The Metaverse, Web 3.0 - What this means for investors.

A digital universe or parallel reality that exists beyond the real world - The Metaverse.

It's impossible to discuss 2022 and beyond Metaverse predictions without discussing one of the hottest buzzwords of recent months.

Metaverse describes a virtual universe where people can connect, do business, and form social bonds through their virtual “avatars”. It is difficult to precisely define the metaverse, but Harvard Business Review describes it as “a virtual reality version of today's internet.”

Metaverses have been around for a long time, at least since Neal Stephenson's sci-fi novel Snow Crash coined the term “metaverse” as a portmanteau of “meta” and “universe.” Even metaverse implementations are not particularly new: around the turn of the century, there was a great deal of discussion about platforms like Second Life (which is still around today).

The metaverse concept seems to have staying power this time around. This notion was reinforced in 2021 when Facebook was renamed “Meta Platforms” and Chairman Mark Zuckerberg emphasised the company's commitment to developing a metaverse.

All the technological underpinnings required for metaverses that are truly functional are now either available or becoming available: virtual reality platforms, gaming, machine learning, blockchain, 3-D graphics, digital currencies, sensors, and VR-enabled headsets.

The Metaverse, a work in progress in many respects, has become big business for technology titans and gaming companies such as Meta (previously Facebook), Microsoft, Epic Games, and Roblox, all of whom have created their own virtual worlds or metaverses.

Metaverses, however, have not received much attention until recently with regards to their implications for the business world. This is now occurring.

Businesses have become increasingly interested in metaverse because of the effects of the pandemic—especially its limitations on physical meetings and travel—which are spurring a search for more authentic, cohesive, and integrated remote and hybrid work environments.

Work can be radically altered by the metaverse in at least five ways:

The Metaverse is part of the solution to digitalisation's need for an improved human-digital interface. The matter is of critical importance to us as a part of the digitalisation wave.

A third generation web is needed to address the shortcomings of web2.0

Metaverse, a blockchain-based virtual reality platform, is one of the most prominent buzzwords in the crypto space. There has been an explosion of interest in NFTs thanks to celebrities hawking them on talk shows, DAOs have been forming left and right, and taxi drivers are talking about blockchains (this is true).

VC activity in crypto can be used as a decent proxy for how hot the Web3 sector is. According to Pitchbook, ~$30 billion was invested in crypto startups globally across 1,278 deals as of late November.

Major venture capital firms are heavily invested in crypto, including Sequoia, A16Z, and Tiger Global.

There is a belief that Web3 will alter the way the Internet works and what it is used for. There will be huge new business opportunities as a result. However, the process may not be as straightforward and linear as it is often portrayed to be. We will cover Web3 in more detail and depth in a future blog post, so stay tuned.

Investors are worried about inflation and Fed rate hikes. And, our crystal ball is blurred by rising inflation, tightening fiscal policy of the central banks, and Russia's unpredictable military aggression.

An illustration of how different generations approach and trust a novel technology, Bitcoin in this case: According to a recent Investopedia survey, 28% of millennials believe that cryptocurrency will help them fund their retirement!

Digital innovation is causing a revolution.

It is believed that Digital Disruption and AI are critical to the future of technology. There's no denying that the rate of digitalization was already fast before Covid-19. However, the epidemic has accelerated the pace of change and increased its reach significantly.

The future is here, and it's powered by artificial intelligence.

The future of data is to leverage smarter solutions that leverage artificial intelligence, machine learning, blockchain technology, and other technologies. However, there are some twists in the tale: Despite the fact that self-driving vehicles will not develop as quickly as the most ardent optimists have predicted, there will still be disappointments along the way (and even if the technology worked flawlessly even in difficult situations, rigid regulations and attitudes might still present problems).

An increase in new stock offerings and initial public offerings.

In 2021, the number of SPAC IPOs reached record highs, rising to 613 from 248 in 2020. The number of US SPACs is starting to slow down, as there was just one SPAC that was liquidated in 2021 (i.e., shut down after not finding a merger target within the promised time period). It's predicted that there will be a deluge of SPAC liquidations in 2022 and 2023. The findings of Michael Klausner and his team, which revealed the poor performance and unfair practices of SPACs, is contributing to increased SEC regulation. The lack of SPAC money, therefore, does not have a significant direct effect on the VC Exit market, as VC-backed firms are more likely to go public through the conventional IPO route than the quicker but more costly SPAC method.

Creating a SPAC is not particularly expensive, but the SPAC teams generally demand a substantial premium. The SPAC craze has quickly come to an end: Only 55 new SPACs were created in the first quarter of 2022, and the current trend suggests that a mere 198 SPACs will be created for the whole year. The decrease in SPACs has also been accompanied by a drop in the number of IPOs in the US markets. At the same time, the Nasdaq's 12-year rally (which generated 1200% gains) came to an end in 2021, resulting in the cancellation of several IPOs early in 2022, when its index dropped more than 20%.

The overall IPO market cooled down as a result of the slow-down in US SPACs.

Global IPO activity has also been sluggish in January and February of 2022, compared to levels in 2021. Global IPOs have started off slow in the beginning of year 2022.

If the share prices of tech companies were to plummet, it's believed that there will be plenty of VC investments in 2022, although not on 2021 levels. If the tech stock market remains strong, of course there will be an ocean of private capital that will continue to flow into VC and PE funds over the coming years.

Europe appears to have an active early-stage venture capital but a very passive late-stage venture capital environment. There has been a lot of talk about positioning a fund to addressing the European funding gap—that is, assisting tech firms digitalizing B2B markets and preparing them for global expansion. However, it seems that larger international funding rounds are not interested in such companies.

The process of converting analogue information into digital data.

We can foresee a decade of fast digitalisation of all business processes, which provides nearly limitless opportunities for intelligent growth companies: Comprehensive high-quality data will be crucial to successful AI and ML projects. Digitalization is already widespread, but its development is never-ending: we are now seeing an endless maturation of AI and Machine learning. Certain business sectors are naturally affected a lot.

The preservation of cyber security.

An increase in VC funding for cyber security has already occurred in 2021, and it is expected to continue at high levels. The recent investment in Tosibox is a good example of modern and cyber-safe VPN connectivity: “100% data security is guaranteed through TOSIBOX's operational technology network data flow management platform.” VC funding for Cyber Security is increasing rapidly.

The climate-related technology sector.

Climate technology has recently garnered VC interest, but (unlike in conventional SW-based solutions) finding decent returns on investment is difficult, as capital expenses are high and the (short-term) scalability of the firms is typically limited.

The importance of ESG considerations has grown significantly in venture capital firms' decision-making processes and investment strategies, as guided by the Limited Partners providing the funds. Furthermore, climate tech took a big step forward in 2021 as a result. Because of this, fossil energy trading with Russia (which would enlarge Russia's war fund) was particularly emphasised in Europe. A fast and comprehensive change was particularly emphasised as a result of this limitation. The growth in renewable energy equity funding is also growing rapidly.

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