What Startup Tech Entrepreneurs Should Know About the State of VC

The world of venture capital is changing, so you’ll need to be prepared.

Every year, thousands of entrepreneurs make pitches and compete for venture capital (VC), the lifeblood of young startups. But VC is surrounded by an entire culture, driven by the companies who hold the capital and the entrepreneurs vying for it. Understanding that culture will improve your chances of making a successful appeal.

So how is the VC culture changing?

It’s Down, But Still Plentiful

VC has risen steadily for the past several years, both in terms of the number of deals closed and the total amount of funding given; however, in 2016, it reached a peak. The number of deals and total dollars funded came down in 2017, though we’re still far ahead of where we were back in 2010.

VCs Like Sure Bets

Venture capitalists tend to favor sure bets over risks, disproportionately. They lean toward potential unicorns (companies that reach a valuation of $1 billion or more), and are becoming more risk-averse as more big players emerge in the market. Unfortunately, this makes it difficult for first-timers and risk-takers to break into the field.

Unicorns Are Overvalued

A recent study confirmed that the vast majority of unicorns are overvalued by at least 50 percent. That’s because they attract the most attention, which tends to push their valuation far higher than it needs to be. That’s at once comforting and alarming; it means there’s less funding available for any company that can’t achieve unicorn status, but it also means unicorn status isn’t as breathtaking as it first appears.

AI Is Key for 2018

Over the past few years, there’s been a dramatic increase in the amount of funding given to startups focusing on artificial intelligence (AI) and machine learning. I expect that trend is going to continue well into 2018 and beyond, so if you want to increase your chances of getting funded, make sure your startup has a machine learning/AI spin on it.

Navigating the VC world is always complicated, but it’s easier with someone in your court. If you’re interested in a free consultation with a startup expert, be sure to contact me today!

About the Author

Jose Vasquez is a serial entrepreneur and tech specialist dedicated to helping startup tech companies grow and succeed. As the founder of Build. Brand. Blast., Jose has worked with dozens of enterprises to find direction, gain momentum, and achieve results.