BEYOND Expo | Renowned venture capitalists find silver lining in global uncertainties

Editor’s note: A version of this article was first published on technode.com

Story by Jill Shen

Although the Covid-19 pandemic, ongoing US-China trade tensions, and an imminent global recession are already hitting technology firms in both China and the US, some investors see new opportunities emerging for today’s technology and startup markets.

More realistic views of the opportunities and challenges could fuel innovation and there can be beneficiaries in uncertain times. TechNode talked to venture capital firms Andreessen Horowitz and Gobi Partners about how private investors adapt to new changes at the BEYOND Expo 2022 tech conference, held online at BEYOND Metaverse. They also discussed how current economic downturns and geopolitical tensions are affecting their investment strategies and the markets they are active in.

The text below has been condensed and edited for clarity:

Connie Chan, general partner at Andreessen Horowitz

In the last several months, you see many companies across almost every industry have had to take a real look at their priorities and investments. Many teams, not just small startups, but large companies, are evaluating their runways and trying to figure out how they can make the capital, the cash they have in the bank last longer. Thus, they have more time to reach their milestones, so that they can fundraise in a more favorable environment down the line.

In terms of what large tech companies are doing, if you see what they’ve announced over the last couple of months, you’ve seen large consumer companies kind of pull back from a lot of the experimental things they are doing. So Instagram announced that they’re going to de-prioritize commerce as an example. Or Snap de-prioritized several things, including their accelerator, games, and original content effort during their layoff.

Our deal flow on the consumer side is a little slower than last year, but overall, we’re still making a lot of investment. I’m always excited about companies that are using video first or artificial intelligence first as a way of rethinking how to solve a problem.

I’m also very excited about cross-border trends that already had a mainstream adoption in China, figuring out how we can import that over to the US. In the US, for example, we’re still in the earliest days of live shopping. Video shopping is still yet to be a very big mainstream trend, but to me, it’s inevitable. That kind of thing will happen and be a big trend next year.

The US-China tensions are not looking like they’re on a great trajectory. The most obvious near-term impacts are supply chain issues for companies with physical merchandise across borders. However, I think one of the silver linings is that talent is still talent, and there are still great founders everywhere. Many of them, rather than building just for their respective countries, they are building with a global mind. If you’re a founder in China, you can dominate China, but you can also grow and expand outside of that region. That’s really a great silver lining.

Thomas Tsao, co-Founder of Gobi Partners

I know it’s bad out there. The sentiment is not good. However, over time I think the venture capital industry has always come out and demonstrated its resilience from previous downturns. We are seeing a perfect storm of really big trends all coming together, and it’s going to be painful for everybody in the short term. Still, in the long term, I think it will also power through because of the entrepreneurs, what they bring to the table, and the problem-solving they continue to demonstrate. That’s what’s going to get us all through.

From a macro standpoint, what’s been going on is really allowing the entire venture capital mindset to shift and distribute to other parts of the world. VC and this tremendous innovation culture have largely been kind of concentrated in China and the US. The two countries have taken up so much of the spotlight. I think what’s been going on is that it’s allowed some of that spotlight to shift to other regions and bring in more entrepreneurs into this global ecosystem.

There is also a growing realization after the Covid outbreak among venture capitalists and entrepreneurs to solve ESG [environmental, social, and corporate governance] problems because the world is increasingly interconnected. We don’t live in little pockets of prosperity. When one part of the world suffers, we all suffer. Covid knows no borders. There are also no borders for climate change. I know parts of the world want to go back to more nationalistic tendencies or go back to silos, but pollution and healthcare are cross-border problems. It’s going to take a new mindset.

One of the beneficiaries or silver linings [of the US-China tension] is that Southeast Asia is getting a lot of attention because it is a very culturally diverse region with connections to China, India, and the US. Southeast Asia can draw upon so many of these influences, and it’s still relatively open. Also, the governments may not directly bridge, but people still want what’s convenient. So we’re seeing many interesting solutions coming out and that’s going to create opportunities for entrepreneurs.

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