2017-21 Sees significant increases within Azafran’s investment sweet spot
by Daniel Nikic, Senior Associate and Data Team Lead
Looking back, it’s safe to say that 2020 will go down in history as one of the most challenging years for humankind, which continues through 2021 and looks to be a dominant factor as we turn into 2022. Looking forward and as we wrap up 2021, the Azafran Data Team has been busy assessing the progress and market timing of Azafran’s investment thesis and one major question is whether the COVID-19 pandemic and its associated knock-on effects have had a negative impact?\
With results of our recent research on exits in our investment sweet spot (see below), added to the data we have been compiling on investments and other correlated data for the past 4 years, we have confirmed our market timing and that COVID-19 has greatly accelerated the development and uptake of technologies/markets that lie at the core of our thesis.
Voice, Acoustics/Sensory and Imagery Take Center Stage
Azafran’s investment thesis is focused on funding the disruptive technologies of tomorrow, today. Specifically, applied deep tech companies that leverage voice, acoustics/sensory, and imagery serving MedTech (Health & Wellness) and IoT/Enterprise markets. COVID-19 has confirmed the fund’s investment thesis to even be more critical for venture capital.
2017-21 Data Proves Market Timing
Azafran has been tracking Artificial Intelligence / Machine Learning (AI/ML) venture capital (VC) funding transactions and exits from January 2017. Over this timeline, the number of companies being funded has grown at a rapid rate year over year (YOY). As of December 3, 2021 the funding for the current year had already reached $60.72B, year to date (YTD) which represents a multiple of 2.7x vs. year end 2020.
Total YTD of funding by year
2021 - $60.72B - 1,696 companies - Funding of $35.8M (Mean) / $9.4M (Median)
2020 - $22.49B - 1,041 companies - Funding of $21.6M (Mean) / $6M (Median)
2019 - $22.71B - 1,073 companies - Funding of $21.2M (Mean) / $3.5M (Median)
2018 - $8.52B - 810 companies - Funding of $10.5M (Mean) / $2.7M (Median)
2017 - $4.4B - 650 companies - Funding of $6.8M (Mean) / $1.6M (Median)
When looking at companies receiving funding, Azafran’s Data Team categorizes them into three main industries (MedTech, IoT, and Enterprise) with 85 sub-industries within the three main industries. Summaries of 2021 are below:
Industries Funding in 2021
IoT - $34.91B Enterprise - $16.67B Health & Wellness - $9.15B
Top 5 Health & Wellness Sub-Categories in 2021
Health Diagnostics - $1.41B Pharmaceutical - $1.25B Biotechnology - $1.24B Information Technology - $603M Medical - $571.2M
Top 5 IoT Sub-Categories in 2021
Big Data Analytics - $5.43B Transportation and warehousing - $4.5B Finance and insurance - $2.36B Entertainment and recreation - $2.24B ICT - $2.23B
Top 5 Enterprise Sub-Categories in 2021
Productivity - $2.84B Security Risk - $2.42B Business Intelligence - $2.24B B2B Sales and Marketing - $2.17B Customer Management - $2.13B
2017-21 YOY Exits Related to Azafran’s Thesis Increasing Significantly
Our Data Team has been encouraged to see and prove that applied deep tech AI/ML in our focus markets has received significant and growing funding, which we know translates to market timing and our bottom line ROI. Specifically, when analyzing the exits, Azafran’s investment thesis has been spot on in timing! The number of exits in the AI market continue to grow YOY and have grown for the main three industries by over 20% from 2017 (261 exits YE) to 2021 (766 exits YTD).
IoT Focus: When looking at IoT sub-industries, it is clear that in relation to funding and exits that Finance and insurance, Big Data Analytics, and Transportation and Warehousing are a good fit for Azafran and have had significant positive returns.
Enterprise Focus: Enterprise is an industry that is essential to Azafran since our focus is on B2B early stage companies (post seed) and the industries outlined below with the largest exits in 2021 correlate with the top sub-industries for funding.
MedTech Focus: The MedTech industry is continuing to grow in interest in relation to the AI market. This is evident with the exits growth representing the largest of all the main industries in our focus.
Conclusion: The timing and investment thesis of Azafran Capital Partners is clearly supported by the data from the transactions and exits of the industries that are of interest. The question should not be does the data support the fund’s thesis but how much will the exits and transactions increase in value for next 5-10 years!
Please reach out to us if you would like to discuss and/or receive more detail.
Source: Azafran Data Team