V for Recovery

As the IMF forecasts the end of the global recession, the cross-boundary nature of venture-backed innovation has never been so apparent.

ARE WE THERE YET? The IMF appears to think so. According to the latest World Economic Outlook update published by the IMF on Jan. 31, the roller coaster venture ride of the past three years may be emerging from the dark tunnel of recession and swinging up toward a brighter future.

Global growth is expected to slow to 2.9% and then rebound to 3.1% in 2024, much sooner than previously forecast, says Pierre-Olivier Gourinchas, IMF chief economist and head of research. A mild winter in Europe and the resumption of growth in China may help to offset the threat to the world economy created by Putin’s brutal invasion of Ukraine and the lingering effects of a devastating pandemic.

The news comes as we prepare to welcome 7,000 guests from around the world to Jerusalem in February to celebrate the 10th anniversary of OurCrowd at the 2023 OurCrowd Global Investor Summit. Perhaps we may also be able to start celebrating the beginning of the end of this bear market.

The OurCrowd Summit last convened just as the pandemic was beginning in early 2020, when the Nasdaq was days away from a major drop followed by a then-record high, and Israel’s high-tech economy – in line with global venture – was headed for two years of record investment.

From the record $26 billion of venture funding in Israel in 2021, we saw annual venture investing fall in 2022 to $15 billion, a 40% drop in line with the rest of the world. Worse still for venture capital managers, we saw the Nasdaq drop 33% in 2022 and tech leaders decline even more, with up to 80% or more wiped off the value of some technology companies.

But, as the IMF report indicates, the new year brings the glimmer of a recovery. By the end of January, the Nasdaq had recovered 13% from its lowest close of the past year on Dec. 28. Even that December low was 48% higher than the Nasdaq’s trough in February 2020. As inflation fears recede, 2024 is starting to look hopeful.

A sounding of OurCrowd investors reveals similar optimism. More than 85% of respondents in a survey of our global network of more than 220,000 accredited investors said they expect the next bull market to begin before the end of 2024, with more than 48% suggesting the upswing will start as early as this year.

If this is the start of the recovery, what pattern will it take?

In 2020, Louise Sheiner and Kadija Yilla of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution published a useful guide to the different shapes economists use to describe the varied patterns of economic growth. These range from the optimistic Z-shape created when pent-up demand enables the economy to zoom above the level set by its pre-recession baseline, through the shallow U of an economy that takes a long time to regain its upward trajectory, to a disastrous L where the market never manages to rejoin its pre-recession curve and languishes at a low level of growth for an extended period.

I believe we are at the start of a V-shaped recovery, much like the one we saw in Spring 2020 when the world economy vaulted back to its former trajectory and then some, as millions of people worldwide adjusted to the challenges of pandemic lockdowns by rapidly adopting the digital transformation of their education, business and leisure activities.

Just as in 2020, the challenges that created this recession are global. While issues affecting China or Ukraine extend far beyond their borders, the problems are bigger than any single country. I expect the solutions to be equally global in nature, fueled by the rapid adoption of relevant new technologies.

Ironically, by restricting us to our homes and denying us the opportunity to travel, the pandemic broadened our horizons and accelerated the globalization of our innovation community. Covid forced us to flatten our world, communicating as easily to colleagues on another continent as we did to those in the next building. The post-Covid community collaborates as easily with the far side of the planet as it does with its near neighbors.

The cross-boundary nature of venture-backed innovation has never been so apparent. As we approach the OurCrowd Summit in February, it is astonishing to reflect that in the past three years, we have developed partnerships with colleagues in the US, Europe, Asia and Latin America without ever meeting in person.?Over the same period, we have quadrupled the number of accredited investors on our platform to more than 220,000, almost exclusively through online digital campaigns. We have vastly expanded the global footprint of our investor base. And we have surpassed $2.1 billion in investment commitments largely via an online digital platform.

When we asked our investors in the recent survey which technology trends most interested them for investment, they chose renewable energy, climate tech, MedTech, FoodTech and AgTech ahead of traditional high-tech sectors like cyber and deep tech.

In other words, investors have a clear preference for technology that will help solve some of our most pressing problems like food security, health equity and combating climate change. It appears that these respondents want to do good, as well as profiting from their startup investments, preferring deals that are impact related, with tangible benefits for society.

So when we finally have the opportunity to convene in person in Jerusalem this month, our international community will focus squarely on these global issues.

We will address sustainability and hear from hydrogen energy companies like H2Pro, from sustainable energy companies like Wind Catching Systems, from MedTech companies like CytoReason, now working with Pfizer to accelerate drug discovery, from Flash Forest, which fires seed pods from drones to trigger rapid reforestation, and we will have two of Israel’s leading chefs cooking and tasting food using alternative, sustainable proteins.

We will celebrate new international partnerships forged despite the recent upheavals, most notably with our Middle East neighbors in the Gulf and North Africa, many of them on their first ever visit to Jerusalem.

And with our new partners at the WHO Foundation, we will discuss how to achieve global health equity by using new technology to ease access to healthcare and mitigate the causes of disease.

Together once again, we aim to harness the talents of entrepreneurs, investors and multinational partners to try and shape this recovery, whatever its letter, for the benefit and prosperity of all.

To register for the 2023 OurCrowd Global Investor Summit on Feb. 15 in Jerusalem, click HERE

About ‘Investors on the Frontlines’

I’m the CEO and Founder of?OurCrowd, the global equity investment platform that gives individual accredited investors access to pre-IPO startup deals alongside top-tier VCs. If you are an investor, private family office or financial advisor, subscribe?here?for my biweekly commentary or follow me on?Twitter. I welcome your comments in the response section below.