I can’t believe we’re already a month into 2023. January has been marked by massive layoffs in the tech industry as we head toward a likely recession. In the news, some experts attribute the mass tech exodus to excessive hiring during pandemic years, when the sector was doing particularly well. While it is a tough time to be in tech, it is a great time to be in the healthcare industry, one of the last categories most consumers will cut spending on. Clearly, changing economic conditions don’t affect all industries equally.
So I wanted to take a step back and look at how different industries fared in the online private markets last year. In 2022, the leading industry for Regulation Crowdfunding investments was (drum roll, please)… healthcare and pharmaceuticals with $48.7 million invested. The financial and insurance products and services industry was a close second with $44.4 million.
What caught my eye wasn’t these numbers, however. The changes from 2021 to 2022 tell a much more interesting story.
First, let’s talk about the industry that didn’t make into our chart today: the financial and insurance products and services industry. Despite being the second most funded category in 2022, the industry’s growth is down 15.1% from 2021 to 2022. That’s a dramatic change in growth from 2021, when the industry was also the second most funded category and saw the third highest funding growth (260%) among all industries we track.
The industry as a whole is undoubtedly popular among private market investors. So why the 15.1% drop? It may be reflective of the fintech market as a whole. Many experts predict that fintech will suffer greatly in 2023 after significant overfunding in years prior. Financial and insurance products and services seemed to follow the same overfunding trend in 2022. So in 2023, I predict this industry will continue to decline within the private markets in tandem with venture funding.
Understanding venture sentiment can make you a more informed investor. It may be less likely, for example, that a fintech company raising a seed round in the online private markets will raise a follow-on venture round in the coming year. In fact, I would not be surprised if financial and insurance products and services dropped out of the top three highest funded industries at the end of this year.
In contrast, several other categories had substantial momentum between 2021 and 2022. Retail shops and department stores, despite making up a small fraction of dollars invested, were up 139% in the online private markets. Security, cybersecurity, and defense companies saw a 70% gain. Meanwhile, education, training, and coaching companies raised 42% more capital in 2022. It may be a good time to invest in these industries, since they appear to be gaining popularity.
At 41%, healthcare had the fourth greatest percentage change from 2021 to 2022. This is likely reflective of investor sentiment coming off of the heights of the pandemic in 2020 and 2021.So far, it doesn’t look like this momentum will stop anytime soon, considering the industry is poised to weather bear markets. So I would not be shocked to see the healthcare industry lead online private market funding again in 2023. Despite the overall decrease in online startup investing as we head into turbulent economic times, healthcare is still winning both in the online private markets and the economy at large. This is reflected across a number of metrics, including wages, staffing, and funding. The healthcare industry is notoriously recession-proof. So it may be a good bet if you are looking to make some investments in 2023.
A decline in the general economy is not all bad news. It may create some spectacular opportunities if you can weather the storm. Coming out on the other side with some strong investments can leave you well positioned to deploy even more capital in the next bull run.
