188
CONCLUSION
is resulting in increasingly investor-friendly terms giving investors leverage over terms and conditions such as the rising prominence of preferred shares in 2022 deals. These market developments are reflected in the decline in the investment sentiment of Canadian organizations (Chapter 4). Whether 2023 will turn out to be a year of two halves as was the case in 2022 but in reverse (i.e. decline followed by growth) is a matter for speculation. One positive in- dicator is that the decline in investment appears to be leveling off in Q2 after the steep fall in Q1. Moreover, it is recognised that 2021 was a bubble and that the rap- id growth in investment activity and valuation that oc- curred was unsustainable and a correction was neces- sary. And the layoffs by ‘big tech’ is alleviating the talent constraints on start-ups. Moreover, there are emerging trends and sectors that may offer attractive investment opportunities for angel investors in 2023. Specifically,
cline in the amount invested compared to the same time last year (Q1, 2022), and a 67% drop in the number of deals. Compared to the last quarter (Q4 2022), this quarter also saw total investment fall by 61% and a 23% decrease in the number of deals 10 . There has been a particularly steep decline in angel, pre- seed, and seed rounds, a slump that has continued for ten quarters, despite its resiliency in 2020. Early-stage deals have also declined. This has been accompanied by a rise in deal size, suggesting that investors are sourc- ing ‘the cream of the crop’. The exit window has also shrunk as big corporations have reduced their acquisi- tion activity. Limited Partners are also cooling on ven- ture capital, especially micro funds, in response to rising interest rates which is prompting institutional investors to preserve capital. This has made investors more cau- tious, raising their benchmark for investing. And given that demand is increasing, the lower supply of capital
10 Canadian venture capital investment in Q1 2023 drops by 82 percent compared to last year, Batakit, 5th May 2023. https://betakit.com/canadian-venture-capital-in- vestment-in-q1-2023-drops-by-82-percent-compared-to-last-year
Powered by FlippingBook