ecosystem by Tage Kene-Okafor originally published on TechCrunch

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Proptech in Review: Investors predict slower growth in 2023

Building and owning a home has been part of human life for as long as civilization itself. But in the past few decades, the lens through which we view real estate and property development has slowly blurred.

It’s not a huge stretch to say that today, as tech increasingly permeates property development and housing, few except those operating in the sector can truly pinpoint what’s happening in the fast-developing world of proptech.

So in order to pull back that veil, towards the end of 2022, we decided to take an in-depth look into the trends and tech in property development and construction. We spoke to a diverse array of investors about finance-focused proptech and the move towards greener proptech.

But since we can’t get a full picture of the proptech space without delving into the tech driving so much of the change, we interviewed Momei Qu, managing director at PSP Growth, and AJ Malhotra, managing director at Insight Partners. They spoke extensively about the latest tech in property and housing development, where the next disruption is likely to happen, and other trends.

(Editor’s note: This interview has been edited lightly for length and clarity.)

TC: There’s a lot of overlap between construction tech and proptech. What would you say is the difference between the two? And where do they overlap?

Momei Qu: We did not coin this term, but we like to use “built world” or “built environment” to capture both categories. Traditionally, we’ve referred to construction tech as solutions that touch things as they are being built (i.e., jobsite, field-level technology targeting AEC as an end customer), and proptech as solutions that touch things after they are already built (i.e., tenant engagement for office buildings, property management for rental properties).

They overlap when there is something of value that applies to the entire lifecycle — construction data around plumbing that can be used for facility management, or outfitting a unit as a “smart home” during the construction phase.

AJ Malhotra: I think of construction tech as a subset or segment of proptech. In my definition, proptech is any technology that touches the full lifecycle of a physical structure, including land acquisition, construction planning, construction execution, financing, leasing, property management, insurance and repair.

Construction tech would fall into the buckets of planning and execution in the examples I just gave, and could also touch financing (for things like construction loans) and repair.

What is your investment thesis for proptech in 2023? What sort of growth are you expecting in the sector?

Qu: The sector has been hurt in 2022, in some ways disproportionally more than others, by the broader tech market reset. Several proptech companies were valued at over $1 billion in private financings or via SPAC, and virtually none of them have maintained a valuation above $1 billion today.

I think part of what made it worse is the double whammy of general inflated multiples in tech/software, coupled with the fact that many proptech companies have a physical component that shouldn’t have allowed them to be valued like a software company to begin with.

I think investors and companies in 2023 will exercise much more discipline, and likely won’t raise too much capital until they have really found a product and sales motion that works. As a growth-stage investor, we typically don’t get involved until we see significant traction anyway, and if they can show momentum and traction in this environment, we are more than happy to lean in in a big way.

Malhotra: I think proptech in 2023 will certainly be challenged, mainly for two reasons.

Proptech in Review: Investors predict slower growth in 2023 by Karan Bhasin originally published on TechCrunch

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4 investors discuss the next big wave for alternative seafood startups

Though investment in food technology has slowed in line with the rest of the venture capital world, the industry recently achieved some milestones that suggest the sector and the government are moving into alignment.

In fact, some investors feel that 2023 will be the year when alternative seafood companies and products make notable strides.

More than $178 million was pumped into alternative seafood in the first half of 2022, and the market’s value is poised to reach $1.6 billion over the next 10 years. One of the sector’s biggest investments was Wildtype, which raised $100 million in a Series B round for its “sushi-grade” cultured salmon.

If this momentum held in the past six months, funding into the sector would meet or exceed the $306 million invested in all of 2021, despite the slowdown last year.

“Investment has been growing steadily, and we expect this to continue,” said Christian Lim, managing partner at SWEN Capital Partners’ Blue Ocean. “We see the alternative seafood industry achieving key technical and economic milestones faster than the alternative meat space, which indicates a potential for continued acceleration,” he said.

Many companies say they are in this for the sustainability factor, and even with the initial blessing from the FDA to Upside Foods for its cultivated chicken making process, the focus is on getting these alternative foods close to the scalability and cost of traditional meat.

