2023’s global startup landscape

As someone involved in the startup scene, you’ll know that agility is everything in the early stages of your business venture. You have to be ready to adapt to whatever new challenges and trends emerge, even to the point of predicting what they’re going to be before they happen. This will give you the best chance of beating your competitors to market share, and taking full advantage of new opportunities as they emerge, quickly identifying the resources and strategy you need (including investment if required).

Of course, nobody has a crystal ball that can tell them exactly what 2023 has in store. However, there are a few hints out there which suggest the likely direction of travel for startups in the year ahead. This blog takes a look at them, as well as what it means for you.

Where investment will come from

Firstly, it’s important to note that it is getting harder and harder to generate investment. In the third quarter of 2022, global early-stage funding came in at $34billion, a drop of 39% on the same period in 2021. However, this doesn’t mean that attracting investment will be impossible in 2023: it just means that startups have to be more savvy in how they go about attracting it.

Source: Crunchbase

In particular, startups should target investors that are interested in their specific sector and capabilities, rather than mass-market potential where investor enthusiasm is waning. Markets with the most potential at present include Biotech (where the global industry is valued at around $300billion and rising), and digital transformation technologies such as artificial intelligence, augmented reality, 5G, the cloud and the Internet of Things.

Additionally, there is likely to be increased interest in Web3 and the blockchain in 2023. In the wake of the FTX crisis, crypto-focused investors will be looking more at regulation, scalability and easy adoption, and at the firms exploring R&D and innovation in those areas.

Investors are also increasingly prioritising environmental, social and governance (ESG) strategies when assessing startups. More and more investors are recognising the societal and even legal requirements to invest responsibly, to the point where a positive ESG contribution is just as important within a startup as financial returns.

Challenges to watch out for

As well as the need to work hard to stand out from the crowd, there are a number of wider issues to be aware of, too. Certainly, the current economic climate won’t help matters: rising interest rates and inflation will naturally lead some investors to be even more cautious and not take risks on anything that isn’t a sure-fire success in their eyes.

Additionally, the talent shortage across most sectors will continue to grow. The combination of the Great Resignation, an increased focus on work-life balance and higher demand for particular skills is making talent acquisition and retention more difficult than ever. Improving salary packages won’t necessarily solve the problem, even if startups have the wherewithal to offer them. Finally, at a time when cybercrime is becoming more severe and more frequent, increased investment in security is proving to be another extremely high priority for startups.

How to take full advantage

If this makes things sound like doom and gloom, then fear not: there are still plenty of opportunities out there for forward-thinking startups to find the investors that can help them reach the next level. What’s clear is that a focused strategy that appeals to specific investors, incorporates ESG, and demonstrates a clear way of hiring the best and brightest around will maximise your chances of securing the investment you want.

Alongside this, it’s also worth thinking long-term and explaining to prospective investors what your vision is for the years ahead, and not just 2023. This is because many of those within the VC sector are optimistic that things will improve in years to come, especially for technology startups. Any startup that can balance ambition with pragmatism in their investor pitch is far more likely to be received positively by investors who are looking for realistic expectations in the current climate.

At InfinityVC, we have a proven track record of investing in startups just like yours and fuelling their growth and success. Explore the stories of our partners and how we’ve helped them here.