These insights were originally published by Marc Vartabedian in the WSJ Pro newsletter, published in January 2023.
Good day. After the venture-capital market did a 180-degree turn last year from the prior year, investors across the industry are attempting to forecast 2023. Most are preparing for another year of slow dealmaking.
One investor, Dan Conner, a general partner at St. Louis-based firm Ascend Venture Capital, is looking at the state of the market with a glass-half-full perspective. Ascend launched a $25 million fund last year to invest in minority-led startups. That fund hasn’t yet closed and could raise another $50 million, Mr. Conner said. The firm could do up to two dozen deals this year, he added.
Venture firms, which raised a record amount of capital last year, are sitting on a cash stockpile, Mr. Conner said, and it is only a matter of time before they will begin to deploy it. “The VC market isn’t by any means packing up its bags and leaving town; firms are flush with record amounts of dry powder to deploy, and they aren't paid to hold cash,” Mr. Conner said.
“By [this year’s third quarter], we think the dry powder stockpile will begin to draw down at usual active market rates,” Mr. Conner said, adding that he thinks a stabilization of interest rates and a successful tech initial public offering or two will help rev the dealmaking engine.