The world is on the verge of a recession. The 2023 macroeconomic environment is characterized by a slowdown, inflation, and rising interest rates that inevitably affect the world of startups and venture capital financing. Investors are re-evaluating their strategies, adjusting to the economic downturn, and are cautious about the future. And while venture capital funds still have money to invest, the number of deals has dropped significantly.
According to Crunchbase, 342 cybersecurity startups founded in or after January 2021 were able to raise $1.85 billion in funding. There are only 122 startups founded in January 2022 or later, and their total funding is about $450 million.
After a gloomy 2022, global venture capital continued to decline.
Here are some trends based on CB Insights data:
- global venture funding dropped by 13%, compared to the previous quarter and continues to slide;
- every region sees a double-digit drop in funding in early 2023, except for the US;
- the unicorn birth rate is at its lowest level in the last 6 years with just 13 unicorns emerging in the first quarter of 2023
- the average deal size for late-stage rounds falls sharply, falling below the average mid-stage deal size
- quarterly IPOs fall by 47%, reaching their lowest level in almost a decade
Is the crisis a good time for startups?
The recession does not mean that innovative businesses will not be very successful. There will always be demand for products and services that solve a painful problem for many people around the world in a unique way.
In 2023, like every year, new promising startup companies will compete for investors’ money by offering exciting innovations, technologies, and business models.
We have collected a few interesting startups of 2023 that innovation enthusiasts, investors, and aspiring entrepreneurs should be aware of.
An American artificial intelligence model developer and research organization with a total estimated value of $4.4 billion. Founded by former OpenAI employees, the company specializes in the development of general AI systems and language models in particular, “guided by the principle of responsible use of AI.” At the end of 2022, Google invested almost $400 million in the company, and Anthropic announced an official partnership with Google Cloud. Anthropic has its own AI chatbot called Claude. Similar to ChatGPT, Claude uses a messaging interface where users can send queries and receive detailed and up-to-date answers. The program is currently available for iOS and Android.
A Ukrainian AgTech startup that recently raised $550 thousand with an estimated value of $3.7 million, is a specialized online service for optimizing business processes of drone spraying services and, in general, the service business in agriculture. The platform offers solutions for agricultural producers and service companies, combining the needs for agricultural operations and the technical capabilities to meet them by engaging external contractors. FarmFleet offers intelligent solutions for farmers to work in changing weather conditions, limited resources, and seasonal peak periods.
It is a unique platform that offers a synthesis of robotics, unmanned technologies, agrochemistry, AgTech solutions in agribusiness and agricultural service business. Currently, the company announces plans to create a cluster in the pilot international market of the United States.
This American startup training AI to use corporate software has been valued at $1 billion. Adept, a San Francisco-based startup, has raised $350 million to develop tools that can actually perform commands based on human prompts rather than provide written answers. In particular, the fresh funding will support the startup’s product development, model training, and staff growth. Unlike OpenAI’s highly publicized ChaGPT, which generates human responses to simple prompts, or Dall-E, which creates images, Adept aims to make software actually perform tasks to increase the productivity of corporate governance and business processes.
According to the company, Adept will help people work more efficiently and productively by running “side by side with the user” as an automated partner, and sometimes by completing tasks entirely instead of a human.
The startup, valued at $742.5 million, is changing the way people buy and sell homes. The centralized platform allows buyers and sellers to conduct transactions safely and efficiently. Homeowners can sell their homes on HomeLight without the need to make expensive repairs, and without the hassle of posting ads and showing properties. Homebuyers will be able to connect with the best agents who use data on home sales to help them find the perfect match. The startup successfully capitalizes on the promising trend of online platforms that eliminate all or part of the intermediation of brokers or agencies in various industries and put more control over transactions or operations in the hands of individuals and small businesses, disrupting conventional marketing practices.
DeHealth is a Ukrainian innovation platform that was ranked among the top five digital health startups at Mobile World Congress 2023, the world’s largest mobile industry exhibition in Barcelona.
The app, developed by DeHealth, helps people with attention deficit disorder to increase productivity. Powered by artificial intelligence and medical data, the app helps to securely store, share, manage, and monetize depersonalized data.
2023 clearly demonstrates that the days of venture capital waste are over. There is more oversight of investments and expenditures, as well as better control over the productivity and efficiency of financial spending.
At the same time, the AI revolution remains the main trend in the 2023 startup industry. Leaders of various industries are trying to customize the technology to their own needs.
According to Goldman Sachs, the widespread use of generative AI could boost US labor productivityby 1.5 percentage points over the decade.
This would be enough to boost global GDP by 7% over the same period. It sounds fantastic, but there will always be risks alongside the super-opportunities.
After all, it’s always worth remembering that successful investing is not only about being “right and gut feeling,” but also about being able to be sure that your investment portfolio will not suffer if you make a mistake.
So, while you may not miss the opportunity to invest in AI, you should also keep in mind diversification – the distribution of investments not only across sectors and verticals, but also across geographical regions.
Source: The Gaze