Venture Capital in 2023 — Emerging Trends and Issues
How FOMO, Diversity and Risk will shape venture capital and startup fundraising in the next year.
More than 91,000 tech workers have been laid off so far in 2022. A lot of them are from the likes of Meta, Twitter, Amazon, Lyft, Stripe and other tech giants.
Many are well-paid, highly talented software engineers or senior business executives. They will probably be reluctant to take a job with lower pay or join a young startup with founders less experienced than them. That, and the expectation of a global recession for the next 1–2 years, will make re-entry into the job market difficult for those who were laid off.
More likely than not, in 2023 a large number of them will try their hands at being founders. This will likely result in a lot of new startups for VCs in the early-stage game to choose from.
But despite what could be a bumper crop of new companies for VCs, their selection process will be influenced by three trends which can be summarized by the following three words: FOMO, Diversity and Risk.
Hurt by FOMO
2022 saw the bubble bursting on a lot of faddish startups — Crypto, DeFi, Fintech, e-commerce and the likes.
Many attracted millions and even billions in capital despite not having sustainable business models and questionable governance. Some were funded richly even when they were just an idea on paper (think Adam Neumann’s comeback gig and all the ICOs of the 2017/18 era).
2023 will be the year that VCs really start to pay for all their FOMO plays in their balance sheet. Already billions have been written off for spectacular implosions like Terra Luna, Celsius and FTX. More startups peddling dubious solutions or technologies will emerge out of the woodwork — especially among crypto and blockchain plays.
Going forward VCs will probably try to self correct and over compensate by scrutinizing portfolio companies harder and getting more involved operationally.