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Venture Capital's and 2023

12 Predictions For Venture Capital In 2023

Some people are calling 2022 the year the party ended. Others are calling it the hangover, or even the new normal. What we can all agree on is that 2022 was a year of reckoning for the venture capital (VC) industry.

In the third quarter of 2022, VC funding totaled just $81 billion, according to Crunchbase. That’s 33 percent ($40 billion) less than the previous quarter, and 53 percent ($90 billion) less than in 2021.

What’s in store for 2023? What are the biggest opportunities in terms of investment stages and types of businesses? How will VC evolve in the year ahead? We spoke with leading investors to get their predictions.

#1: A resilient new generation of founders will emerge

Sophia Bendz, General Partner, Cherry Ventures

“My prediction isn’t so much what will happen in 2023, but what changes 2023 will create in the long term. The year will be rooted in the still-tough market and macro environment of 2022, and that will produce a generation of founders that are more robust, more strategic, more determined, and far more resilient than those we’ve witnessed in the past decade. I cannot wait to meet these founders and team up with them.”

#2: The downturn will push startup founders to build painkillers, not vitamins

Mar Hershenson, Managing Partner, Pear VC

“Recessions are a great time to build significant companies (discontinuity leads to opportunity). Generally in a recession the lack of money forces people to be more creative, solve only problems that people are truly willing to pay for (even when budget is tight), and be more frugal, only spending on things that move the needle.”

#3: Founders just starting out will be one of the best investment opportunities

Reshma Sohoni, Founding Partner, Seedcamp

“At the earliest stages, exceptional entrepreneurs will be building the companies of the future, undeterred by the macro conditions. While the market will take its ‘truth serum’ and re-emerge from the valley of despair (hopefully with some lessons learned), the next billion-dollar companies will be created.”

#4: Robots will take over, and will plug our labor shortages

Reece Chowdhry, Founding Partner, Concept Ventures

“As the global workforce shrinks and the population ages, the adoption of robotics and automation will be key to boosting productivity and plugging the labor shortages that have plagued businesses in 2022. I believe there will be a big drive to shift to automation in 2023, as organizations realize that there is no talent shortage if they adopt robotics and software at scale. Businesses will find it's the only way they can deliver the output they need with the workforce available. Maybe this quote was even generated by a robot.”

#5: The supply chain crunch will get worse before it gets better

Elizabeth Yin, General Partner, Hustle Fund

“I think the supply chain crunch across many products will get worse. China still has a zero-COVID policy, so the manufacturing backlog is real and will take a couple of years to get through.”

#6: Climate tech will emerge as a bright spot in an otherwise rocky environment

Abe Yokell, Co-Founder and Managing Partner, Congruent Ventures

“As tech and crypto retrench amidst the economic downturn, climate tech investing will emerge as a relatively predictable safe haven for entrepreneurs, tech refugees, and investors. The inevitable impacts of climate change, alongside the recently passed Inflation Reduction Act, will create the conditions/precedent for a long bull run across the climate tech landscape.”

#7: We’ll see better investors, less “VC tourists,” and more thorough diligence

Mar Hershenson, Managing Partner, Pear VC

“We will see more real companies and better investors. Less money in the system means companies need to have better operational excellence (do more with less money). Investors are also going back to basics. Diligence is back, along with appreciation for companies that are building real value, not relying only on future value.

Less founders. Less investors. More opportunities. When it is harder, the tourists leave.”

#8: Seed valuations will remain high, while other stages will face more pressure

Mar Hershenson, Managing Partner, Pear VC

“Seed valuations will remain high, because everyone sees seed as the lowest risk spot in the market.”

#9: VCs will face more challenges raising their own funds

Beezer Clarkson, Partner, Sapphire Partners

“The end of the latest bull run has forced a hard reset for many Limited Partners (LPs), and they’re reevaluating the venture managers they want to prioritize partnerships with for the next decade-plus. I think 2023 will bring pronounced LP churn as they look to rebalance their portfolios and focus on those with long-term return potential, which likely also means shedding the overall number of venture funds backed.”

#10: Funds managed by women and people of color will outperform

Claude Grunitzky, CEO, The Equity Alliance

Venture capital has long been a white man’s game, but things are starting to change. I am seeing so many signs that confirm what I have long suspected: despite the fundraising challenges we face, funds managed by women and people of color are starting to outperform funds led by white men."

