Startup Investors Grow More Optimistic, Yet Worry About the Scarcity of Quality Projects
The Czech startup landscape stands a significant chance of strengthening this year, as investments in technology companies are expected to increase markedly following a leaner last year. Fund general partners are particularly keen, with a third of them planning to invest substantially more. They are concerned, however, about securing sufficient capital from private investors. Although the vast majority intend to continue their investment activities, nearly 30 percent plan to do so at a reduced level compared to last year. These findings emerge from a survey conducted by the investment group DEPO Ventures, which is constructing an international syndicate of angel investors in addition to managing angel funds. The survey's strategic partners include the law firm Mavericks, the CzechInvest agency, and the Czech Business Angel Association (CBAA).
Investing in 2023
67% of General Partners experienced extended fundraising periods in 2023, and an equal proportion noted delayed exits. Additionally, 40% of investors slowed their investment processes and increased bridge financing, highlighting the sector's strategic response to the prevailing economic climate.
Investment Appetite in 2024
Among the 93% of GPs who plan to invest, 33% claim they will invest even more than in the previous year. Limited partners also maintain their appetite for investment, with 87% affirming their intention to invest in funds this year. On the other hand, 25% of business angels are either undecided or will not invest this year.
Biggest Concern
The primary concern among startup investors is finding sufficient quality startups, with 43% expressing apprehension about this challenge. The economic climate and global events also contribute to the anxiety, impacting investment strategies and priorities.
Returns
Despite the risks, venture capital continues to promise rewarding returns. According to the MOIC analysis, the most common return on investments in startups typically ranges from a 1 to 5-fold increase of the invested capital across various methods. High returns, exceeding an 11-fold increase, are rare and are mostly achieved by business angels.
Geographic Focus
While 25% of respondents still focus exclusively on startups from the Czech Republic, there's a noticeable trend towards broader geographic diversification. This highlights the importance of global reach and startups' potential, regardless of origin. Interest in Central and Eastern European startups remains high (33%).
Trends
Investors are most interested in AI, Fintech, and HealthTech/Healthcare. Despite fluctuations in interest in blockchain technology, its integration with AI presents newfound potential.
Educational Gap
Nearly half of the investors who had never invested in startups before expressed a willingness to do so if equipped with more knowledge, underlining the importance of investor education in fostering a thriving venture capital ecosystem.
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Depo Ventures is an investment group manages an angel fund, angel network and provides capital advisory services. Our team is helping European investors identify promising startups, find co-investors and mitigate the investment risk.