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  • Writer's pictureAlyssa Wang

Why Do Investors Love Tech?

In Q2 2023, San Francisco had a significant increase in venture capital deal value, capturing 42% of the national total. The Bay Area’s thriving niche included numerous generative AI startups and prominent unicorns like Stripe, which raised $6.8 billion in May, accounting for nearly 20% of the region’s total deal value of the year.


This year, two significant investment rounds occurred close together. Paris-based OpenAI rival Mistral AI raised €600 million in a round led by General Catalyst, and German AI translation startup DeepL secured a $300 million investment led by Index Ventures. At the same time, VC funding for AI visual media surged by nearly 90%, reaching $402.7 million in total.


Why has tech become a heated investing choice in recent years?


That’s because of its strong economic fundamentals. Despite market volatility and heightened interest rates, tech companies, especially the software sector have demonstrated continued growth in EBITDA margins. This sector‘s recurring revenue models and stable cash flows make it attractive to both private equity and venture capital investors.


For example, in 2023, software transactions contributed 57.3% of the global PE technology deal value. In Q4, Clearlake Capital Group and Insight Partners acquired Alteryx, an analytics company, for $4.4 billion, underscoring the continued investor confidence in software deals​.


At Starlight Capital, we feature aspiring entrepreneurs to participate in our online private equity forum. Please register for our event exclusively for expansion-stage companies on August 8 to meet interested investors. For more information, contact Bryan at emersonb@starlightcapital.co or 907.795.5586.


The tech surge is just the beginning. Let’s expect more to come during our election year.

 

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