Founders and investors both are bracing for a tough 2023 as the economy shows little sign of improvement. But many questions are in the air: Will the truckload of dry powder VCs make its way to market? Will there be more layoffs if the pressure on valuations continues? What awaits AI?
However, we can answer some questions: some trends will definitely remain, such as interest in artificial intelligence, and crypto will come 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 founders and female founders.
To find out how minority investors plan for 2023, we spoke to 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 continued movement in the creator economy as more people move out to build their own brands and rely on new content creation and monetization tools,” she said.
Alexis Alston, director at Lightship Capital, thinks the future will be favorable for companies building technology to help others do business and save costs: shift towards companies relying more on sales optimization and content creation tools as replacements for previously heavily redundant teams.
But investors were pessimistic about improving capital allocation to black founders next year.
Richard Kerby, general partner at Equal Ventures, hopes to see more diverse founders get funding next year, but don’t expect a big change. “I think a lot of the narrative that many investors put out about investing in more black founders was mostly just talk and not a lot of content or real dollars flowing to black founders.”
We spoke with:
Alexis Alston, Director, Lightship Capital
Which sectors will you keep an eye on and which trends do you expect to take off in the coming year? Why?
I’ve always been interested in the ever-growing applications of AI, including generative AI, natural language processing, and deep learning. I look forward to seeing how AI can help scale formerly human-led business areas such as sales, social media, marketing, and content development.
As fast-growing techs begin to cut back on overheads, I believe we’ll see a strong shift toward companies relying more on sales optimization and content creation tools as replacements for previously heavily redundant teams.
What is the most pressing political issue you watch and how does it impact you as an investor? Would you support a startup that addresses any of these issues?
There is a deep undertone currently ringing around the expectations or lack of political oversight of 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 create a ripple effect for many of our institutional and consumer investors.
As an investor, the lack of oversight has led to ultra-high valuations and unrealistic expectations of exit potential within these nascent markets. In the end, the average 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 confident that next year will be any different. In any case, I am deeply concerned that the number will drop in 2023 as institutional funds either tighten their purse strings or start looking for criteria for founders that often exclude black founders.