AI startups retain their status as venture capital favorites, while the cryptocurrency sector faces a waning interest. Recognized as one of the most over-invested market segments, the crypto industry's outlook is becoming increasingly cautious, as highlighted in PitchBook's recent VC Tech Survey.
PitchBook, a division of the analytical and ratings agency Morningstar (USA), offers in-depth data and analytics on global capital markets, operating from its headquarters in Seattle, London, and Hong Kong.
Similar to the earlier 2023 survey, AI startups remain the primary focus of venture capitalists, significantly outpacing other industries. However, there's been a nearly 10% decrease in capitalists favoring AI, which PitchBook attributes to concerns about the sector's excessive hype.
In late 2023, PitchBook conducted a survey with 72 venture capitalists, exploring their outlook on tech innovations and investment trends for 2024.
The survey revealed a general optimism about the venture capital activity in the upcoming year. It showed a doubling in the number of respondents expecting an increase in venture capital investments compared to early 2023.
Despite this optimism, investment priorities are clearly defined. Profitability remains a key criterion, with a focus on the product-market fit of startups to ensure alignment with market needs and interests.
Geopolitical considerations also influence investment decisions. With global conflicts affecting market stability, regions like China are deemed less attractive for investments due to ongoing tensions with the US. In contrast, despite the large-scale Russian invasion of Ukraine (Eastern Europe), venture capitalists continue to view Europe as an attractive investment region, followed by Latin American countries.
72% of respondents expect the greatest growth in AI technology. Source: PitchBook
Respondents also recognize the potential in the biotechnology sector. They anticipate that further integration of artificial intelligence will lead to revolutionary breakthroughs in drug development.
Unfortunately, despite signs of a new cycle beginning, investors are not particularly optimistic about cryptocurrency startups. They view the crypto sector as over-invested and rightly expect returns from previous investments. Evidently, only one in ten capitalists believes in the growth of the crypto sector. Notably, six months ago, there were 5% more venture companies supporting cryptocurrency.
Venture capitalists are no longer keen to invest in crypto. Source: PitchBook
