The VC landscape reaches consensus on future investment focus: “Look beyond the trends”

Last year was a rough year for venture capital. According to Crunchbase, with a 38% decline in global startup funding, 2023 was the lowest year for venture funding since 2018. So, what are VC investors looking for in their future investments? How can startups and scale-ups position themselves in this funding environment?

At The Tech Arena 2024, profiled venture capitalists joined the panel discussion on the future of VC investment. Unsurprisingly, AI was a recurring theme, reflecting the highest-invested industries of 2023. However, Olu Oyinsan, Co-Founder and Managing Partner at Oui Capital, provided a crucial perspective on the cyclical nature of trends in VC investing, urging the audience to avoid getting caught up in buzzwords.

“Over the past 5-7 years, there has been a new trend every two years. About five years ago, if you put Crypto or Blockchain in a deck, the evaluation went up, and then it was Big Data, then AI, and now Climate. I think it’s important to look beyond the trends and figure out what it is as a business case. Once something becomes a business case, it’s a sustainable trend.”

The importance of long-term thinking

Olga Shikhantsova, a partner at Speedinvest, agreed with Oyinsan and emphasized that our current view of AI is reminiscent of our view of the internet when it was new.

​​”In the past, companies were called Internet companies; now, every company is an Internet company. With time, every company will be an AI company, and the same goes for blockchain; these will be just technologies. Let’s instead invest in the actual problems in the market,” Shikhantsova said.

Andreas Helbig, Partner at Atomico, chimes in, “It’s hard to imagine the future. I think our brains are generally wired to be more short-term thinkers, which is why we’re talking about these hype waves and less long-term thinkers.”

The panel agrees that looking long-term is important when investing in solutions, especially regarding climate tech solutions.

Governmental stability to support the long game

Fausto Boni, Partner at 360 Capital, adds that it’s important to have support from the government to foster innovation, especially within the complex climate sector.

“I think the government and policy need to have some consistency and stability. That’s the most important thing. Especially when you invest in something that will be in your portfolio for six or seven years, you need to have a reasonably stable policymaker in front of you. That the rules don’t change of the game suddenly and erratically like we have had in the past,” Boni says.

So, what is the next big thing that VCs are looking for? The consensus in the panel discussion is that the AI language training model ship has sailed, but climate tech is still an interesting field.

Watch more of the panel discussion in the player above.