Thoughts on 2022
As we come to the end of the year, here are some of my thoughts on the year that was 2022 and a few comments on how things might pan out in the near term.
By most measures 2022 was a tough year for investing and fund raising but it was definitely better that 2021. The key issues were marco-economic obviously: war in Ukraine, inflation, interest rates rises etc.
In my work world, this marco-economic uncertainty manifested itself in three ways:
- It made it particularly difficult for PE/VCs themselves to raise new money as their underlying LP institutional investors moved to the side-lines.
- It softened valuations, particularly in the tech sector. Actually, my assessment is that this mightn’t be a bad thing as some of the valuations had become frothy.
- Many PE and VC investors adopted a double down approach by giving follow-on money to existing portfolio companies rather than doing new investments. They are smarter than me, but I question whether this might have impacts on their portfolio construction and their overall returns as follow on investing typically result in lower overall returns.
Two ongoing trends in 2022 are worth (re)highlighting. China is moribund. We haven’t done a deal there in 2 years and honestly don’t see that changing the medium term. I have also spoken to a couple of Chinese domestic investors that are actively actioning or thinking about setting up in Singapore (not Hong Kong) to make up for the lack of action in China. Also, we have seen more opportunities in non-Singapore ASEAN (Vietnam for example) – maybe this is also a product of the same trend.
Geography is breaking down, at least in some sectors. What I mean by this is that investors (especially in North America) are more interested in investment opportunities outside the States than they may have been in the past. Personally, I think this maybe a by-product of COVID. I had lunch with an investor in New York earlier in the year and he described a deal that he had just closed and he said ‘it was in New Jersey but it could have been in New Zealand as we did all of it over zoom’. To be frank, I do think this is more pronounced in some sectors (fintech, regtech and cleantech) than others.
Look forward to serving many more in 2023.