Mark McDonald, Head of Data Science and Analytics, discusses the importance of venture capital funding for transformative technologies and business innovation. The podcast explores the dramatic growth and implications of venture capital investments in 2021, the impact of emerging technologies on public markets, and the positive qualities of venture capital as a diversification source. They also highlight their new data set and upcoming events.
Venture capital has had a significant impact on equity markets, with a performance gap between tech and non-tech companies.
The venture capital industry has shown interest in emerging spaces like AI and sustainability, shaping future market trends.
Deep dives
The Influence of Venture Capital on AI and Equity Markets
The launch of chat GPT has led to a surge of interest in artificial intelligence (AI) and generative AI. The flow of venture capital into these technologies has had a significant impact on equity markets, with a dramatic performance difference between tech and non-tech companies. Tracking venture capital flows can provide valuable information for investors in public assets.
State of the Venture Capital Industry
The venture capital industry experienced significant growth in capital deployment in 2021, driven by the increasing interest in emerging technologies. However, there has been a recent setback, with capital deployment returning to pre-pandemic levels. The HSBC-Ventee measure, which tracks capital deployment relative to the behavior of the last two years, shows a substantial collapse in funding. The industry is showing signs of bottoming out, with the recent data indicating a slight uptick.
Emerging Spaces and Diversification Opportunities
The venture capital industry has shown interest and investment in emerging spaces, with AI and sustainability being common themes. These investments in disruptive technologies play a crucial role in shaping future market trends. Venture capital investments provide diversification benefits due to their lower correlation with public equity markets, offering potential downside protection and reducing overall portfolio volatility.