Tracking global private capital trends for 2023

Private markets are witnessing a shift towards alternative sources of financing as the demand for credit lines, unsecured loans, and venture debt rises in support of early- and late-stage startups in 2023. Julie Ruvolo, the managing director of Venture Capital at Global Private Capital Association, sheds light on the evolving landscape of private capital investments. Reflecting on the tumultuous year of 2022, marked by a global market correction, Ruvolo highlights a transition from growth-centric strategies to a more sustainable growth approach. Despite this correction, Africa and the Middle East stand out as regions experiencing consistent growth in venture capital investments, with Africa expected to reach around three billion and the Middle East nearing two billion for 2022. Ruvolo emphasizes that these regions are still undercapitalized, with vast potential for innovation and startup development. She notes that the low base of investment in Africa and the Middle East makes it challenging to predict a significant correction, especially considering the immense room for growth compared to more established markets. Ruvolo anticipates a shift towards more traditional venture capital investment models in 2023, with a focus on long-term commitment and sustainable growth. The surge of opportunistic investors in recent years is expected to be replaced by steadfast VCs dedicated to fostering innovation in these emerging markets. The interview delves into the unique position of Africa in the global startup ecosystem, contrasting the total funding raised by African and Middle Eastern startups with that of a single American state, Florida. The disparity underscores the untapped potential and growing importance of African innovation on the global stage. Ruvolo highlights the increasing interest from global investors in supporting African startups, with investments expanding beyond the traditional hubs of Nigeria, South Africa, Egypt, and Kenya. Notable investments in emerging markets like Algeria, Sudan, and the Democratic Republic of Congo signal a diversification of venture capital support, mirroring the growth trajectory observed in Latin America. The conversation shifts to the rising prominence of ESG (Environmental, Social, and Governance) considerations in venture capital investments. Ruvolo emphasizes the growing focus on responsible deal-making, slower diligence processes, and overall responsible investment practices among VC investors worldwide. The ESG movement, stemming from developments like the FTX scandal, has spurred a shift towards more sustainable and ethical investment practices in the private capital space. As the conversation concludes, it becomes evident that ESG principles are set to play a pivotal role in shaping venture capital trends in 2023, fostering a more conscientious approach to investment decisions. With private capital markets evolving to meet the changing needs of startups and investors, the year ahead holds promise for sustainable growth and innovation in emerging economies.