The VC sector in 2022 faced challenging times, and startups had to prepare for a rough ride.
In terms of trends, 2022 witnessed a reversal of previous norms. Previously, startups were receiving more funding while achieving fewer key performance indicators (KPIs). However, in 2022, the requirements for funding increased, and the available capital decreased. This meant that hitting initial goals might not be enough to secure the next funding round, leading to revised roadmaps for many startups. The psychological environment became more challenging for entrepreneurs, especially those who had not experienced a major market downturn before.
The winners of 2022 were those companies and VCs that had built strong brands and demonstrated their resilience during challenging times. Startups focusing on creating something new rather than just adding features or enhancements were better positioned to weather the storm. On the other hand, the losers were VCs that had overcommitted their fundraising in previous years and now struggled to keep up with the pace of their next fund. Overvalued companies faced difficulties in their next raise and had to settle for lower valuations.
Global processes, such as the Russian invasion and geopolitical issues, had an impact on the Israeli market, highlighting the interconnectedness of global events and local markets. Companies were advised to prepare for the coming year by accepting the reality of the market, understanding their valuation, prioritizing efficiency, and being agile in making necessary changes.