The venture capital firm 500 Global is optimistic about the sector, although funding for venture capital firms has suffered a setback in 2022 due to economic uncertainties.
“There is definitely a decline in fund allocation for venture capital firms this year, but it depends on what markets you invest in and what the opportunities are in those markets,” he said. Vishal Harnal, managing partner di 500 Global, alla CNBC.
According to data compiled by Crunchbase, in fact, 2022 global venture funding totaled $445 billion, with a reduction of 35% compared to the previous year.
“Ma I would not go so far as to say that there is a funding winterHarnal told CNBC’s Martin Soong and Sri Jegarajah.
The Venture Capital firm it manages more than $2.7 billion in assets.
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Among the startups he invested in during the early stages are the Australian graphic design software group Canvathe Southeast Asian ride-hailing company Grab and Indonesian fish farming tech startup eFishery.
Grab then went public on the Nasdaq.
According to Harnal, entrepreneurs have gotten used to getting cheap capital over the past decade. Startups are mostly unprofitable, as they prioritize growth over profitability in the early years, which usually results in a loss of liquidity.
“Now that there’s been a change or a transition to a different way of doing business, a different way, we’re changing the playbooks again.”
However, with global economic headwinds slowing growth, startups have been forced to refocus on profitability and to be more cost-effective.
Venture Capital: the managing partner of 500 Global speaks
“Now that there’s been a shift or transition to a different way of doing business, a different mode, we’re switching players again,” Harnal stressed. Which pointed out that currently there is a quantity of “dry powder” unprecedented, amounting to 15 billion dollars, in venture capital, especially in Southeast Asia, referring to liquidity reserves to be used in case of need.
“The question we ask ourselves as investors is: Is this capital enough to get companies through the current moment for the next two or three years? What are the opportunities that present themselves in times like this?” asked Harnal, who gave the example of how the opportunities in a bear market are different from those in a bull market.
“This changes the way funds flow into venture capital funds, so there may be less capital coming from non-institutional investors who are not used to investing in companies”.
But the longtime venture capitalists remain favorable to investments in technology companies.
“For institutional investors who have decades of experience investing in venture capital firms and have done so through market cycles in the past, the capital allocation is not shrinking,” Harnal said.