Alan’s Thinking Cap | Q3 2023 Capital Markets Update

EisnerAmper’s webcast, Alan’s Thinking Cap | Q3 Capital Markets Update, featured a conversation between Alan Wink, Managing Director of Capital Markets at EisnerAmper and Artem Trotsyuk, Ph.D. Partner at LongeVC, a West Coast-based venture capital firm that invests in an “ageless future” and supports early-stage biotech and longevity-focused founders that are attempting to change the world.

The two discussed the following venture capital activity topics:

The impact of higher current interest rates and the recent movements by the Fed certainly play a role in VC investment levels and are major causes for capital availability being at its lowest level since 2019. As a result, Longe VC’s early-stage deals have focused on quality companies with reputable science and longevity missions. People are living longer, and costs of health insurance continue to rise, therefore creating a demand for new therapeutic interventions.

Companies solely seeking capital without a solid development strategy are considered red flags for venture capital firms which, look for product market fit and actionable items that can take a product to commercial viability and success. Having only an algorithm is insufficient for a venture capital firm to invest. In the eyes of the VCs, founders and management teams must be coachable, as they are going to be the ones taking the company to their final development stage and eventually to an exit.

Additionally, venture capital firms need to gain trust, understand portfolio company strategies, and be aligned with their business models to bring value- add to their investments.

With respect to AI and venture capital investments, this emerging technology is playing a critical role in minimizing the product development lifecycle. Today, we are seeing portfolio companies using AI extensively in drug discovery. For example, medical imaging accounts for a large percentage of digital health’s venture capital funding. As funding grows, it is expected that AI products will increase commensurately. Apparently, VCs that adopt AI become better at identifying good quality startups, but only with startups whose business models are similar to those that were successful in the past.

What’s Next for Venture Capital

There is no consensus on where the venture capital industry is heading. The number of venture capital deals is on the decline and exits through IPOs and SPACs are extremely difficult to achieve. However, there is still considerable money on the sidelines looking for a home and this should certainly impact future VC dollars invested in good quality start-ups. In today’s market, VC-backed companies are looking for more liquidity and additional capital for growth and it is expected that in the biotech industry this liquidity will be achieved through M&A.