Tech investments still attract VC firms despite market difficulties

In spite of numerous macroeconomic issues that marked the last year and are sure to continue to loom over the new year as well, it appears that venture capital firms are staying optimistic regarding tech firms. The optimism is very cautious, but recent reports show that several VC companies have decided to keep their investments in the tech space.

The reason why this is noteworthy is that the tech space had it particularly hard in 2022. Many tech firms grew quickly when they launched, and for a time, the euphoria was fueling this growth. However, over time, and due to all the difficulties seen last year, this euphoria has evaporated. Now, even the most prestigious tech firms are seeing sharp declines in profits, leading to manpower cuts.

The companies had to deal with cutting interest rates, inflation, the consequences of the Ukrainian war, other geopolitical tensions, and more. On the positive side, the drop in the value of tech firms’ shares now presents an opportunity for VC companies. At least, those that have a large amount of dry powder — capital that is committed but remains undrawn.

One of the partners at Rocketship.vc, Madhu Shalini Iyer stated that this is a tough period for everyone. The company envisions a slowdown to last for at least another 12 to 18 months. With that being the case, the companies will be careful, and they will place even more emphasis on due diligence, as they cannot afford mistakes right now.

Investors themselves will be going to take more time to close deals, while the bar for startups will get higher, as well. She added that Rocketship will keep investing in the best opportunities that are emerging from the hard times and that it doesn’t operate out of fear but instead out of caution and experience. In other words, it will not miss opportunities, but it will not rush ahead if there aren’t any.

There is great potential in Southeast Asia

VCs are detecting plenty of strong long-term opportunities in Southeast Asia, despite market uncertainty, according to Sequoia Southeast Asia’s managing director Abheek Anand. Most of them involve investing in early-stage tech firms in the region.

The region is seen by many as an exciting juncture, with deepening markets and high consumption power. There is also a significant talent density, which is also something that firms are on the lookout for. With all that said, Anand believes that this is the perfect time to start a company. Existing firms are struggling, and they are forced to make tough choices and trim expenses. However, at the same time, emerging businesses have the chance to thrive in the long term.

He concluded by saying that there is a lot of capital available in this region, which can fuel growth. However, this can put pressure on companies, making them feel like they have to grow quickly. As a result, the founders might become impatient if progress doesn’t come fast enough. To survive this, firms and their executives will need discipline and patience.