The U.S. startup landscape boomed in 2021, doubling year on year with a $329-billion venture capital investment across the board. This was compared to $166 billion in 2020, and experts suggest we could see a new peak toward the end of 2022.
As VC investors continue to search for out-of-the-box opportunities, 2022 continues to open the door to new startup ideas and fast-growth ventures, as global trends such as sustainability, remote working and multi-sector digitalization continue to remain attractive to investors looking to see a significant return.
In fact, in 2021 alone, we saw a sharp influx in VC investment, leading to the creation of 936 unicorns as we stepped into the new year. While gaining VC attention has become harder in the wake of the post-pandemic startup boom, global VC funding is still high in 2022, according to CB Insights.
As you can see here, we saw a peak in VC investment in November 2021, but as we step into 2022, the number still continues to be high and rising in comparison to levels pre-pandemic.
So, as we jump into Q2 2022, what trends can we expect from the VC market, and what do new entrepreneurs on the block need to do in order to secure a funding round? Let’s have a closer look.
AI-based startups remain in the lead
The artificial intelligence (AI) market continues to grow. With a global market evaluation of $387 billion in 2022, predicted to expand at 20.1% CAGR over the next decade, it’s no surprise that VC investors want to get their teeth into its potential.
Automation has become vital since the onset of the pandemic. With global work-from-home trends still on the rise and COVID-19’s digital shift pushing all sectors into the technological age, AI stands at the forefront of success.
According to a recent report by the Organization for Economic Cooperation and Development (OECD), investments in AI-based startups are growing at an accelerated pace in 2022.
“The venture capitalist (VC) sector tends to forerun general investment trends, indicating the AI industry is maturing. As the AI industry matures, the median amount per investment is growing, there are more very large investments and proportionately fewer investment deals at early stages of financing,” OECD revealed.
In fact, the yearly global investment in AI-powered startups has grown from just $3 billion in 2012, to a whopping $75 billion by the end of 2020. As we step further into 2022, experts predict that this will continue to rise as AI is increasingly woven into all aspects of the corporate sector, automating financial management all the way to warehouse and supply chain operations.
Fractional CFOs on the rise
As VC investment trends continue to rise, so does the demand for fractional CFOs, as startups continue to rely on financial advisers to support their investment plans on an ad hoc basis.
In the wake of the pandemic, the role of CFOs became more significant to a remote-based startup sector. With new figures showing that 80% of pandemic ventures were failing after just one year, many business leaders are now prioritizing their finances and investing in fractional CFOs to improve their financial stability to attract VC investors.
Sustainable investing will be prominent in the U.S.
Clean technology is also set for wide-scale investment in 2022. As green energy investment booms once again in America on the back of new sustainable trends, cleantech has risen up to fame once again as billionaire Bill Gates leads a venture fund into a number of American battery and electric-car companies.
In response, the VC world is starting to give cleantech some serious attention. Sustainable investing has become a popular trend and will continue to grow in 2022. This has led to an increase in Zebra investing, which aims to boost the success of sustainable companies valued below $1 billion that work to improve global sustainable relations and eco-friendly movements.
In fact, according to a new report by PWC, VC investments in cleantech have increased threefold since 2020, and are expected to keep rising as VC investors fight it out for sustainable investing opportunities.
Could crowdfunding take the lead?
Did you know that new research has revealed that less than 5% of business start-ups now depend on venture capital investment during their primary growth stages? As new sources of funding hit the start-up landscape, could we see a fall in venture capital investment in response?
Both crowdfunding and crypto-based investments are rising up in popularity post-pandemic. In fact, in 2020, the cap for crowdfunding investment was raised from just over $1 million to $5 million in the wake of the new startup boom.
As you can see, crowdfunding’s market growth is expected to accelerate at a rate of 15% CAGR year on year, slowly catching up to venture capital’s reign on the investor throne.
While venture capitalists are more concerned about quality investing, over quantity, the market doesn’t have too much to worry about, but investors can be sure to look out for even more new sources of funding this year, as new players continue to log into the investing game.