Our very own John Cook sat down with Zach Malone, a highly regarded investor at Magarac Venture Partners.
In this insightful discussion, you will find expert analysis on the current and projected landscape of startups and venture capital in 2023. Drawing on Zach’s extensive expertise in sectors such as AI, robotics and healthcare, he offers valuable insights into the region’s potential for capital-efficient business models.
JC: It’s been a tumultuous time for startups and venture capital. What’s ahead for 2023?
ZM: 2023 will be an interesting year for the startup/VC ecosystem. Unfortunately, I think a lot of companies that raised money in 2021 and 2022 will close down in the coming year. That being said, I think the back quarter of the year will see an increase in capital deployed and the pace of deal flow return to relative normalcy. This will lead to an increase in the number of companies raising capital and ultimately restart the momentum we’ve experienced over the last few years.
JC: Which sectors or investment themes are you most excited about right now?
ZM: It may sound somewhat cliche, but I’m most excited about how companies can leverage and/or create exciting breakthroughs in the world of AI. As the adoption of the iPhone began to take off around ~2009, coinciding with the mass adoption of cloud computing, a lot of companies were able to leverage this paradigm shift to build exciting new business models. I believe AI will become the driving force behind many new businesses in the coming year and will have a dramatic impact on the future of our world.
JC: Magarac Ventures is focused on the Midwest and Pittsburgh in particular. What types of companies is the region producing and what differences do you see from larger startup communities in places like San Francisco or New York?
ZM: In general, the Midwest tends to produce companies that utilize capital-efficient business models compared to startups based on the coasts. This bodes well for the region given the current climate in the VC world. The region also has strong domain expertise in AI, Robotics, and Healthcare. I believe all three sectors will produce the lion’s share of venture returns over the coming decade.
JC: As an investor, how important is brand or reputation when evaluating companies?
ZM: Having a strong brand can help companies stand out from the crowd and make it easier to “open doors” when raising capital. If an investor independently hears positive feedback on a company prior to speaking with them directly, the likelihood of those conversations resulting in an investment increases.
JC: Which communications challenges do startup founders struggle with most when building a company?
ZM: A strong brand is the result of several factors including strong fundamentals and happy customers. When a company is starting out it can be difficult to determine the right time to begin developing and executing a communications strategy to build upon early momentum. In my experience, it’s best to begin developing and iterating on a communications strategy in order to maximize the benefits and remove barriers to growth as much as possible.