Over the course of the past year, Venture Capital (VC) firms have become more cautious when looking to invest in startups and early stage companies. This made it more difficult for companies to receive funding and, in conjunction; the technology IPO market was weak until the end of the year. However, because funding for VC firms was strong, there is growing hope for the industry moving into 2017. The venture capital industry landscape has developed a barbell structure, meaning that there are many small and many large VC funds, with few mid-sized funds.
This year has the potential to be better than 2016 because VC firms are holding large amounts of cash and, as valuations are expected to decrease, firms may be poised to strike. Furthermore, there is an expectation that the technology IPO market will continue to rebound, following its upward trend at the end of 2016. President-elect Donald Trump has stated that he intends to decrease taxes and regulations on business while increasing major infrastructure development. If true, this could help to stimulate spending as well.
Based on interviews with top Silicon Valley investors, artificial intelligence and machine learning will be the hottest areas VC firms may look to invest in during 2017. Artificial intelligence has the potential to influence every industry including financial services, healthcare and retail by changing software and business structure. Overall, there is reason to be optimistic about the role of Venture Capital firms in the new year.