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Understanding Investment Cadence in 2023: Insights from 15 Investors

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Understanding Investment Cadence in 2023: Insights from 15 Investors Investment cadence in the first half of 2023 has witnessed diverse performance and plans among investors, reflecting a shift towards a more cautious and selective approach. In this article, we explore the insights shared by 15 prominent investors, shedding light on their strategies, expectations, and the factors influencing their investment decisions. Selective Investments and Flexibility: Sony Ventures' Approach Sony Ventures, led by its CEO, has adopted a strategy of selective investments and flexibility in H1 2023. By carefully choosing investment opportunities, Sony Ventures aims to optimize returns and mitigate risks associated with uncertain market conditions. This approach allows them to capitalize on promising ventures while maintaining a resilient investment portfolio. Prudence and Capital Allocation: Rajeev Dham's Perspective Rajeev Dham, a notable investor, emphasizes the importance of prudence and predicts a decrease in capital-chasing startups in the coming months. By adopting a cautious outlook, Dham aims to identify investment opportunities with strong potential for sustainable growth and value creation. Deal Making Rebound: Mark Grace's Optimism Mark Grace, an experienced investor, expresses optimism regarding the rebound of dealmaking in H1 2023. As market conditions stabilize and confidence returns, Grace expects an increase in investment activities, presenting opportunities for investors and entrepreneurs to forge strategic partnerships and drive innovation. Menlo Ventures: Balancing Growth and Scale Menlo Ventures experienced increased activity in their Venture Fund during Q2 2023 while observing slower growth in their Inflection Fund. In the latter half of 2023, Menlo Ventures anticipated a significant acceleration in their Inflection Fund, focusing on early-stage companies with predictable scale and settled valuations. This strategic shift enables Menlo Ventures to capitalize on emerging growth opportunities while ensuring prudent investment practices. Tola Capital: Focus on AI and Selectivity Sheila Gulati, representing Tola Capital, highlights their focus on investments in artificial intelligence (AI) and the impact of increased capital on the investment landscape. With a selective approach based on valuation, Tola Capital aims to identify investments that leverage AI technologies, contributing to the transformative period driven by advancements in AI. Insights from Investor Discussions: Pitching Strategies and Key Considerations In addition to investment cadence, entrepreneurs must understand investors' expectations and pitch strategies to secure funding successfully. We explore insights from various investors, providing valuable guidance for founders seeking investment opportunities. Leveraging Domain Expertise and Non-Technical Founders: Madonna's Approach Madrona Ventures seeks investments in B2B software, cloud infrastructure, and AI/ML, welcoming cold emails and emphasizing the potential for non-technical founders. By leveraging domain expertise, non-technical founders can succeed by recruiting top talent, maintaining a strong customer focus, and demonstrating a deep understanding of their target market. Salary Discussions and Pitch Memos: Advice for Founders Founders often face uncertainties regarding salary discussions and presenting their pitches to investors. According to industry experts, the average salary for founders in pre-revenue startups ranges from $130,000 to $150,000. Founders are encouraged to inquire about investors' sectors of interest, track records, follow-on funding practices, and network support. When pitching to investors, a concise and well-crafted pitch memo can effectively convey the value proposition of a startup. Seeking Alignment and Feedback: Struck Capital's Perspective Struck Capital, focusing on fintech, e-commerce enablement, climate tech, and AI, values founders who seek alignment with early investors and understand the intricacies of their business. By actively seeking feedback from other founders in the VC's portfolio, founders can refine their strategies and enhance their chances of securing funding. Engaging in a meaningful back-and-forth discussion during pitch meetings is important to gain deeper insights and establish a strong rapport with investors. Midyear Investment Outlook: Global Market Insights It is crucial to analyze the midyear investment outlook to gain a holistic understanding of the investment landscape. According to Morgan Stanley's report, investors should consider high-quality, long-duration bonds, equities in Japan and emerging markets, and mortgage-backed securities. The report highlights the anticipated slowdown of the global economy, persistent inflation, and tight monetary policies. Regional differences will create varying investment opportunities, with Asia expected to experience stronger growth. U.S. and European equities may underperform, while Japan and emerging markets offer attractive returns. Conclusion Understanding the investment cadence in H1 2023 provides valuable insights into the strategies and expectations of investors. With a shift towards selectivity, caution, and flexibility, investors are navigating the evolving market conditions to optimize returns and mitigate risks. Founders seeking funding can benefit from insights investors share, including the importance of domain expertise, pitch memos, alignment with early investors, and engaging in meaningful discussions. By staying informed about the midyear investment outlook, entrepreneurs can position themselves strategically to capitalize on emerging opportunities and foster sustainable growth in their ventures.
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