Investors are now placing more emphasis on startups' profitability and corporate governance practices before committing investments. Despite the challenging environment, fresh capital is being invested in sectors such as AI. However, investors are urged to be cautious and skeptical about what is real and what is hype in the AI space. The rising cost of capital, geopolitical tensions, and a slowing global economy are making venture capital firms more cautious about investing in startups.
Key takeaways:
- Asian venture capitalists are increasingly focusing on opportunities in artificial intelligence (AI) technologies as the funding winter in the startup space is set to worsen amid escalating geopolitical tensions, soaring interest rates and growing macroeconomic headwinds.
- Venture capital funding fell 27% to a four-year low of $77 billion in the three months ended September from the previous year, with Asia recording a sharper year-over-year decline of 40% to $20 billion in the third quarter.
- Investors are putting more emphasis on startups’ profitability before committing investments and increasingly looking into corporate governance practices at the fast-growing companies due to the higher cost of capital and heightened macroeconomic headwinds.
- Despite the challenging environment, investors are pouring fresh capital into a few hot sectors such as AI, but they are also exercising caution and skepticism about what is real and what is hype in the AI space.