Understanding where venture capital is going not only provides fascinating insights into financial activity amongst some of the most exciting and innovative businesses. It shows what inspires investors most in our challenging times.
In this post, we will take a look at 2023. What were the hottest sectors of the year? What piqued the interest of venture capitalists most?
We will also take a look at forecasts for the current year, 2024.
So, let’s dive in!
VC Funding Continues to Thrive
Global venture capital investments totaled roughly $1.207 trillion in the top 10 most-invested industries alone.
In previous years, especially 2021, venture capital investment in startups boomed, leading some experts to speculate that we may have been about to exist a startup bubble of sorts.
However, other experts speculated that startups may be the last way investors can achieve extreme growth, meaning that venture capital would continue to maintain attractiveness as an asset class.
In our complicated and constantly accelerating world, many of the traditional types of investing simply do not provide astronomical returns. And some of the newer types, such as cryptocurrency, seem too complicated and risky for many investors.
According to some experts, investors who want large growth simply don’t have the options that they used to.
While many investors used to go into real estate or diversify internationally, these things simply don’t offer the opportunities they used to, at least right now.
As it stands, SaaS (Software As A Service) startups especially simply don’t need that much capital to get going, compared to many other types of assets.
They can reach profitability a lot earlier on and get capital from a wide range of resources.
The Ten Top Funded Startups Sectors of 2023
In 2023, global venture capital investments in the top 10 industries alone reached $1.207 trillion. These sectors received so much funding due to several factors. These include:
- Market demands
- Societal shifts
- Perceptions amongst industry insiders
- Pursuit of Innovation
$294.73 billion in VC went into the sustainability sector. This makes a lot of sense, as anxiety about climate change and its impacts is at an all-time high globally.
Weare already seeing the negative effects of it in many countries around the world, inspiring many enterprising startups to take on green technology. In this sector, there is an urgent necessity of innovation and a high potential for profit.
The next most-invested sector of 2023 was mobility, with $171.79 billion in VC invested. Urban life is in constant transformation, with cities constantly growing, declining, and shifting across the US.
This impressive amount of funding reflects that investors understand that this is a critical area. How we move goods and people in these challenging times is a critical question that we must answer.
Venture Capital Flowed Into Many Industries
Despite the global push toward greener solutions, $140.84 billion was invested into oil and gas. This trend highlights that we are far from done with oil and gas as energy sources.
$127.88 billion in venture capital went toward marketing and advertising. The digital revolution has radically changed how businesses market over the last 25 years or so. This shows that venture capitalists understand the critical role understanding these shifts and developing new strategies plays in driving business growth.
For several years that has been a lot of buzz about present innovation and the potential of fintech. Last year, $118.81 billion in VC went into financial services. This shows that venture capitalists are confident that fintech will continue to grow as a sector.
$107.77 billion in venture capital went toward the coal and natural gas industry in 2023. It further illustrates that while VCs are placing a stronger focus in renewable and green energies, they are striking a balance between green energy and more traditional energy sources.
The Final Top VC Investment Sectors of 2023
Venture Capitalists invested $92.65 billion into the materials sector last year. There is simply no industry at all, of any kind, rather traditional or high tech based niches, without the materials to make it happen.
It is likely that we will see more sustainable solutions continue to develop in this sector over the course of 2024 and beyond.
VC invested into energy in 2023 totaled $87.58 billion. In this broad sector you see a mix of both traditional technologies and developing ones. As such it is critical to progress overall and presents diverse opportunities for investors.
Investments in supply chain related companies reached $86.52 billion in 2023. Consumer demands are shifting, and how businesses can serve them is also evolving. There is significant room for advancement, investment, and returns here.
The final sector in the top ten most vc-invested sectors of 2023 was real estate. This is one area where there has been some buzz, especially when it comes to innovators seeking to merge traditional real estate with fractional investing via cryptocurrency and web3.
These trends illuminate critical areas where technology, business, and innovation are converging to find smart solutions to modern problems.
The 2024 Outlook
According to StartUs: These sectors are strong candidates for VC investment this year. They say that some of last year’s big winners will stay strong.
This includes:
- Energy
- Oil and Gas
- Materials
However, in the coming year, they say that telecommunications is also a strong candidate for increased VC investment. There have been significant technological advancements in this area over the past few years, including tech like 5G and Internet of Things.
Also, it is likely we will see more investment in biotechnology, pharmaceuticals, and chemistry. The health of human beings and the overall health of are planet are critical things that will be addressed via technological advancement.
Demographic shifts will likely lead to increased investment in personalized medicine, as well as new treatments and vaccines. Via biotechnology, we will likely see advancements when it comes to applications in genetics, disease treatment, and biofuels.
Future Investment in Clothing and Entertainment
Especially in the US, we are starting to see increased consumer consciousness and a desire to shop ethically and sustainably.
Many are seeking to “buy less and buy better.”
On top of consumer desires, it is critical for the health of the planet that we find less destructive ways to manufacture clothing. This can be achieved through investment in smart fabrics, focusing on sustainable manufacturing, and apparel supply chain innovation.
The new media and entertainment sectors are also a big place where we may see some VC involvement this year. It’s no secret that the way most people under 40 consume content and make purchasing decisions have shifted radically thanks to social media.
These days, being an online content creator or influencer is one of the most sought-after and desired careers for young people. In this emerging and thriving industry, there is significant room for innovation.
Users crave new platforms every few years, and there is a lot of room to improve things on the creator side. For example, while TikTok is popular with young people globally, it is well known for paying creators poorly, if at all.
However, there are large issues with many platforms. For example, many digital creators cite the YouTube algorithm as one of the main things that contributes to them burining out of the platform entirely.
Almost all platforms have controversies regarding supressing the content of people who do not meet eurocentric beauty standards, amplifying misinformation, and censoring information that does not align with the ideals of the platform’s owners.
As more people seek work as content creators, and more and more young people turn away from traditional media and toward new media, there is room for improvement.
Final Thoughts on Venture Capital Trends in 2023 and 2024
As you can see, venture capital trends follow where technology, the necessity of innovation, market demand, and the potential for return on investment come together.
Our world is changing rapidly for many reasons. This is related to demographic shifts, climate change, technological acceleration, and globalization.
Our industries will have to change and adapt to meet shifts and demands. Vast rewards await those who are a part of successfully meeting these challenges!
What do you think? Comment below.
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