Venture capitalists (VCs) are the backers of innovative projects and are thus vital for the advancement of new technologies, says Vineet Budki, managing partner & CEO of Cypher Capital, a $100 million private fund which is investing in blockchain, crypto, and other digital asset projects.
Speaking to Khaleej Times, he noted that there are several industries today that continue to draw robust venture investor interest including blockchain, supply chain management, renewable energy, marketing technology and gaming.
He also acknowledged that, at present, the venture capital business is facing several challenges from deteriorating public market performance, inflation, rising interest rates, and economic and geopolitical instability. In Q1 of 2022, 4,822 venture capital agreements were done at a value of $71 billion, much less than the $90 billions of VC investments in Q4 2021.
In May 2022, VC funding fell 14 per cent month over month from $45 billion in April. The largest pullback was in late-stage venture capital and technology growth investing, while seed funding remained robust. The slowdown, Budki said, is noticeable due to the current market conditions. “VCs became very selective in deciding which project to fund these days, but from the other end - it’s buying time, as there are fewer valuations, and chances to find good deals are big.”
“Nontraditional investors such as private equity companies, hedge funds, corporate venture capital groups, and sovereign wealth funds continue to contribute significantly to VC success,” he added. “They contributed $52 billion, or 74 per cent of VC deal value, in Q1.”
Over 800 mega deals were finalized in 2021, which was greater than the total number of deals concluded in 2018, 2019, and 2020 combined. More than 700 of the 800-plus mega deals executed in 2021 obtained funding from atypical VC firms.
“These unconventional VC investors were swayed by VC returns, which have been the best performing private asset class in recent years,” Budki explained.
He also noted the growing interest revolving around investments in sustainable startups that are focused on tackling environmental challenges. “Web 3.0 looks promising - it’s at a very early stage right now, and we are always open to investing in projects that have a positive impact on the environment, especially those which are working on minimizing the carbon footprint, fighting world hunger, or lack of water supplies.”
“One of our recent investments - IOMOB - is promoting mobility as a Service (MaaS) which has a net potential positive impact on decreasing the carbon footprint of ground transportation journeys,” he revealed. “Cypher Capital is a blockchain and crypto VC and even though this segment is outside of our domain, we feel that this is the future of investment as it affects us indirectly. From Green Energy to Carbon Capture, there are various use cases that will become critical as rapid industrialization and its environmental effects will take a toll on human living conditions, and in turn efficiency.”
Looking ahead, he said that the remainder of 2022 will help build a foundation for rapid growth in the coming years when economies will make a healthy recovery and technology will make life more convenient and enjoyable for consumers and businesses. “As investors, our outlook is long-term and the outlook for 2022 is more speculative and short-term. Still, we believe, down markets are the best time for founders to build because the noise is less, and free capital is scarce.”
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