What trends and shifts can we expect to see in the world of angel investing and venture capital in 2024? In the latest episode of Minutes with Marcia, host Marcia Dawood recaps the significant changes and trends from the past few years and anticipates what the future holds for the investing landscape. The episode covers the resilience of angel investors amidst economic fluctuations and the evolving methods of early-stage investing, including the preferences of the upcoming Gen Z investors. Marcia emphasizes the significance of data-driven due diligence, the role of board members in startup success, and the potential challenges and opportunities that may emerge in the angel investing world in the upcoming years. In this insightful episode, Marcia shares her reflections on the recent years in venture capital and angel investing, highlighting the pivotal moments in the investment landscape and discussing the prospects for 2024.
What trends and shifts can we expect to see in the world of angel investing and venture capital in 2024? In the latest episode of Minutes with Marcia, host Marcia Dawood recaps the significant changes and trends from the past few years and anticipates what the future holds for the investing landscape. The episode covers the resilience of angel investors amidst economic fluctuations and the evolving methods of early-stage investing, including the preferences of the upcoming Gen Z investors. Marcia emphasizes the significance of data-driven due diligence, the role of board members in startup success, and the potential challenges and opportunities that may emerge in the angel investing world in the upcoming years. In this insightful episode, Marcia shares her reflections on the recent years in venture capital and angel investing, highlighting the pivotal moments in the investment landscape and discussing the prospects for 2024.
https://www.washingtonpost.com/business/2023/12/18/recession-economy-inflation/
2023 Angel Funders Report - https://www.angelcapitalassociation.org/angel-funders-report-2023/
2023 OASB Annual Report - https://www.sec.gov/files/2023-oasb-annual-report.pdf
Sign up for Marcia's newsletter to receive tips and the latest on Angel Investing!
Website: www.marciadawood.com
And don't forget to follow us wherever you are!
Apple Podcasts: https://pod.link/1586445642.apple
Spotify: https://pod.link/1586445642.spotify
LinkedIn: https://www.linkedin.com/company/angel-next-door-podcast/
Instagram: https://www.instagram.com/theangelnextdoorpodcast/
TikTok: https://www.tiktok.com/@marciadawood
Marcia Dawood
Hi everyone. As promised, this quick episode of Minutes with Marcia is part two of two, taking a look back at what has happened over the last year or two, and why and what trends could be coming in 2024. Our current Angel Capital association chair, Dr. Ron Weissman gave a few talks recently on his upcoming predictions for 2024, as well as some data on AI artificial intelligence. Not to be confused with AI angel investing you. There was also interesting data released in early December of 2023 by the Angel Capital association in their Angel Funders report and the securities and Exchange Commission Small Business Advocacy Office, which I will also reference links for. Those will be in the show notes as a quick recap, 2021 was one of the best years in venture capital history. Record returns, record funding, record valuations.
Very founder friendly. A great time to be an entrepreneur. And then 2022 was the great Flip war. Inflation, supply chain problems, everything went down. It was the end of a twelve year bull market. Vc funding slowed. Valuations were down, ipos were canceled. Spacs were underwater.
Collapse of exits, returns to lps dropped. On a brighter note, series C and series A deals and dollars remained strong. The early stage was the least affected area. Unprofitable unicorns and later stage was the most affected. According to data from CaRTa, there were record numbers of shutdowns in 2022, but the first three quarters of 2023 saw 16% more shutdowns than all of 2022. Also, nearly 20% of rounds in 2023 were down rounds, and when I first saw this stat, it seemed low to me. But the number doesn't include flat rounds. And I can just say from my own personal experience from the startups that I saw fundraising in 2022 and 23, many were raising on not necessarily a down round, but a flat round, meaning that many had done well enough to warrant an increased valuation when raising.
But because the environment was so challenging, they decided to raise at the last valuation that they had raised at in the past, making it a flat round. So in such a challenging market, where were some of the highlights? Artificial intelligence as of November of 2023 had already $75 billion invested into it. And if you remember, in November of 2022 was when we first learned about Chat GPT, which has taken on most of the market share, which by March of 2023 was averaging 1.5 billion monthly web visits. Investing for AI isn't for the faint of heart in October of 2023, at our ACA Women's Investor forum, we hosted a panel to talk about how to better do due diligence on AI companies, since the technology seems to be evolving so quickly. The conclusion was to focus on the basics, on what we know, on doing due diligence on any company. We should be asking the same questions. What's the business model? Is it the right market? The right customer? What's the sales cycle? What are their expenses? What's the use of funding? What are the deal terms? What is their valuation? Is it an acceptable amount of risk in order to get to an exit? What is their exit strategy? All of these questions are the same questions we should ask of an AI company that we're evaluating, or any company. And as Ron notes in his talk, quality data will become a key differentiator when evaluating AI companies.
Another thing to look at for any company is the importance of the board of directors. The board can make or break a startup considering how fragile these companies are at such early stages 2022 and 23, the role of the board in a startup was more critical than ever. Board members need to be well versed on governance and how to keep cash in the bank and the company moving forward. Strong coaches are needed, not just cheerleaders. So as we look ahead at what could be in store in 2024, let's look at how our economy ended in 2023. In a Washington Post article by Rachel Siegel, which I will put a link to in the show notes, she says the economy is ending the year in a remarkably better position than almost anyone on Wall street or in mainstream economics. Predicted inflation has dropped to 3.1% from a peak of 9.1, the unemployment rate is at a hot 3.7% and the economy grew at a healthy clip over the most recent quarter. The Fed is probably finished hiking interest rates and is eyeing cuts next year.
And if we look at where the stock market ended in 2023, the S and P 500 ended the year with a 24% gain, according to CNBC. So does this mean we are headed for days like 2021? Well, probably not tomorrow, but the future is looking brighter. It is a great time to be an angel investor, even after strong 2021 returns. Angels didn't overreact. We were the most resilient asset class in 2022. Very consistent and resilient. Capital invested was down, but not dramatically different than VC. Capital invested per deal was similar to prior years, and Capital invested annually per angel group was similar to prior years to Ron's prediction for 2024.
We stay the course. Angels will continue to invest consistently and resiliently as we have done over the past several years, supporting both new deals at 55% and existing portfolio companies at 45%, and the opportunities to be a mentor capitalist, a force for good investing practices will abound. There will be new challenges and opportunities that will emerge, and I think that we will see angel world changing over the next few years. I think we will see more VC seed funds. There will be new forms of early stage investing as we've been seeing, like equity crowdfunding, investing through your DAF donor advised fund, or investing through an IRA. We've talked on the show before about the accredited investor definition and possibly new ways of becoming an accredited investor, which I am a big advocate for. As many of you know from me being on the small business capital formation SEC advisory committee, Gen Z's are going to want to invest differently than the way that we have as angels in the past. There will be no more dinner meetings and things like that.
Things are going to be electronic, they're going to be on apps, on the phone, and they're going to be fast. So these are some of the changes that I see happening in the future. I'd love to hear more about what your predictions are for 2024, so feel free to go to my website@www.marshadawood.com and drop me a line to tell me what you're thinking. Thanks for listening.