'Venture capitalists swap Paris Hilton for Al Gore'

 Venture capitalists are trading reality stars for policy wonks. Rising rates and falling valuations have forced startup investors to move beyond cryptocurrencies and latch on to more useful ideas like green energy and healthcare, based on chatter at a recent confab. Tight funding demands sober analysis.

Hundreds of top venture capitalists flocked to Los Angeles this week to congregate at a two-day, invite-only soirée for tech’s elite. The backdrop this year, though, included gloomy data: Venture funds raised about $21 billion in the fourth quarter last year from limited partners, according to Preqin, marking a nine-year low. For 2022, venture-backed companies collected nearly $240 billion for their coffers, 31% lower than the record $345 billion in 2021, according to Reuters.

This year, topics such as green tech and healthcare innovation were at the forefront of discussion. Crowds piled into the theater at the Museum of Motion Pictures to hear a reality check on climate change from former Vice President Al Gore. The somber mood marked a shift from last year when reality TV star Paris Hilton took the stage in conversation with a Coinbase (COIN.O) executive about non-fungible tokens and a SoftBank investor advising VCs on how to stand out “when everybody has billions of dollars.”

There were still acrobatic performances and other markers of fanfare, but there was a sense that venture capitalists are trying to evaluate risks more carefully by doing more due diligence and slowing their pace to spend time considering the broader implications of their investments. That is reflected in where they’re putting their money. Artificial intelligence, real estate and renewable energy were the sectors that attracted the largest funding rounds in February, according to Crunchbase. One panel featured executives of three startups in the buzzy AI space, including the chief scientist at OpenAI competitor Cohere, which is reportedly in talks to raise funding at a $6 billion valuation.

Several onstage conversations, including with Adobe’s (ADBE.O) head of product, Scott Belsky, and Reddit founder Alexis Ohanian, touched on how tech executives are trying to avoid recreating the hype cycle that helped funnel millions of dollars into cryptocurrency. Benchmark general partner Sarah Tavel, who led her firm’s investments in blockchain analytics firm Chainalysis and NFT startup Sorare, noted that the burden of proof has now shifted to founders to show that their products solve real-world problems. And even Hailey Bieber, best known for being a model and social media influencer, came to talk business – namely, her skincare brand’s ascent to “eight figures” in revenue in a few months.

While VCs may not quit their more frivolous vices cold turkey, the tough environment will force them to take a more disciplined tack.

The 10th annual Upfront Summit took place in Los Angeles on March 1 and 2. The conference, which is hosted by Upfront Ventures, saw over 1,000 venture capital investors, entrepreneurs and leaders attend.

Venture firms raised $20.6 billion in the fourth quarter last year from limited partners who back their funds, marking a nine-year low, according to data provider Preqin. That amount was less than half the level raised in the three months prior.

https://www.reuters.com/breakingviews/venture-capitalists-swap-paris-hilton-al-gore-2023-03-03/