Specialist VC: "The competition for capital will be concentrated to 12-18 months from now"

Venture fund Specialist VC: 

"Happy February everyone! We believe it is still not too late to share a summary from our Investor Day about what we see as the local industry outlook for 2023. Disclaimer: all based on our observations and gut feeling 🤔.

Access to funding 💰: 

* Companies are postponing fundraise to avoid downrounds and, therefore, the competition for capital will be concentrated to 12-18 months from now. 

* Total capital raised in the Baltics will drop considerably (-50%) due to lack of super rounds. However, total number of deals will drop less (-20%).

Deal flow: 

* The quantity will decrease ⬇️. “Let’s do a startup and get money from investors” mentality will not work any more. People will value more regular jobs that provide security. 

* The quality will increase ⬆️. We will have more companies with traction and validated unit economics. Teams focusing on break-even, rather than funding attraction.

Valuations 📉: 

* Valuations move sideways (bridge rounds) ➡️.

* Early stage (pre-seed to Series A) - there will be minor (<20%) valuation corrections. Further corrections are possible if the salaries will start dropping (which we believe is unlikely for now).

* Later stage (Series B onwards) - significant corrections (at least 30%). Investors seek for profit rather than hypergrowth.

Sectors: 

* Energy⚡, health, sustainability 🌳 and deep tech 🧬 are in. B2B SaaS seems to be less popular, but efficiency solutions are in demand.

Exits 🎢: 

* Transaction readiness has increased: corporates would like to buy, founders are looking to sell. Price remains an issue. 

* We predict an increase in M&A activity. Companies in seed / seed+ stage will discover opportunities for exit (the small zebra scenario 🦓). It is supported by high replacement value for corporates caused by current salary levels.

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Some of the thoughts you may have already come across in the news feeds and other summaries like this. If there was something new to you, agreeing/disagreeing in the comments is very welcome 💭"