One possible explanation for the recent venture capital explosion could be due to startups feeling more confident about their prospects, as well as optimistic investors feeling that there is still plenty of money available. Additionally, tech stocks have been slumping recently, meaning even smaller companies may be able to attract larger rounds of investment. Finally, startup investing has slowed down a bit in recent years as the housing market recovers and many tech funds are waiting for better opportunities.
With so much capital available, startups are quickly filling up on investment options, with a number of new funds being announced each week. Such competition has led to good news for startups, as many venture capitalists believe that the more choices they have when selecting a startup to invest in, the better chance they have of striking gold.
The current economic downturn is no doubt frustrating for many, but it is important to remember that it is also merely a phase. The cycle of booms and busts is inevitable, and eventually the economy will resume its normal trajectory.
It’s been a tricky year for venture capitalists. New funds have been closing left and right, but few of these firms have actually announced the closures or their new investments yet. That could change in the coming weeks and months as more of these startups come forward with news about their progress. Defy.vc is one example – it just closed a third fund which brings its total investment commitment to around $300 million, up from $151 million when it launched its second fund last year and $262 million when it closed its first fund in 2019.
The closure of Defy Ventures, a startup accelerator fund, has left the Boston area with just one startup accelerator.
Looking back, it’s difficult to pinpoint just what happened in 2022 that made the year so confusing and troublesome. From Russia invading Ukraine to mass inflation in multiple countries, it seems like everything went wrong at once. Perhaps history will remember 2022 as a rough year for the world economy, but individual investors may be better off forgetting about it!
