Hot or Not for 2023? Investing predictions from an angel investor

By Maninder Dhaliwal, managing partner at Startup Studio – Accelerator and Venture Fund, founding chair of TiE Vancouver Angels, and global steering committee member for TiE Global Angels: the largest angel investor network in the world.

With 2022 in the rearview, it’s time to set our sights on 2023. There are already some clear frontrunners to entice investment, and some others that might need a second glance. I’m excited at the growth of ideas and the diversity of industries that aspiring innovators are bringing to the investor’s table. There’s a lot to sift through, and for the average person – or even a seasoned industry veteran – getting a grip on what will soar and what will sink in 2023 is a lot to wrap one’s head around.

As an angel investor for over 10 years, I’ve seen my share of bears, bulls, and everything in between. Here are my predictions for what will be fiery for tech, and what will be frosty.

What’s hot:

• AI

• Climate

• Health

AI (Artificial Intelligence)

AI is back, and this time it’s real. It’s not enough to simply include AI in your pitch deck and call yourself an AI company. You have to be prepared to answer much more detailed questions, like what type of algorithm are you using? For example, is it linear regression, logistic regression, or decision tree-based? You will be asked about your training data sets, and who in the founding team holds responsibility for AI. With more awareness of AI and what it can do, expect to provide much more in-depth information, sophistication, and the ability to articulate all of that clearly. It wouldn’t be tech if we didn’t have a “bubble”. And AI seems to be heading that way.

Climate

Good old cleantech has been rechristened “climate”, and it is roaring. The climatetech resurgence or increased focus (i.e. funding) is being led by governments and government agencies around the world. “Climatetech” isn’t just a catch-all phrase. Innovations are diverse, from areas like reducing carbon intensity of everyday products to hybrid long-haul trucking in transport, revolutionizing water conservation, harvesting ocean data to mitigate the impact of rising waters, and beyond. Climate as an investable industry is buoyed by government-led initiatives, and propelled forward by ingenious innovators and entrepreneurs. It’s an exciting area to see building in funding and potential, as both an angel investor, and a tree-hugger.

Health

Healthtech is big. Labs and researchers are cash-rich from pandemic funds and they are going strong. Just think how much money was raised when racing to find a vaccine for COVID. Health as an industry has exploded into a vast and lucrative field, and it’s not slowing down. According to market and consumer data agency Statista, “revenue in the digital health market is projected to reach USD $170 billion in 2023. Revenue is expected to show an annual growth rate (CAGR 2023-2027) of 10.78 percent.”

Health will continue to rocket, building on the momentum and the capital injected from the pandemic. A projected growth rate of almost 11 percent is a big number, and one that investors are paying close attention to. Health has both capital access and ready and eager potential clients for the generated innovation.

What’s not:

• Consumer and ecommerce

• Web3 and crypto

Consumer and eCommerce

For consumer technology, the days of “specialty kombucha” raising money like tech companies are gone. The Wild West-era of targeted online ads and invasive harvesting of consumer browsing and location data are over. Access to data made available to the highest bidder for remarketing and online ads is tempered. Through the new privacy policy helmed by Apple, targeted ads on mobile devices are gone (for now). Without targeted ads, customer acquisition for B2C companies has skyrocketed in price and the economics no longer make sense for most consumer companies and products.

Web3 and crypto

There is definite value in digital currencies and decentralized financial systems. But million dollar digital monkey photos and exchanges with zero oversight – and no operating and risk-management policies – did a lot of damage to the credibility of the industry. Without trust, investor hesitancy increases, and funding stalls. The ramifications of the FTX scandal are still rippling through the Web3 world, and it has plunged the value of a hyperinflated industry to new lows. This isn’t the end of crypto. It will return in the future, but grown up, leaner, and mature.

Who are investors excited about?

Founders with work experience pedigrees are entering the market in greater numbers. They were recently senior employees at tech incumbents whose stock options were worth too much for them to walk away. This is good news for investors, as these founders bring networks, knowledge, experience, and resilience to the startups that they found, and these startups make great early-stage investments.