Climate related sectors are showing very strong growth in capital raised, and we expect more money to fund climate companies this year than ever before. These sectors present exactly the decade-long secular bet that investors love to back.
Technology companies are increasingly providing solutions to many of the problems the world faces, such as climate change, water scarcity and pollution management, and this trend will only accelerate.
Penetration of tech-enabled businesses into traditional sectors remains embryonic, in a similar way to the internet during the dotcom crash of 2000. The rush for corporates to reduce costs likely means even greater investment into supply chain technologies, and even more into e-commerce.
Overall, valuations for growth companies that balance growth and profitability are remaining far more resilient than high-growth, high-burn businesses, and already we see capital paying more attention to balanced business models. Those companies that can show a clear and credible path to profitably will attract even more interest.
We believe the tech sector will begin to tier into those segments and business models that will attract a much greater share of the $2tn that must be invested in the coming three to five years (the typical investment period for a fund), and of course others that will struggle.
Overall, we are incredibly bullish on the prospects of real winners to emerge from the past few easy funding years.
And there is more, much more, than enough capital already raised to back them to success.
Marc Deschamps is co-head at DAI Magister