Dynamic Note #6: June 2023 Global Investment and Trends

In this sixth dynamic note, an analysis is made of global corporate capital investment, studying the sectors with the greatest traction capacity and the evolution in recent years. It also analyzes the behavior of the main global players in this field. It is relevant to highlight that the labor outlook in Alicante plays a crucial role in this analysis, since the decrease in unemployment both in Spain and in the province can generate a favorable environment for investment. According to the most recent employment report, in May 2023, the province of Alicante registered a total of 134,715 unemployed, (2,394 people less than the previous month, and 8,707 less than in May 2022). These figures demonstrate a positive trend in local employment, which is an encouraging sign for investors, insofar as a stronger and more stable labor market tends to provide greater opportunities for growth and development for companies and entrepreneurs.

State of venture capital globally
After breaking records in 2021, and compared to this year, global venture capital investment loses steam in 2022. In 2021, investment figures close to €160 billion were reached. Meanwhile, 2022 records a 26% decrease in the total amount of venture capital deals, and a 15% decrease in the total number of deals compared to the previous year.

Nevertheless, venture capital continued to remain at historic levels, making it the second most active year in history. With December 2022 still to close the year, there were more VC deals worldwide (13,700) than in any of the last 10 years, excluding 2021. This represents an annual average of 10,500 deals, implying an average increase of 30% in 2022.
In this thriving investment environment, regions such as the United States, China, the United Kingdom, India, France, Germany and Canada stand out. In addition, in 2022, underdeveloped venture capital markets come to the fore, with South Africa and Saudi Arabia experiencing notable growth in investment, with increases of 31% and 92% respectively compared to 2021.

In 2022, the main VC funding rounds have come from the energy sector; fintech; and healthtech. In this context, after the crisis period following the pandemic, it will be the companies that prioritize ESG1 criteria in their strategy that will transform the dynamics of the new sustainable economy. Thus, globally, 2022 is shaping up to be an outstanding period for funds focused on environmental, social and governance (ESG) issues, with $23.6 billion (21,707 million euros) raised in the first half of the year alone. Thus, sustainability-related investments have seen an 11% increase, in contrast to the decline seen in private equity in general.

Although investments in conventional energy have increased due to the energy crisis and rising oil and gas prices, energy transition remains the “jewel” of long-term investments, reaching an all-time high of $158 billion (€145.329 billion).

Unicorns are key to growth

Unicorn2 companies have become a major focus of venture capital investment. In 2022, an all-time record was set for unicorn startups, with more than 1,000 registered, according to Crunchbase. Investment in fast-growing startups has reached unprecedented levels, generating strong interest from venture capital funds, which expect one of these companies to become a decacorn3.
The diversification in sectors and countries of origin of these companies attracts funds from the markets. Investors are interested in their proficiency in social networks, customer focus, profitability, easy expansion and economies of scale.

By sector, fintech is the most represented category in unicorn companies (25.58%), followed by software and internet services (20.16%), healthcare (9.30%), Artificial Intelligence (7.36%) and e-commerce and direct-to-consumer (5.43%).
By country, the United States accounts for more than half of all unicorns (59.3%), followed by India (6.98%) -which overtakes China with respect to the previous year-, China (3.10%) and the United Kingdom (2.08%). Spain accounts for 1.16% of these unicorns. This ranking reflects the list of countries that stand out as leaders in the race for digitalization and the integration of Artificial Intelligence in their economic sectors.

Startups lead the way

Most of today’s unicorns have not emerged as technology-based startups or are directly or indirectly related to technology sectors by chance.
The keys to their growth and expansion tend to be their ability to attract funding, grow their workforce, expand geographically, have a positive impact on society, follow a responsible business model and have a strong focus on sustainability.
If we look at the ‘Top 100 Next Unicorns’4 list, we see that practically all the members are technology companies. The ‘enterprise SaaS’ and ‘fintech’ (16%) stand out. After these, ‘Big data / AI’ (15%), ‘Digital Media’ (15%) and ‘Marketplace’ (14%) are also on the list of business services offered by these ‘scale ups’5.
Among the candidates to exceed 1 billion valuation, there are four Spanish success stories: Playtomic, RavenPack, Typeform and Wallapop.

New investment trends for 2023

As emphasized throughout this dynamic note, market trends show fintech, healthcare technology, corporate, food and energy sustainability, and solutions in AI and other disruptive technologies as the most popular areas for investment.

In this sense, Facephi, a technology company from Alicante specialized in biometric authentication, has reached a strategic agreement with the US fintech Orokii to license its biometric technology. This agreement is of great strategic importance, since it strengthens Facephi’s presence in the United States. In addition, the company recently announced another agreement with the Swiss fund Nice&Green to raise up to an additional 20 million in financing. Through this agreement, Nice&Green becomes Facephi’s largest shareholder, owning 11% of the company’s capital. With this injection of funds, Facephi seeks to accelerate its organic growth in key markets such as Latin America, Europe, the Middle East, Africa and Asia.

For its part, the Alicante-based social robotics startup Bumerania Robotics has managed to stand out especially in the hospitality sector in just three years. Recently, the company has obtained significant funding from the investment company Álamo Futura. Through this investment, the investment company has acquired 49% of Bumerania’s shares, which will enable the startup to boost its growth and expand internationally.

In the health technology or healthtech sector, ICU Medical Technologies, a company located in the UMH Science Park in Elche, is dedicated to the development of medical devices. Recently, they have achieved an important milestone in terms of financing by selling their first ticket of 50,000 euros to the investment fund Vincle Capital. This transaction is part of an open financing round that seeks to reach €250,000. This financial backing from Vincle Capital will allow the startup to continue the development and manufacturing of its Kronosafe medical device, an innovative pacemaker clamping solution using 3D printing.
In terms of energy sustainability, Hydros Power, the startup attached to the Alicante Science Park dedicated to the development of renewable hydrogen generating stations, has closed a successful investment round with a post-money valuation of €1 million, which will allow it to continue its research and development.

Meanwhile, the foodtech against food waste Oscillum, focused on combating food waste, has obtained €1.5 million in funding from the Center for the Development of Industrial Technology (CDTI) through the program Ayudas PYMES Sello de Excelencia. Thanks to this investment, the startup will be able to continue developing and optimizing its innovative SmartLabel, capable of detecting the level of food spoilage, providing information on its safety for consumption.

Sources consulted:
– PwC
– Crunchbase
– Dealroom.co
– London & Partners
– CB Insights
– Fast Company
– FacSet
– McKinsey
– Alicante Plaza

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