Founders and investors alike are bracing for a tough 2023 as the economy shows few signs of improving. But there are a lot of questions up in the air: Will the truckload of dry powder VCs have make its way to the market? Are there going to be more layoffs if the pressure on valuations persists? What’s in store for AI?
We can answer some questions, though: Some trends are bound to stay, like interest in artificial intelligence, and crypto will continue to be under scrutiny, even as the market looks to the future. There are other aspects of the venture world that will probably not change, like 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’s vice president, Jadyn Bryden, the creator economy is one hot spot worth watching in the coming months. “I’m expecting to see continued movement in the creator economy as more people venture out to build their own brands and rely on new tools for content creation and monetization,” she 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 fast-growing tech darlings begin to cut back on overhead expenses, I think we will see a strong shift toward companies relying more on sales optimization and content creation tools as a substitute for previously heavily redundant teams.”
But the investors were pessimistic about capital allocation to Black founders improving next year.
Richard Kerby, general partner at Equal Ventures, is hopeful that more diverse founders would get funding next year, but doesn’t expect a huge change. “I think a lot of the narrative that many investors put out there about investing in more Black founders was mostly just talk and not a lot of substance or actual 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 take off next year? Why?
I’ve always been interested in the increasingly expanding applications of AI, including generative AI, natural language processing and deep learning. I’m looking forward to seeing how AI can contribute to scaling previously human-led areas of business, such as sales, social media, marketing and content development.
As fast-growing tech darlings begin to cut back on overhead expenses, I think we will see a strong shift toward companies relying more on sales optimization and content creation tools as a substitute for previously heavily redundant teams.
What is the most pressing political issue you are keeping tabs on, and what impact does it have on you as an investor? Would you back a startup that addresses any of these issues?
There is a deep undertone that is reverberating right now around the expectations of or the lack of political oversight for more nascent tech and financial products. Around everything from crowdfunding to crypto, there is a deep 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 ultra-heightened valuations and unrealistic expectations of exit potential within these nascent markets. Ultimately, 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 going to Black founders has rarely exceeded 1%, do you feel next year will be any different? Why or why not?
I am not confident that next year will be any different. If anything, I am very concerned that the number will drop in 2023 as institutional funds either tighten their purse strings or begin to seek criteria for founders that often exclude Black founders.