#11: Bigger bets will be placed on women

Erin Harkless Moore, Director of Investments, Pivotal Ventures

“We have no doubt that female founders and female-led funds will prove resilient, and more investors will double down on diversity as the smart play in 2023. Long story short, if you’re not backing women, you’re losing out. Data shows that female-founded companies continue to beat out the broader market by exiting faster, with higher values for investors. Given the economic downturn and uncertainty, many LPs may be rationalizing their fund portfolios and cutting relationships in 2023; however, more will lean to emerging managers as an opportunity to shift talent and play promising sector themes in fintech, healthcare, future of work, and sustainability.”

#12: VC funding will rebound by the end of 2023

Gene Frantz, General Partner, Capital G

"Fear not—year-end 2023 headlines will look a lot better than today's. The current news cycle may be rough, but persistence and innovation combined with an improving economic outlook will restore the optimism that has always defined our industry."

In Conclusion

Despite the turbulence of 2022, many of the investors we interviewed expressed guarded optimism for the year ahead. We’ll see more resilience, more rigorous diligence, more diversity, and a greater focus on solving big problems that matter. These are shifts in the VC industry worth celebrating.


Top 10 Biotech VC Investors in 2022

The biotech industry is still in its early stages, but some investors are making it work. We’ve compiled a list of the top 10 biotech venture capital investors who have made their mark on the industry by investing in start-ups and leading successful exits, helping to build and grow companies all over the world.

Top 10 Biotech Venture Capital Firms

1. RA Capital

RA Capital Management is an investment advisor based in Boston specializing in the life-sciences and drug development sectors. Their team has been investing since 2002 and is comprised of professionals with training in biology, chemistry, and medicine and also has industry and business development experience at the executive and board levels. They invest in companies with promising technologies and products. Their approach is to achieve a superior understanding of data, experimental/trial design, regulatory process, and commercial potential. When appropriate, they can offer their portfolio companies leads on in-licensing opportunities and strategic partnerships, as well as insight into the demands of the public markets.


Founded: 2001

Total fund size: $2B

Stage: Seed, Series A, Series B, Growth

Sector: Life Sciences, Biotechnology

Investment Geography: United States

RA Capital Management's most notable exits include Bristol Myers Squibb, FORMA Therapeutics, and Global Blood Therapeutics.

2. Casdin Capital

Casdin Capital is a fundamental research investment firm focused on the life sciences and healthcare industry. It manages a long-short equity fund and makes investments in early-stage to late-stage private investments.

Casdin was launched in 2012 by founder and CIO Eli Casdin and as of October 2020 has approximately $2.2 billion in assets undermanagement.


Founded: 2012

Total fund size: $30M

Stage: Series A, Series B, Series C, Growth

Sector: Life Sciences, Health Care, Biotechnology

Investment Geography: United States

Casdin Capital's most notable exits include Invitae, Fulcrum Therapeutics, and Absci.

3. OrbiMed

OrbiMed is a healthcare-dedicated investment firm, with approximately $5 billion in assets under management. OrbiMed's investment advisory business was founded in 1989 with a vision to invest across the spectrum of healthcare companies: from private start-ups to large multinational companies. OrbiMed manages the Caduceus Private Investments series of venture capital funds and a family of public equity investment funds.


Founded: 1989

Total fund size: $8.6B

Sector: Biotechnology, Life Sciences

OrbiMed's most notable exits include Adaptive Biotechnologies, Invitae, and Athersys.

4. Logos Capital

Logos Capital is a fundamental biotechnology-focused fund that seeks to combine in-house data analytics with scientific and clinical expertise to identify transformative therapies in healthcare.

Based in San Francisco, Logos combines expertise across medical, scientific, and statistical disciplines to expand the depth of diligence in identifying compelling investment ideas and uncorrelated-market returns. They combine scientific diligence with their statistical modeling of clinical trials to achieve the highest levels of conviction in each position.


Founded: 2019

Logos Capital's most notable exits include SomaLogic, C4 Therapeutics, and Affinivax.

5. Venrock

Venrock continues a tradition of partnering with entrepreneurs to establish successful, enduring companies. With a primary focus on technology and healthcare, portfolio companies have included Apple Computer, Athenahealth, Centocor, Check Point Software, DoubleClick, Endeca, Gilead Sciences, Idec Pharma, Imperva, Illumina, Intel, Nest, SlideShare, and Tudou.


Founded: 1969

Total fund size: $4.1B

Stage: Pre-Seed, Seed, Series A, Series B, Growth

Sector: Applications, Digital Health, Internet, Health Care

Ticket Size: $ 4M - $ 20M

Investment Geography: United States

Venrock's most notable exits include Intel, Apple, and Cloudflare.

