Venture Forwards: Invest or Miss Out

Venture Forwards: Invest or Miss Out Featured Image

Salaam, it’s Uzair from Cur8 Capital, I lead our venture capital investing. I’m starting this series, Venture Forwards, to share some of our insights on the venture landscape and the various sectors we’re exploring. To sum it up, a platform shift is underway, and you do not want to sit this one out. Great companies are founded in these choppy times, but most people don’t invest in them – I’m here to convince you otherwise. 

Reflect, then advance…

2023 was a challenging year for venture capital. Even though ZIRP (zero interest rate policy) ended in early 2022, because of delayed effects, 2023 became the year when ZIRP funded startups finally started to shut down (This Week in Startups, 2024).

The primary reason for the delayed onset of shutdowns was that a lot of cash was accumulated by big startups, giving them enough funds to last well into 2023. It’s only now that they’ve run out of cash. Per carta, c.1.5k companies died in 2023, which is the largest death toll for startups since the dot-com crash.

At Cur8, we primarily do pre-seed/seed investments, with an investment horizon of 5 to 7 years or longer, and short-term fluctuations in the broader tech market have a less immediate impact on us. 

In fact, we saw that seed valuations increased as multi-stage funds started infusing capital at the seed-stage (because late-stage markets were illiquid), valuations which would have otherwise fallen in line with late stage venture. 

Moreover, we started investing out of our EIS fund late in 2022 only, another reason why we have been relatively insulated from the reckoning. That said, a healthy venture market, especially later stage venture, means more follow-on opportunities for the companies we’ve funded, thus we are keeping a close eye on the space.

Looking 2024: a future filled with promise

We expect startups to continue shutting down in 2024, but are confident that the worst is behind us. We are already noticing signs of the sentiment trending back up. Valuations are now back at 5 and 10 year averages, and publicly listed tech is showing signs of recovery – setting the stage for an exciting 2024. 

We definitely see the IPO markets opening up over 2024, and 2025 – with effects trickling down to venture.

(Ibarra, 2024)

Our view is that interest rates will remain high throughout 2024, continuing to put downward pressure on valuations. We think that when the IPO markets open up again, multi-stage firms will go back to investing in later-stage companies. This will leave more opportunities for firms like Cur8 to get involved in deals. Consequently, we’ll have a chance to secure good returns with deals available at attractive valuations. 

Putting aside the medium-term macro trends, what really excites us the most about 2024 are the big platform shifts underway. Let’s discuss the two we are most looking forward to. 

AI Takes Off

With 180M+ users, and 1.5B + website visitors per month, it’s safe to say ChatGPT showed everyone the power of Artificial Intelligence (AI) first hand. Generative AI has evolved from applications that merely processed and generated text to ones that can execute multiple tasks across domains. 2023 saw rapid growth and developer adoption for Large Language Models (LLMs), setting the stage for the application layer to emerge – and here is where things get exciting – think how the PC revolutionised personal computing, or how the iPhone gave way to the Apps.

The AI boom has brought high valuations with it. Many AI companies have term sheets similar to the ZIRP era. At Cur8, we were/are weary of this massive bubble in AI inception rounds since Q1 2023. 

That said, we’re now seeing AI valuations sobering up a bit. Our thinking is that AI will play out over decades, and not over a couple of months or years. Thus, although the pipeline is bustling with AI ops, we are always on the lookout for an asymmetric risk reward ratio when investing, staying in the game while studying and understanding the space.

Although startups are utilising advancements in artificial intelligence (AI) to challenge established industries and create entirely new markets, existing companies are showcasing extraordinary speed in product development and a willingness to experiment like never before. Microsoft, Amazon, Shopify, Adobe Firefly, and GitHub Co-Pilot etc have all integrated AI into their user experiences at impressive speed. 

For us as investors, this means the age old adage that ‘incumbents are slow is not playing out when it comes to AI.

Lastly, we learnt that Data and Information hygiene is critical for a company to capitalise on this trend, and make the most out of it. To this end, we now look at this when making a new investment whilst nudging our portfolio companies to be well positioned in this regard.

Climate Tech: Finally Taking the Stage

A fast follower to Artificial Intelligence is the new energy stack, aka Climate Tech. Climate tech startups have been around for quite some time now, and we at Cur8 have been investing in them for the past few years. 

That said, a lot has changed in 2023, which is why we believe 2024 will be a blockbuster year for Climate Tech startups. Specifically, scientists have reached a broad consensus around the severity of the challenge, followed by quickly shifting public awareness, and finally the global commitments to Net Zero have been cemented by government legislation (like the Inflation Reduction Act in the US). These developments make us very optimistic.

At Cur8, we’ve been busy in this arena, investing in Isometric (formerly Exponential) and Staze. We’ve kicked off 2024 with an exciting deal in Climate Tech only (to be announced soon) and have many more opportunities in our pipeline. 

Our investment strategy here is to balance long term investments in moonshot technologies (think, tech that sucks carbon out of the sky, emerging lithium-ion battery alternatives) with investments in startups that are utilising proven tech in new ways to address the climate challenge.

What does this mean for you?

As history has shown, this is a great time for founders to start a company, and for investors to back companies. The environment is just much more rational (profit vs growth) for quality founders to build huge companies. 

The capital constraints mean these founders would pursue sustained growth, competition is low, talent is more affordable and available and knows no borders thanks to covid, and AI has made everyone much more efficient. 

We believe this vintage will be the best vintage since the Uber, Airbnb time. At Cur8, we see tons of venture deals every week, and our team can confidently say that the environment is teeming with innovation. 

The Cur8 EIS VC Fund

The Cur8 EIS VC Fund is strategically investing and capitalising on the trends of Generative AI & ClimateTech. For an investor, venture Capital can significantly enhance the diversification benefits and return profile of your portfolio, along with giving you a front-row seat to innovation. Although our fund is very young, we’re already ahead of curve in terms of performance, and have deployed capital across industries with 70+ investments. We offer the best in class fees along with Shariah compliance, an unparalleled offering in the market of EIS funds. Our next deployment deadline for investing in the Cur8 EIS VC Fund is 29th February, 2024, – make sure to invest before then.

I hope you found this insightful. For ideas, and queries, feel free to email me at [email protected]

Don’t invest unless you’re prepared to lose all the money you invest. This is a high‑risk investment and you’re unlikely to be protected if something goes wrong. Take 2 mins to learn more.

Works Cited

Ibarra, Amelia. “The The State of SaaS with Altimeter Capital Partner Jamin Ball.” SaaStr, 2024, Accessed 5 February 2024. State of Canadian Software Report. 2024.

“Our thesis on climate.” Founders Factory, 16 November 2023, Accessed 5 February 2024.

This Week in Startups. “Bill Gurley, Brad Gerstner, & Jason Calacanis on the state of tech markets, hosted by David Weisburd.” YouTube, 2024, Accessed 29 1 2024.

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