This guest post is authored by Mark Bivens. Mark is a Silicon Valley native and former entrepreneur, having started three companies before “turning to the dark side of VC.”
He is a venture capitalist that travels between Paris and Tokyo (aka the RudeVC). He is the Managing Partner of Shizen Capital (formerly known as Tachi.ai Ventures) in Japan. You can read more on his blog at http://rude.vc or follow him @markbivens. The Japanese translation of this article is available here.
In many ways, 2022 has been a turbulent year. Accordingly, the timing couldn’t be better to solicit guidance from some insightful venture investors on the year ahead.
As usual, I am happy to elevate the voices of VCs beyond the usual Silicon Valley household names. Once again, I am pleased to publish the wisdom of an all-female cast of VCs for this season’s set of predictions,
May 2023 bring us further enlightenment. Happy new year !
Miwa Seki – MPower Partners, Japan
2022 saw an increased scrutiny and skepticism around ESG investment. We see a shift of focus from E to S, especially in the areas of human capital engagement. DEI (Diversity, Equity and Inclusion) is an essential element of that and will become a main focus by the ESG focused investment.
We have conducted research on the IPO return gap between male-lead startups and female/minority-lead startups in Japan. The result shows higher return per the money raised at the time of the IPO by female/minority-lead startups.
Our own start-up survey also revealed higher employee engagement in startups which integrated ESG to their management practices. With such evidence, 2023 will see more focus on DEI among the startup and VC community.
Asumi Ota – D4V, Japan
I have high expectations for businesses that aim to globally promote content, technology, and products originating from Japan (such as manga and high-quality “Made in Japan” products). Due to the diversification of human resources working in Japanese venture companies and the growing interest in Japan from global investors, I sense an increase in the number of entrepreneurs who are trying to promote Japan’s high quality goods overseas in various fields.
What we have continued to focus on as of last year are the industries and sectors that had not been able to embark on major digitalization reforms in the past, despite having the needs for such transformations. For example, the healthcare industry has been considered a difficult industry for digitalization due to personal information protection and other regulations. However, it is on the verge of a remarkable evolution, triggered by moves to promote medical device certification of therapeutic apps and the spread of telemedicine.
The pandemic has created a situation where companies and industries that have followed legacy methods have been forced to change, creating room for venture companies that can quickly prototype novel ideas. In these business areas, collaboration with stakeholders such as large companies, governments, and local governments is important. With the support of policies and public policy that promote digitization, openness, and venture investment, the foundations are now in place for startups to make significant progress.
Finally, as the severe economic state continues, each company will continue to be polarized with respect to startup funding procurement. Due to these conditions, we expect that profitable management and ESG initiatives will become even more important in the future. Consumers are placing more emphasis on a company’s mission and story, and large companies are increasing their ESG-related investments. Therefore, funds will be concentrated on companies that not only have ESG initiatives but also have the storytelling skills to communicate these initiatives.
Janneke Niessen – CapitalT, Netherlands
Climate change is hot—no pun intended. Our portfolio companies in climate are doing really well, with much business growth and interest from the VC community.
I expect this trend to strengthen in 2023, which will hopefully help accelerate the reversal of climate change on a global scale.
In addition, hardware companies in this space, for whom it has always been really tough to raise capital, have more fundraising options in the new year due to the accelerated interest in climate tech.
Ayako Miyahara – Genesia Ventures, Japan
New Startup Fundraising: Global market conditions will lead startup investors to be more selective. On the other hand, it is believed that DPI (Distributions to Paid-In Capital) will begin to sprout in the Japanese domestic vintage funds that are gradually maturing, and attention will be paid to the new flow of funds leveraged by such track records.
Impact investing: The startup ecosystem is being restructured in line with the “New Capitalism” of the Kishida administration. In addition to economic return, as the importance of social impact grows, discussions on environmental improvements, including evaluation methods in capital markets, are expected to get underway.
Linkages with Asia: Southeast Asia and India remain promising markets due to their strong economic growth, the expanding future potential of the digital domain, and the abundance of opportunities for Japanese companies to exit. India, in particular, is expected to overtake China as the world’s most populous country by 2023, attracting attention from investors who are avoiding the US-China conflict and the Russia-Ukraine war. Japanese companies are increasingly moving into India, especially in the manufacturing sector, so more focus is expected on the infratech that is developing in this sector.
Haruka Takamori – Strive, Japan
AI Democratization Will Take a Leap
In 2023, we can expect to see even more progress in digital product development overall due to technological advances in AI.
With the release of OpenAI’s ChatGPT in 2022, AI can be easily applied to product development and creation without high-level specialized machine learning knowledge. In other words, it is now possible to create low-code, no-code, generative products that meet any objectives through AI API integration with unprecedented precision and efficiency.
If we categorize output by AI into linguistic and non-linguistic categories, the universalization of programming knowledge in the linguistic analysis domain, and the automation of the elucidation of psycho-cognitive relationships in product design in the non-linguistic analysis domain, is expected to progress further, and therefore increase the demand for personalized products as well.
Last but not least, demand for services that not only streamline and optimize the product creation process but also perform verification of AI-generated products such as QA and UI/UX testing tools is also expected to increase.