New PitchBook survey finds majority of venture capitalists have invested in AI

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Jun 28, 2023, 06:00 ET

TORONTO , June 28, 2023 /PRNewswire/ --

PitchBook and Collision Partner on Seventh Investor Survey Amid Market Volatility

Artificial intelligence dominates investor interest at Collision, with nearly three-quarters of respondents indicating they've made investments in the space recently. Last year, fintech and blockchain were selected as the technologies with the most disruption potential.
Investors are now reporting some pull back in investment in response to swiftly rising interest rates and economic uncertainty.
Over half of investors believe it will become more difficult to raise capital from LPs in the next twelve months

PitchBook, the premier data provider for the private and public equity markets, today released findings from a new survey conducted in partnership with Collision, a Web Summit event and North America's fastest growing technology conference, which takes place June 26-29, 2023 at Enercare Centre in Toronto, Ontario. PitchBook is sponsoring the Investor Lounge at Collision, where investors in attendance can work, take meetings and network.

This is the seventh survey PitchBook and Collision have partnered on at Web Summit conferences and provides an insight into investment strategies, representation of women in VC, and sentiment toward emerging technologies, such as artificial intelligence, climate tech and fintech have changed amid market uncertainty. Nearly 100 global venture capital (VC) investors attending the conference completed the survey.

"We've seen venture activity decline in response to ongoing headwinds in the market," said Kyle Stanford, lead VC analyst at PitchBook. "VC fundraising could be on track to drop to levels not seen since 2017, in line with investor sentiment seen in the survey results, and dealmaking activity recently fell below the long-term growth trendline. Despite this, there is still significant dry powder available to deploy and it is encouraging to see investors report much of their existing funds are for new investments."

Similar to other regions globally, Canada's VC ecosystem has seen a pullback in activity following the exuberance of recent years. Canadian startups raised $3.5 billion in the first two quarters of the year. While this is a drop from 2022 and 2021 when investors poured $6.3 billion and $7.8 billion into Canadian startups, activity in 2023 is on pace to exceed the more normal numbers seen in 2019.

"For the most part, these findings correspond with what we're seeing at Collision. There has been a huge pick up in AI startups attending Collision, with an increase of 27% each year, and overall growth of 105% since 2020. However, we have found that the percentage of startups who have received funding within the 12 months since Collision 2022 is healthy (11% of startups raised over US $565 million), despite the negative trend in fundraising activity," said Ricardo Lima, Head of Startups and Investors at Web Summit.

See findings and comparisons with past surveys below:

Investment strategy

When asked about the most exciting regions for investment, 68.6% of investors chose North America (up from 58% in 2022) followed by Asia (11.7%), Europe (11.6%), Africa (4.7%) and Latin America (3.5%). Looking closer at investor interest in Asia, India and Southeast Asia rose to the top with 7% and 3.5% of total responses, respectively.
For the third survey in a row, the management team remains the most important criteria for evaluating investment opportunities, jumping from 26% of responses in 2022 to 48% in 2023. Potential returns (33%) far outweighed risk (9%) as a factor. The biggest economic threat to potential returns, according to investors, is economic growth.
The VC ecosystem has been battered by economic headwinds and rising interest rates in recent months. Despite this, 68% of VCs say their pace of investment over the last 18 months remains at near-normal levels. However, 3.4% of respondents said they have halted all investment for the time being – a notable spike compared to November 2022 when no respondents said they had halted investments.
Looking at the mix of new and follow-on investments in existing funds, 89% of respondents said at least half of their fund was for new investments. Seven months ago, that number was 82%.

Fundraising environment

When asked about fundraising activity, 59% of investors said they were not currently in the market raising a new fund and over half (54%) believe it will become more difficult to raise capital from LPs in the next twelve months.

Women in VC

Two-thirds of VCs surveyed have invested at least 25% of their capital into women-led startups in the last 18 months. The number of investors reporting no investments in female founders, however, rose slightly from 32% in November 2022 to 33.3% at present.
Survey respondents also reported fewer women in senior management positions at their firms, dropping to 69% from 75% just seven months ago.

Emerging technologies

Investor interest in artificial intelligence and machine learning has skyrocketed in the past year, with 64% of respondents indicating AI/ML has the potential to be the most disruptive technology in the next five to 10 years. Compare that to just seven months prior at Web Summit 2022, where AI/ML secured the top spot with just 29% of investor responses.
Backing their bullish sentiment, 74% of investors said they have made at least one investment in AI/ML in the past eighteen months and nearly 14% said they have made more than six investments in the space.
Fintech and blockchain, the top response at Collision 2022 (30%), fell to fourth place with just 6.8% of investors selecting this previously hyped category, continuing the decline we saw with the November 2022 Web Summit survey (23%) results.
Climate tech (11.5%) and digital healthtech (6.9%) rose to second and third place, respectively.

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About PitchBook
PitchBook is a financial data and software company that provides transparency into the capital markets to help professionals discover and execute opportunities with confidence and efficiency. PitchBook collects and analyzes detailed data on the entire venture capital, private equity and M&A landscape—including public and private companies, investors, funds, investments, exits and people. The company's data and analysis are available through the PitchBook Platform, industry news and in-depth reports. Founded in 2007, PitchBook has offices in Seattle, New York, London, Hong Kong and Singapore and serves more than 90,000 professionals around the world. In 2016, Morningstar acquired PitchBook, which now operates as an independent subsidiary.

About Collision
Collision is considered the single most important tech deal-making event in the world, gathering the next generation leaders reshaping the world. Web Summit events have gathered half a million people across Web Summit in Lisbon, Web Summit Rio in Brazil and RISE in Asia since the company's beginnings as a 150-person conference in Dublin in 2009. Our mission has been to create software that improves conferences and enables meaningful connections between the CEOs, founders, investors, politicians, cultural figureheads and members of the media who are reshaping the world. Collision recently announced that it would return to Toronto in 2024 for a sixth year.

About Web Summit
In the words of Inc. Magazine, "Web Summit is the largest technology conference in the world". Forbes says Web Summit is "the best tech conference on the planet", Bloomberg calls it "Davos for geeks", Politico "the Olympics of tech", and the Guardian "Glastonbury for geeks".

SOURCE PitchBook