by: Elisa Steccaglia, Principal at XAnge.
Q4 2022 Angel to Seed funding totaled $6.9bn around the world[1] — down 16% quarter over quarter and 35% yoy. Some would look at that as a setback, others will be relieved to put the bubble behind their shoulders and bless the return to fundamentals.
Besides this eternal debate, the important question is another one: where has all this capital flown?
Here’s my 3 main takeaways:
- The most demanded Christmas’ gifts were in the AI, DevTools, Fintech & web3 verticals.
- Climate is making a lot of buzz but struggling to generate VC-grade deal flow for the moment.
- E-commerce is not dead; the best VCs worldwide are keeping an eye on tools & infra for digital commerce (ex. Flvrs in US).
Let’s be clear: my goal here is not to make predictions about the future (still struggling with the crystal ball), but to make you relive the best moments of your recent past.
So here we are, let’s have a look to Pre-Seed and Seed hottest verticals of Q4 2022 🌶:
AI
Impossible to count all the different use cases, but few of them made Tier I VCs take out their cash book:
- AI for video and media assets with Twelve Labs (US) that applies AI to power video search by extracting actions, objects, text and speech (Index’s deal);
- In Biotech, Cradle (CH) pushed it through to generate proteins design recommendations and Levity (DE) is dusting off workflow automation (Balderton’s deal);
- ChatGPT owned by OpenAI, which just raised $10bn with Microsoft. We should be prepared to see a new generation of startups as companies build applications on top of OpenAI’s software (i.e., text to image with DALL-E, copywriting with Jasper). Also, Microsoft competing with Google on web search could generate new opportunities for MarTech startups.
Dev tools
We are still at level one: the key challenge here is to simplify the work of developers. Even if it has been a while since this topic is on the table, the pain remains unsolved. Different trendy use cases:
- Components pre-packed lines of codes: Clerk (US) for example is building pre-packed suite for user authentication and management (financed by a16z), or Lightdash (US) that turns a dev project into a full-stack BI platform (Accel’s deal);
- CI optimisation and scaling, with the example of Nx (US) that leverage on distributed task execution and computation caching;
- Customer support, with amazing example of Plain (UK) that complete the circle by building a customer support pre-packed suite for developers’ tools.
Fintech
Yes, there is still room to disrupt in the payment and savings industry. You don’t believe it? Here below 2 amazing companies that raised money last quarter:
- Atlar (DK), which is a B2B platform to automate payments and money movement. In the same CFO’s tooling galaxy, we can find Sequence (UK), that automatizes billing for financially complex contracts;
- The other example is Tellus (US), the saving app that boldly targets the B2C market. The promise here is to automatically turn your savings into a passive income generating up to 5.5%/y through investments in residential real estate. It seems that the US playground is still fertile for B2C investment platforms after Robinhood.
Web3
Besides the bear market and the few atomic bombs that exploded last year (May 2022 market crash, FTX bankruptcy, NFT crash, ok let’s stop here..), generalist funds are keeping investing in the web3 space.
Personally, I am falling for the crazy good stuffs that are happening in the music space, where a16z led the charge in Q4 in both Us and UK:
- Volta (UK): experience creation platform that helps artists (musicians, etc) to create immersive experiences in the metaverse (speaking easy: your fans enjoy your techno music concert with a perfect combo of light effects and underground atmosphere while you are actually mixing in your kitchen);
- Arpeggi (US): blockchain music creation platform. Artists can create and mint music as an NFT, and this is a big thing as it enables artists from all over the world to co-create and collaborate together on the same track, song, piece of art while tracking the ownership of it.
In addition to music:
- Community management and engagement is still attracting interest. Besides the numerous attempts during the last 18 months, the newcomer is Kalder in US;
- Also, crypto tax/admin tools with Binocs (India) that simplifies the calculation of crypto tax and portfolio tracking. In the same galaxy we have Request, that addresses invoicing, in our XAnge’s portfolio.
Last but not least, Buildspace (US), a crazy good idea that excited me a lot recently for his power to decentralise and put together people from all over the world to build projects over the time of a weekend. A model that I have seen germinate also in Europe recently, within some early-stage web3 start-ups.
We are at the end of this small capsule of souvenirs, you just saw all that is worth remembering of the last 3 months.
Stay tuned for next quarter!
Ps. Do you wish to further discuss these trends or are you building a SaaS/platform 4 climate or a B2B fintech startup?
Do not hesitate to drop me a message, I am particularly interested on that 😊
