After an incredibly successful decade, the US VC market saw a dramatic shift in 2021. 2021 was characterized by sky-high venture capital and excitement about what that could bring. This wave of optimism has crashed as 2022 rolled around. Unsustainable “growth at all costs” strategies have been discarded and replaced with a focus on building foundations for solid businesses. Worryingly, perceived risk levels have shot up over the last twelve months, too – meaning it’s never been more important to make smart decisions when investing or pivoting your business strategy going forwards!
As VC investments continue to shift and evolve with the market, VC funding deals in 2023 will likely look quite different than they did in prior years. VC firms and investors are likely to become more conservative when investing, taking extra time to evaluate potential investments before committing resources. VC firms may focus on long-term success rather than just short-term gains and on finding companies that fit their investment strategies. Deals may take longer to close as VC firms carefully weigh their options. VC funding will be smaller on average as VCs spread their resources across multiple investments and focus on diversifying their portfolios.
In addition to VC firms being more selective with where they invest, VC deals for 2023 may also feature higher valuations and increased scrutiny of terms by both sides. As VCs become savvier about what exactly makes a successful company—and how much it’s worth—valuations are likely to increase dramatically. This could lead VCs to hold out for better terms or larger stakes to maximize returns should the venture succeed. On the flip side, entrepreneurs may push back against high valuations or unfavorable terms to protect their interests and maintain control over their projects despite outside investment.
With the growing popularity of alternative forms of financing such as crowdfunding, debt financing, and initial coin offerings (ICOs), traditional VC investing is expected to decrease further in 2023 as these other options become more attractive for startups seeking investments. This means that VC funding deals might be even harder to come by this year due to increased competition from other financing sources and venture capitalists vying for a limited pool of opportunities.
Overall, it is safe to say that VC funding deals in 2023 will look quite different than before due to an ever-changing landscape in which both startups and venture capitalists must adapt to succeed. As such, both parties need to be smart about approaching negotiations while remaining agile enough to react when opportunities arise swiftly. Ultimately, entrepreneurs must realize that although there may be fewer available investments this year compared with years past, those that go through could prove far more valuable than ever if done right by all involved parties.
Author: Anju Chaudhary
English