“The cultivated seafood industry is beyond needing to solve for the technology — the technology is there and it continues to improve with every iteration,” said Kate Danaher, managing director, S2G Ventures. “Now we need to think about brand-building, labeling, consumer education, scaling production, and developing and improving the supply chain and inputs that will support a scalable industry.”

Each startup journey is vastly different, but one pattern we have seen working is an iterative approach to go-to-market strategy, product development and regulatory approach. Friederike Grosse-Holz, director, Blue Horizon

And like other plant-based, cultured and fermented food companies, alternative seafood companies also must figure out the best way to get people to not only give their products a try, but to ask for seconds.

As we kick off 2023, investors say regulation will help alternative seafood make additional strides, and they are optimistic that traction will be found. Read on to find out how active investors are thinking about alternative seafood, where they see growth, what they are keeping their eye on, and more.

We spoke with:

Kate Danaher, managing director of ocean and seafood, S2G Ventures

What will it take for the alternative seafood industry to have its first unicorn? Do you think 2023 is the year for it? Which companies do you think are close to achieving this milestone?

I do not expect the first alternative seafood unicorn to happen in 2023. The first goal we should all be focused on is demonstration of repeated production runs at viable price points.

Cultivated protein companies have made tremendous progress in the development of their products, but the big hurdle is getting a product of consistent quality and cost to the market.

To date, we have seen big dollars flowing to support the first wave of cultivated protein products, including in seafood. To achieve the step up in valuations that will eventually lead to a unicorn, companies will have to demonstrate a quality product with margins that fit within a viable business model at scale.

There have been some strides in the U.S. towards approving the process for producing alternative protein. How can founders work with regulators and investors to bring more proof-of-concept projects to fruition?

Many constituencies need to be “won over” to mitigate the headwinds that cultivated protein is likely to meet as it goes to market, such as industry groups, consumer groups and regulators.

Startup founders can support industry growth, commercialization and acceptance by building bridges with industry groups to show that cultivated seafood can be complementary to wild and farmed seafood.

Additionally, they should provide transparency into the production process to win over consumer groups and join an association, such as AMPS or Good Food Institute, who are doing important regulatory work on behalf of the industry.

Depending on who you ask, mainstream production of alternative proteins, like beef, chicken, and pork, is still years away. How can the alternative seafood industry achieve this faster?

I feel confident that alternative protein products will be available for purchase in the U.S. in the next 12 months, both cultivated seafood and other animal proteins. But for the foreseeable future, that product will be niche, premium and in limited production. Once production capacity constraints are resolved and costs come down, I expect these products to be as widely available as their animal protein counterparts.

One area where seafood may have an advantage in speed to market is related to regulation, given the FDA has sole jurisdiction over alternative proteins whereas the USDA and FDA share jurisdiction over animal protein.

In addition, seafood has a higher price point and its muscle structure is simpler in comparison to other animal proteins, making it more straightforward to grow a product that more easily replicates wild/farmed species.

Many alternative seafood startups aim to solve for the climate crisis as well, but this industry has unique challenges such as cost and appealing to consumers. What will be key in helping companies produce sustainable products at scale?

For cultivated seafood, the technology is there and it continues to improve with every iteration. Now we need to think about brand-building, labeling, consumer education, scaling production, and developing and improving the supply chain and inputs that will support a scalable industry.

If these products can be more affordable and meet consumer expectations, they can achieve impact at scale — for the animal through less wild fishing, for humans by delivering a seafood product with no toxins or microplastics, and for the environment through less waste.

Additionally, consumer education will be key. This, in part, includes driving awareness around the true cost of our food beyond what we pay in the grocery store. Consumers are becoming more aware of the externalities and factoring that into their purchasing decisions, but there is much more work to be done in that respect.

What does the future look like for investment in this space? Which areas are you highlighting as future growth indicators?

The good news is that cellular seafood products have reached a stage where they are approaching readiness to go to market from a regulatory, taste and performance perspective.

