Founders and investors both are preparing for a difficult 2023 as the economy shows few signs of improvement. But there are many questions in the air: Will the truckload of dry powder VCs ever hit the market? Will there be more layoffs if pressure on valuations continues? What’s in store for AI?
We can answer some questions, though: Some trends will certainly remain, such as interest in artificial intelligence, and crypto will continue to be evaluated, 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 female founders.
To find out how minority investors are planning for 2023, we spoke with three active Black investors. For Xfund vice president Jadyn Bryden, the creator economy is a hot spot worth watching in the coming months. “I expect to see continued movement in the creator economy as more people try to build their own brands and rely on new tools for content creation and monetization,” he said.
Alexis Alston, principal at Lightship Capital, feels the future will be favorable for companies that build tech to help others do business and cut costs: “As the fast-growing tech darlings begin to cut costs overhead, I think we’ll see a strong shift towards companies relying more on sales optimization and content creation tools in place of previously over-redundant teams.”
But investors are pessimistic about allocating capital to Black founders improving next year.
Richard Kerby, general partner at Equal Ventures, expects more diverse founders to get funding next year, but doesn’t expect much change. “I think a lot of the narrative that a lot of investors put out about investing in more Black founders is often just talk and not a lot of substance or actual dollars flowing to Black founders.”
We spoke to:
Alexis Alston, principal, Lightship Capital
Which sectors will you continue to keep an eye on, and which trends do you expect to take off over the next year? Why?
I am always interested in the ever-expanding applications of AI, including generative AI, natural language processing and deep learning. I look forward to seeing how AI can contribute to scaling previously human-dominated areas of business, such as sales, social media, marketing and content development.
As the fast-growing tech darlings begin to cut overhead costs, I think we’ll see a strong shift toward companies relying more on sales optimization and content creation tools as a replacement for previously redundant teams.
What is the most pressing political issue you are watching, and how does it affect you as an investor? Would you support a startup that addresses any of these issues?
There is a profound tone reverberating right now around the expectations of or the lack of political oversight for newer tech and financial products. Around everything from crowdfunding to crypto, there is a profound lack of oversight that is only now beginning to cause a ripple effect for many of our institutional and consumer investors.
As an investor, the lack of oversight has led to extremely high valuations and unrealistic expectations of the potential to emerge within 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 any different? Why or why not?
I’m not confident that next year will be any different. If anything, I am very concerned that the number will decrease by 2023 as institutional funds either tighten their purse strings or start looking for criteria for founders that often exclude Black founders.