Founders and investors they are equally preparing for a tough 2023 as the economy shows little sign of improvement. But there are many questions in the air: Will a VC truckload of dry powder make it to market? Will there be more layoffs if pressure on valuations continues? What’s in store for AI?
However, we can answer some questions: Some trends are sure to remain, such as the interest in artificial intelligence, and cryptocurrencies will continue to be under scrutiny, even as the market looks to the future. There are other aspects of the venture world that are unlikely to change, such as the lack of funding for minority and women founders.
To find out how minority investors are planning for 2023, we spoke with three active black investors. For Xfund VP Jadyn Bryden, the creator economy is one hot spot worth watching in the coming months. “I expect to see continued movement in the creator economy as more people venture into building their own brands and rely on new tools for content creation and monetization,” she said.
Alexis Alston, director of Lightship Capital, believes the future will be bright for companies that build technology to help others do business and reduce costs: “As fast-growing tech darlings start to reduce overhead, I think we’ll see a strong move toward companies that rely more on sales optimization and content creation tools as a replacement for previously highly redundant teams.”
But investors were pessimistic about the allocation of capital to black founders improving next year.
Richard Kerby, general partner at Equal Ventures, hopes more diverse founders will receive funding next year, but he doesn’t expect much change. “I think most of the talk that a lot of investors put out about investing in more black founders was mostly just talk and not a lot of substance or real dollars flowing to black founders.”
We spoke with:
Alexis Alston, Principal, Lightship Capital
Which sectors will you continue to keep an eye on and which trends do you expect to heat up next year? Why?
I have always been interested in the ever-broader applications of AI, including generative artificial intelligence, natural language processing, and deep learning. I look forward to seeing how AI can contribute to the scaling of previously human-driven areas of business such as sales, social media, marketing and content development.
As fast-growing tech enthusiasts begin to reduce overhead, I think we’ll see a strong shift toward companies relying more on sales optimization and content creation tools as a replacement for previously heavily redundant teams.
What is the most pressing political issue you care about and what impact does it have on you as an investor? Would you support a startup that tackles one of these problems?
There is a deep undertone currently reverberating around the expectation or lack of political oversight for new technology and financial products. There is a profound lack of oversight around everything from crowdfunding to cryptocurrencies that is only now starting to have a ripple effect for many of our institutional and consumer investors.
As an investor, the lack of oversight has led to ultra-inflated valuations and unrealistic expectations of exit potential in these emerging markets. In the end, the everyday angel investor (who tends to be more representative of the general population than institutional investors) gets the short end of the stick every time.
Given that the percentage of venture capital that goes to Black founders rarely exceeds 1%, do you think next year will be different? Why or why not?
I’m not sure next year will be any different. If anything, I’m very concerned that number will drop in 2023 as institutional funds either tighten their strings or start looking for founder criteria that often exclude black founders.