What to expect in VC investing in 2022

I read through countless articles in my first half of December and decided to put it together in the ultimate guide on the expected trends in VC investing in 2022.

?? Here's what new wave of investors are backing and trends we are likely to see in 2022:

? Crypto.

The cryptocurrency market is now worth more than $3 trillion, with Venture Capital funding for crypto companies surging.

As of late Nov 2021, VCs invested more than $27B globally into crypto startups, which is more than the previous 10 years combined. The crypto economy is expected to top $7.5 trillion in 2022, and most jobs will partly be in the metaverse.

Expect the following: use of bots to buy NFTs, cryptocurrencies becoming mainstream methods of payment, and continued use of DAOs as business models.

? Fintech.

Last year has seen some of the biggest fintech valuations to-date (Klarna at $45.6b, N26 at $9b, Airwallex at $5.5b), and this trend is likely to rise.

Expect the following: societies going cashless, e-commerce on the rise, and consumers turning to neobanks.

With high intensity of competition, every Fintech startup strives to provide best customer experience. The Product-Market fit is there, so we're likely going to see more investment pouring in.

? AI & ML.

VCs invested over $75B in AI startups in 2020.

The global AI market is expected to grow at a CAGR of 40.2% from 2021 to 2028 to reach USD 997.77 billion by 2028.

Top VC firms investing in AI right now include Sequoia Capital (highest number of investments in the AI tech space in 2020), Softbank Group (largest private equity fund adding up to $93 billion), and M12 (invests in early-stage enterprise software companies along with applied AI projects).

Developments in machine learning allow nowadays AI models to recognise?more?objects than the number of examples they were trained on. AI machines can now understand a user's facial expressions, voice inflections and verbal patterns to proactively start conversations and make suggestions.

? SaaS.

SaaS underpins all the other trends, becoming the most prevalent business model, currently growing by 18% each year.

This is evidenced by the growth of some of the biggest SaaS solutions out there - e.g. Salesforce alone grew from $161 billion to $251 billion in a span of 18 months. Similarly, Shopify evaluation in early 2020 was $52.1 billion compared to more than $185 billion today—that’s 225% growth in 20 months!

? Remote/ Gig/ Creators Economies.

Globally remote teams and ever-more powerful productivity tools drive the move away from traditional 9-5 to the freelancer model, enabling people to have more control over their work/life balance. With that, HR Tech will be on the rise.

VC investment in European HR tech startups reached $2.2 billion in 2021, surpassing previous year’s heights by 144% (PitchBook).

• Sapphire Ventures prioritises investment verticals such as: distributed & remote work, pay and benefits, productivity tools and employee engagement and communication, among others.
• Behind Genius Ventures deployed $1.25M to make 12 investments in this space, investing in companies at the pre-seed/seed stage that are centered around the Future of Work and Play.?

???? New generation of investors steps into the VC landscape with a goal of democratizing access to venture capital.

Meagan Loyst founded Gen Z VCs , a community empowering the next generation of leaders in venture capital, and grew it to more than 11,000 members since November 2020.

Inspired Capital announced its second fund , $281M to be invested in Seed and Series A companies, across all categories of innovation and all types of founders.

?? Focus on Impact Investing, Female Founded Businesses, and Sustainability.

Under-represented founders are coming to the forefront of discussions.

Diversity grows to become top priority. We got investors such as Danielle Lay , an immigrant check writer, who says she's motivated to elevate entrepreneurs from underrepresented backgrounds; Mac Conwell , focused on building relationship-based connections and also backing underrepresented founders; and plenty more:

• Backstage Capital invests in underestimated founders.
• AllRaise - focus on women in tech.
• One Way Ventures - backing immigrant founders.
• StartOut Growth Lab - an accelerator for LGBTQ+ entrepreneurs.
• Black Angel Tech Fund - backing black talent.

To conclude...

?? 2022: cash-rich, inclusive, innovative.

The number of mega-deals will continue to increase.

Back in 2015, there were about 142 unicorn companies. According to CB Insights, there are now 863 unicorns today (with a collective value of $2.8 trillion.)

There will be more points of access to venture capital.

Equity crowdfunding platforms are growing in popularity, allowing non-traditional (and even unaccredited) investors to have access to startups by pooling their money with other small investors.

VC landscape will continue to become more diverse & inclusive.

In the past, the Silicon Valley was the heart of the global VC landscape. Nowadays, it only accounts for just under 20% of total VC funding (in the US). In fact, a fair amount of VC money is leaving the US altogether. The US accounted for 50% of global VC investments in 2020. Asia-based investment platforms are seeing significant growth.

?? Here's to a great 2022.