6. F-Prime Capital

F-Prime's roots are in one of America’s great entrepreneurial success stories. Fidelity Investments was founded in 1946 and grew from a single mutual fund into one of the largest asset management firms in the world, with over $2 trillion in assets under management. For the last forty years, this venture capital group has had the privilege of backing other great entrepreneurs as they built ground-breaking companies in technology and life sciences, including Atari, MCI, ROLM Corp., Alibaba, Ironwood Pharmaceuticals, and Ultragenyx.

Today, F-Prime's funds are larger and more global, but its teams are still small and local. F-Prime stays true to its entrepreneurial roots. In the US and Europe, F-Prime Capital Partners is investing in healthcare (formerly Fidelity Biosciences) and in technology (formerly part of Devonshire Investors). In other geographies, its sister fund is called Eight Roads (formerly Fidelity Growth Partners), with investment teams in London, Shanghai, Beijing, Hong Kong, Tokyo, and Mumbai.

Together F-Prime brings a world of insight, domain expertise and relationships to support entrepreneurs. Without the pressure of fundraising from outside investors, F-Prime Capital Partners focuses all of its time finding and helping great entrepreneurs build important companies.


Founded: 1946

F-Prime Capital's most notable exits include TradeBlock, Precision BioSciences, and Blueprint Medicines.

7. Vivo Capital

The firm is a 25-year-old global investment firm focused on healthcare with approximately $5.8 billion in AUM, which we have invested in over 290 public and private companies worldwide. Headquartered in Palo Alto, California, with offices in Asia. Our team consists of 50 multi-disciplinary professionals, including, physicians, scientists, entrepreneurs, operating executives, and industry experts. The firm operates as a multi-fund investment platform, covering growth equity, private equity including buyout, venture capital, and public equity. Vivo invests broadly in healthcare across all fund strategies, including biotechnology, pharmaceuticals, medical devices, and healthcare services, with a focus on the largest healthcare markets.


Founded: 1996

Total fund size: $5.4B

Stage: Series A, Series

Sector: Financial Services, Health Care

Vivo Capital's most notable exits include Bristol Myers Squibb, Arcutis Biotherapeutics, and Poseida Therapeutics.

8. Arch Venture Partners

ARCH invests primarily in companies co-founded by scientists and entrepreneurs, concentrating on bringing to market innovations in life sciences. They enjoy special recognition as a leader in the successful commercialization of technologies developed at academic research institutions and national laboratories.

ARCH has raised ten venture funds totaling over $3 billion and has invested in the earliest venture capital rounds for more than 150 companies. ARCH investors include major corporations, pension funds, endowment funds, financial institutions, and private investors.


Founded: 1986

Total fund size: $7.7B

Stage: Seed, Series A, Series B, Series C, Growth

Sector: Biotechnology, Health Care, Life Sciences, Energy, Financial Services

Ticket Size: $ 50K - $ 150M

Investment Geography: Agnostic (Global)

ARCH Venture Partners's most notable exits include Twist Bioscience, Karuna Therapeutics, and Bluebird Bio.

9. Surveyor Capital - Citadel

Surveyor Capital is a fundamental equities business. Surveyor’s sector-aligned investment teams operate market neutral strategies and aim to generate alpha through a deep understanding of each company’s strategy, management teams, drivers of performance, and cyclical and secular industry trends over the medium and long term.


Founded: 2008

Total fund size: $300M

Surveyor Capital's most notable exits include Point Biopharma, Science 37, and Cerevel Therapeutics.

10. Sofinnova Partners

Sofinnova Partners is a venture capital firm that invests in the life sciences sector, from seed to later-stage.

The firm manages over €2 billion of assets dedicated to life science investing and actively partners with ambitious entrepreneurs as a lead or cornerstone investor to develop transformative innovations that have the potential to positively impact its collective future. It invests in start-ups, early-stage companies, corporate spin-offs, and occasionally turnaround situations with a focus on Life Sciences (Biopharmaceuticals / Biotech, Medical Devices, Industrial Biotechnology). Sofinnova Partners proactively sources deals, takes a lead role, is most often the first institutional investor in Round A financings, and leads its portfolio companies until exit. They sit on the boards of their portfolio companies and play an active role from the formation phase alongside entrepreneurs.

It was headquartered in Paris, Ile-de-France in 1972.


Founded: 1972

Total fund size: $3.7B

Stage: Seed, Series A, Series B, Series C, Growth

Sector: Life Sciences, Biotechnology, Health Care, Pharmaceutical

Investment Geography: Agnostic (Global)

Sofinnova Partners's most notable exits include Abivax, CinCor Pharma, and Shockwave Medical.




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