Dubai Investment Fund, Andreessen Horowitz and Tiger Global are well-positioned to continue their growth in 2023

Depending on how you view things and whether you sit on the side writing the cheque or the side waiting to receive it, the investment landscape of 2022 thus far can either be perceived as 'half full' or 'half empty.' But it’s definitely unlike 2021, which was a banner year by all accounts. Last year (2021) closed out with the highest investment rate ever recorded ($300 Billion), with twice the amount invested in US startups versus 2020. Globally, nearly $1.6 trillion was invested in emerging companies. Comparing 2021 and 2022, the current year has been choppy, at best. Note that all monies herein are reported in US dollars.

What’s now clear is that 2021 was the year for startups seeking working capital. Investors had pent-up demand – and extra cash – after things slowed to a mere trickle in 2020 as the world grappled with the onset of the pandemic. In 2020, investment levels fell below those recorded during the financial crisis from a decade earlier. Many entrepreneurs joked on social media that all they needed to do was to present a venture capital firm with a slide deck and poof they had a six-figure cheque. In contrast, founders are lamenting how difficult it has been to access money, particularly seed capital, here in 2022. Let’s dig into what’s been going on in the world of venture capital.

Much of the investments in the current calendar year have come from larger funds as smaller funds appear to have shown some restraint in investing in new companies; instead, they have bolstered investment with companies already within their portfolios. All this activity, or, in some cases, the lack thereof, creates a competitive opportunity for VCs to invest in the world’s best companies – but to do so at lower prices and valuations. Here, the Dubai Investment Fund (DIF) is well-positioned to continue developing its investment thesis for opportunities that will have a long-term impact on communities. With DIF’s deliberate approach towards diverse portfolio investment, there is a significant opportunity for the VC firm to generate additional value and positive impact.

With regards to foreign direct investment (FDI), Singapore (27 per cent) and the USA (18 per cent) were the two largest foreign investors in 2021. The bulk of these monies flowed into India, which is a country highly regarded for its potential in technology innovation. On the receiving side, China ($101 Billion), the USA ($67 Billion), and Australia ($59 Billion) are the top three recipients of FDI monies thus far in 2022. What’s changed since last year is that the USA ($114 Billion), Australia ($80 Billion), and the UK ($58 Billion) have been the largest sources of FDI outflows – and Singapore is currently not even within the Top 5.

Within the USA, San Francisco remains the dominant market. Despite the tremendous focus on growing New York City as a tech hub with numerous startup accelerators, San Francisco pulled in 2.5 x the money ($53 Billion) that NYC ($19 Billion) did. These monies were recorded in the first half of 2022.

By Q2-2022, investors had collectively become a little more hesitant concerning opening their pocketbooks. Deal values, as did the number of deals, fell sharply. The number of unicorns was also reduced versus previous quarters. Also, mega-rounds of $100 million or more, which have been increasingly attracting non-traditional investors, have slowed down considerably as caution prevails across all industries worldwide. There were 4,456 deals in Q2 for $62 Billion. PitchBook analysts stated, “We can expect strong fundraising activity and a record amount of dry powder to drive dealmaking shortly until more certainty can be found across markets.”

May 2022 marked the first month in more than a year where investment totals ($39 Billion) for a month fell below $40 Billion and well below the November 2021 peak of $70 Billion. Late-stage and technology growth companies have been the hardest hit by the VC pullback of 2022. Early-stage companies were also negatively affected whereas seed funding emerged as the most robust of all fundraising stage efforts. Tiger Global and Andreessen Horowitz were the two VC companies most active in seed round investing last quarter.

As for other investing trends, SPACS have begun to lag. Despite the turmoil in the world with supply chain disruption, war, and inflation, investment deals continue to close. Artificial intelligence, blockchain, and crypto continue to be of general interest to the investment community at large. High volatility must be acknowledged as some economies teeter on recession. This is creating headwinds for some investors, however, DIF is poised, given its investment areas of interest and fund, to overcome some of the external pressures facing VCs in other markets. Potentially, this could confer some competitive advantage to DIF, but this cannot be predicted with any certainty. As it will for many venture capital firms, time will tell.

Recently, the Dubai Investment Fund (DIF) expanded its activities to New Zealand, Cyprus, and the Czech Republic, and appointed managing staff there according to the company's Twitter. In so doing, nearly 200 specialists will be united under the Dubai Investment Fund effort. In keeping with the current trends to attract and support top talent, all employees were given the option of working remotely, in-office, or with a hybrid arrangement. This brings the total headcount of DIF to more than 2,600 people working in 20 countries worldwide. Dubai, New York, London, Tokyo, Frankfurt, Hong Kong, and Shanghai represent the largest offices as they are co-located with the most active investment markets in the world. This neatly positions DIF to explore opportunities in ESG, healthcare, and green energy, which are among the fastest-growing and most sought-after based on the 2022 investment trends referenced earlier in this article.

New solar power plants are under construction in New Zealand along with innovative biomedical projects leveraging artificial intelligence in healthcare and precision medicine advances. DIF believes that its current approach and expansion will further increase the company’s profits by 7 per cent next year. An essential aspect of this bullish estimate is having the right combination of long-term planning, a sound investment thesis, and top talent who are poised to execute effectively through a deep understanding of market trends and conditions.

Abu Talha is the business strategist at Teamology Softech and Media Private Limited.

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