It remains heartening to see healthy amounts of earlier-stage (A and B) funding happening – and particularly the increase in A rounds (including seed funding) which, for the first time ever in the history of this index, topped $1 billion. This was especially the case in the United States.
While America continues to dominate insights industry investment activity, Europe definitively came of age in 2021 and 2022 as a major player. However, last year a good part of this was due to the two biggest global investments (ContentSquare and EcoVadis) occurring in France. The activity was registered in ten European countries in total (with even a small deal in Ukraine), but nearly half of it took place in the United Kingdom. Only two of the British transactions were ‘megadeals’ (over $100 million), with the majority being either seed funding or Series A. As such, the UK can lay claim to being the insights industry’s primary European incubator.
A big shoutout should also go to two smaller nations that punched above their weight: Israel, which saw ten transactions, garnering just under $300 million, and Canada, which brought in $150 million in new funds for the industry.
Headwinds in 2023?
While countries can make claims to be insights incubators, so too can the entities that actually put their money where their mouths are – the Venture Capital and Private Equity firms that invest their funds in the burgeoning insights sector. Some of these have been truly prolific over the years, including Sequoia, Insight Venture Partners, Andreessen Horowitz (now also known as a16z) and Salesforce Ventures. Each of these has invested hundreds of millions in the sector and has profited handsomely from doing so. There was, however, one prolific investor in the insights industry that was not so fortunate – Silicon Valley Bank. When SVB collapsed in March of this year, it had invested in fourteen market research and analytics entities, including Quantilope and Civis Analytics. Much of this was in the form of Venture Debt (as opposed to Venture Capital), of which SVB was the largest issuer in the world. Analysts expect that the bank’s collapse will make it much more difficult to obtain such debt and may even enable VCs to drive down valuations, making raising capital less attractive than it has been for the last ten years.
At this time last year, we noted the headwinds that seemed to be looming over investment prospects in 2022. Of these, the Ukrainian war, rising inflation and increases in interest rates appeared to be the most problematic, and a decline in investment in the industry was likely. Why didn’t that happen? I asked this of the President of a major insights brand that completed a very large round towards the end of 2022. His answer was simple: inertia. Once deals are underway, it takes time – months – to complete them. In other words, venture capital is like an ocean liner. It takes a long time to slow down.
Last year I wrote “Time will tell” when wondering whether we would see a deceleration of investment in the industry. This year, I am getting off the fence.
Investment in the insights sector will be down in 2023, quite substantially.
The one exception to this, however, will be an investment in AI as it relates to research and analytics, especially Generative AI. There I expect the wildebeest to run.