Our first Emerging Tech Hub report was released on the one year anniversary of Covid. We were curious how the shift to work from anywhere impacted the VC industry and the startup community. The results were clear, VCs migrated to Miami, Austin and LA and VC investments started to flow to what we identified as the top 25 emerging tech hubs in the US.
In last year’s report, we identified that Mayor Suarez was more than lip services and was doing a great job of recruiting blockchain companies to set up shop in Miami. We also identified hot categories like health tech and edtech were starting to slow down as we emerged from Covid lockdown and investors shifted their attention to Web 3.
2022 was a tale of two stories in the VC industry. The first half of the year saw record funding and the second half of the year saw the industry hit the brakes as public and private valuation tumbled. In this year’s report we decided to look at the second half of 2021 and compare it to what we saw in the second half of the year in 2022.
Highlights include (see charts below):
- Overall, we saw a 29% drop in investments H2 22 compared to H2 21
- Philadelphia, Dallas/Fort Worth, Salt Lake City and Raleigh-Durham were the only four cities to see VC investment increase in H2 compared to the same timeframe last year
- In H2 22, SF Bay Area investments accounted for 27% of investment in these regions, down from 36% in H2 21
- Miami continues to be a top hub for blockchain investment
- Every category saw investment activity decline; blockchain only saw modest decline down 5%, SaaS and Enterprise down 32%, while edtech experienced the biggest drop at 46%
We continue to believe the investment opportunities will see a return to growth in 2023. The evolution of AI across consumer, enterprise and government applications is white hot. Whilst AI is already everywhere, AI is still at its infancy and the innovation over the next few decades will be amazing. AI is truly revolutionary and will create new products and services used by the majority of the population by the end of this decade.
As global tension increases, cyber-attacks continue to be a top threat. Cybersecurity companies will stay highly relevant and new companies are needed to stay ahead of the bad actors. Data and digital assets will continue to become more valuable over time and with the digitization of everything more and more assets in the world are subject to cyber-attacks.
Climate Tech will be a massive thematic area of growth which will attract substantial VC and infrastructure investment over the coming years. Climate change is the #1 threat to the world and the future of our society. We need to fund start-ups that can make an immediate IMPACT today as the clock is ticking on the heating planet and irreversible damage.
Even in the face of headwinds, blockchain investment was impacted the least in the second half of 2022. The build out of blockchain’s infrastructure will continue but what will be different in 2023 is blockchain projects will need to prove that they can deliver true hard benefits compared to traditional solutions. It will be crucial for entrepreneurs to demonstrate technologies married to use cases that have user traction rather than the technology tokens having user traction.
We are excited and optimistic for the year ahead. We believe emerging tech hubs will rebound, as VC investments increase in the year ahead. Miami and Salt Lake City continue to show their penchant for attracting technology talent, Atlanta offers a talented and diverse market for tech investments and Austin and Seattle continue to attract steady investments.