Cellular seafood companies are making amazing advancements in reducing the price and nearing the stage where they are ready for growth capital to scale the business. I expect to see more innovation and investment into the advancement of consumer experience and 3D structures.

What is needed to attract more institutional investment for later-stage funding to help scale the market?

I fully expect cellular seafood companies to be in a sold-out position in the future, because there is demand from a large early adopter consumer segment. The next wave of investments will be into infrastructure and companies that build adjacent inputs to outsource parts of the supply chain.

We have strong indications that FDA clearance is coming, and that will tick a big box for institutional and later-stage investors. Once this is behind us, it will be about who is in the market showing traction and producing a product at a price point that makes a compelling business case.

Friederike Grosse-Holz, director, Blue Horizon

What will it take for the alternative seafood industry to have its first unicorn? Do you think 2023 is the year for it? Which companies do you think are close to achieving this milestone?

It will take a clean label and healthy nutritional composition equivalent to seafood, including protein and omega-3 fatty acids.

4 investors discuss the next big wave for alternative seafood startups by Christine Hall originally published on TechCrunch

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Losing the horn: VCs think majority of unicorns aren’t worth $1 billion anymore

The past few years have been a rollercoaster for the startup world’s herd of unicorns.

Two years ago, we saw a record number of companies cross the $1 billion valuation milestone. But that momentum slowed to a trickle last year, and this year’s market conditions look likely to reverse course to a point that we may witness some of those companies losing that status.

Down rounds are likely to become the norm this year as venture firms and investors look to bring valuations back to earth. We’ve already started to see some decacorns, like Stripe and Instacart, lowering their valuations, but they are so highly valued that they aren’t at risk of losing their unicorn status. But most unicorns don’t enjoy that luxury.

CB Insights’ unicorn index shows that there are 1,205 companies currently worth over $1 billion. But if you look closely, you’ll notice that the majority of these startups are actually hovering right at the $1 billion mark. Currently, 685 unicorns were last valued between $1 billion and $2 billion — that’s more than half the list.

How many of these will stay unicorns through this calendar year? To find out, we recently surveyed more than 35 investors on how many startups they thought would drop below the $1 billion valuation mark in 2023. While nobody could peg a specific number, of course, the vast majority felt the herd has likely already been winnowed.

Losing the horn: VCs think majority of unicorns aren’t worth $1 billion anymore by Rebecca Szkutak originally published on TechCrunch

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When it comes to web3, investors say they’re in it for the long haul

In the heat of 2021’s record-setting venture market, you couldn’t avoid the growing noise from the burgeoning web3 sector. Trust me, I tried. But while some of that momentum carried into 2022 (Yuga Labs closed a $450 million seed round in March), the rest of the year was relatively quiet.

Yes, venture as a whole had a quieter year overall in 2022, but the lack of web3 deals stood out particularly because the sector entered the year with so much momentum. Maybe the dramatic meltdowns of token Luna and the second-largest crypto exchange FTX scared investors off web3 as a whole? Did the rapid decline of consumer interest in NFTs spur VCs to rethink the category? We decided to find out.

To get a better idea of how the people writing the checks are thinking about web3, TechCrunch surveyed more than 35 investors, and it turns out the majority are not only actively investing in the category, they also harbor hopes of a shining future for what they feel is a potentially transformative technology.

One VC, who asked to remain anonymous, said that because the technology is so nascent, we aren’t seeing the true potential use cases yet, which could explain the lack of continued excitement after 2021’s rally.

“Those who understand the space know there’s a lucrative future that’s still in its earliest days,” they said. “Those who don’t understand the space also know that but will be more hesitant to deploy without a fundamental grasp of the real-world applications. Almost none of the purported benefits of web3 (decentralization, pseudonymous identities, zero-knowledge proofs, etc.) have been realized in full yet. It’s like the era of the [early World Wide Web], when every web page was simple HTML with ridiculous graphics and archaic capabilities.”

When it comes to web3, investors say they’re in it for the long haul by Rebecca Szkutak originally published on TechCrunch