The angel investing world is more than ready to turn the calendar on 2022.
The macroeconomic landscape has left most sectors uncertain, VC investment has dried up, the cryptocurrency world is in turmoil, and Big Tech has its back against the wall.
However, as we’ve said throughout this economic downturn, the landscape for startups and early-stage companies is, in a lot of ways, more favorable than for large, established companies.
More prone to adjustment and capable of adaption, these companies – while affected by the overall economy – can more readily adjust to lean times.
And the downturns don’t stop startups from succeeding.
While in 2021, a grand total of 340 new companies ascended above a $1-billion valuation, thereby earning the title of “unicorn,” this past year saw 174 join the ranks.
Sure, a nearly 50% drop from the year prior seems negative on surface level, however, when compared to the 107 startups that earned their horns in 2020, the relative success is amplified.
It’s fair to wonder just how many of those startups received funding prior to the economic downturn, as we’ve seen several prominent unicorns fall from grace following lofty valuations (FTX being the most prominent).
Additionally, the pressure on startups that raised at lofty valuations is even higher, and some might find themselves constrained by expectations and unable to deliver in this landscape.
Now, as we enter 2023, there is a belief that while there could be a number of previously-crowned unicorns that lose their horns on account of an inability to operate at inflated valuations, those that earn a unicorn horn next year will have likely done so off of strong fundamentals and revenue.
In a way, this makes the jobs of angel investors somewhat easier, as they no longer have to jump aboard the latest hype train to generate returns. Instead, a far more reasonable standard can be applied to due diligence using simple questions like, “has this company broken even?”
After all, there’s something to be said for actually earning your unicorn horn, and those that do are far more likely to remain in the ranks than those that were gifted membership based on investor hysteria.
So, as we enter the new calendar year, consider which investment opportunities are best suited to continue operating smoothly in lean times.
These are the ones with a leg up in the race to ascend to the billion-dollar ranks in coming years.