Venture capital (VC) investment trends can vary over time, and what may be considered a neglected sector at one point could attract more attention later. However, some sectors have historically faced challenges in attracting significant VC funding. Keep in mind that the landscape may have evolved since then, and it's always advisable to check the latest market trends.
Here are some sectors that have sometimes been perceived as neglected by VC funds:
Industries outside the tech realm, such as manufacturing, agriculture, and utilities, may encounter greater challenges in securing venture capital funding when compared to their high-tech counterparts. Nevertheless, this dynamic is evolving with the emergence of Industry 4.0 and the infusion of technology into conventional sectors.
Biotech and Healthcare
Despite significant funding in healthcare and biotech, specific domains within these sectors, such as early-stage drug development and certain medical devices, may be viewed as riskier and encounter difficulties in attracting venture capital funds.
Although the education sector holds promise for disruption and innovation, it has historically received comparatively less attention. However recent years has seen a notable uptick in edtech investments.
Sustainability and Clean Energy
Despite the increasing interest in sustainable and clean energy solutions, certain segments within this sector may encounter obstacles in securing substantial venture capital funding, particularly when compared to more established industries.
Non-Profit and Social Impact
Conventional venture capital investors generally prioritize financial returns, posing a challenge for sectors primarily centered on social impact or non-profit initiatives to secure traditional VC funding. Nonetheless, there is a growing trend in impact investing and social entrepreneurship gaining recognition.
Startups in the hardware industry typically encounter greater initial capital and prolonged development timelines in contrast to their software-focused counterparts. This can render them less appealing to venture capital funds seeking faster returns on investment.
Fintech Outside Major Hubs
Although fintech, as a broad category, has garnered substantial investment, startups located outside major financial hubs may encounter difficulties in capturing the attention of venture capitalists. The landscape is evolving as investors progressively broaden their focus beyond traditional technology hubs.
With US$1trn+ invested in VC backed startups since 2018, we realise how private equity and venture capital act as growth catalysts for global innovation. The investor appetite remains subject to change, influenced by market dynamics, technological progress, and general economic situation. While entrepreneurs should be mindful of these trends, they should largely prioritize assessing the distinctiveness, viability and scalability of their business models when pursuing funding.